Preview
FILED
3/13/2020 7:05PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO.,TEXAS
DEPUTY
Terri Kilgore
CAUSE NO. DC-17-10592
MARTY MURPHY, IN THE DISTRICT COURT
Plaintiff and Counterclaim-
Defendant
V.
PAVECON HOLDING C0,, INC.,
PAVECON LTD. CO., 192nd JUDICIAL DISTRICT
mmmmmmmmmmmmmmmm
PAVECON PUBLIC WORKS LP,
PAVECON PUBLIC WORKS GP
LLC, LABCON, INC., DAVID
WALKER,
Defendants and Counterclaim-
Plaintiffs, DALLAS COUNTY, TEXAS
DEFENDANTS’ MOTION FOR NEW TRIAL
If Defendants are not entitled t0 judgment as a matter 0f law, as shown in their
Motion for J.N.O.V., then Defendants are entitled t0 a new trial. Errors and omissions
in the jury charge prevented Defendants from properly presenting their case t0 the
jury and caused the jury t0 render an improper verdict. Question Numbers 1 and 2
0n contract formation and breach were both defective because, as Defendants pointed
out in their obj ections, neither instruction followed the PJC, both instructions omitted
the controlling fact issues the jury should have been asked t0 decide, and the
questions lacked necessary instructions 0n elements 0n Which Murphy bore the
burden of proof (such as conditions precedent). Question Number 3 on breach-of—
contract damages was defective because the question failed t0 follow the PJC 0r to
provide even the most basic instructions 0n the proper measure of damages (i.e. the
value of stock—at the time 0f injury—Murphy alleged he was owed). Moreover, the
jury should have been given several additional questions 0n Defendants’ affirmative
defenses (e.g., modification, release, estoppel) and on the issue 0f Murphy’s receiving
a benefit despite his breach of fiduciary duty because each of those well-pleaded
defenses and claims had ample support in the evidentiary record. At a minimum,
then, Defendants are entitled t0 a new trial and the verdict should be set aside.
DEFS.’ MOT. FOR NEW TRIAL Page 1
ARGUMENT
Defendants are entitled to a new trial When errors in a jury charge probably
caused the jury to render an improper verdict or probably prevented the defendants
from presenting their case t0 the jury 0r a reviewing court. See, e.g., Romero v. KPH
Consol., Inc., 166 S.W.3d 212, 230 (TeX. 2005). Here, there are five categories 0f
charge error that either caused the jury t0 render an improper verdict or prevented
Defendants from presenting their case t0 the jury. First, omitting controlling and
disputed fact questions from Questions 1 and 2 0n contract formation and breach, the
charge failed to follow the PJC, encompassed immaterial issues, and thus probably
caused the jury t0 render an improper verdict. See, e.g., Sw. Bell Tel. Co. v. John Carlo
Texas, Ina, 843 S.W.2d 470, 472 (TeX. 1992). Second, by refusing Defendants’
instruction on breach of contract that included an instruction on conditions
precedent, the charge failed t0 instruct the jury 0n controlling issues that might have
resulted in a different verdict given Murphy’s concessions that he didn’t satisfy
certain conditions. See, e.g., Walker v. Comdata Network, Ina, 730 S.W.2d 769, 778
(TeX. App.—Dallas 1987, writ dism’d). Third, the omission 0f any instructions 0n the
measure 0f Murphy’s damages—the value 0f the stock at the time 0f injury that
Murphy alleged he was owed—was itself harmful error. See, e.g., Jackson v.
Fontaine’s Clinics, Ina, 499 S.W.2d 87, 90 (TeX. 1973). Fourth, the omission 0f any 0f
Defendants’ well-pleaded defenses, such as modification and release, was itself
harmful error requiring a new trial. Elbaor v. Smith, 845 S.W.2d 240, 243 (TeX. 1992).
Fifth, the rejection 0f Defendants’ question about benefits Murphy received as a result
0f his breach 0f fiduciary duty deprived Defendants 0f their right t0 have a jury decide
a disputed issue 0f fact, one that would have been integral t0 Defendants’ case about
the propriety 0f disgorgement. See, e.g., Hill v. Shamoun & Norman, LLP, 544 S.W.3d
724, 741 (TeX. 2018).
DEFS.’ MOT. FOR NEW TRIAL Page 2
I. The Omission of Controlling Facts from Questions 1 and 2 that
Defendants Specifically Asked Be Inserted Harmed Defendants and
Therefore Requires a New Trial.
“Controlling fact questions supported by the pleadings and the evidence should
be submitted t0 the jury for determination.” Conquest Drilling Fluids, Inc. v. Tri-Flo
Int’l, Ina, 137 S.W.3d 299, 308 (TeX. App.—Beaumont 2004, n0 pet). This is Why the
PJC expressly requires litigants t0 provide some factual detail in the charge about
the substance 0f the parties’ contractual dispute. See Texas Pattern Jury Charge,
Business, Consumer, Insurance & Employment PJC §§ 101.1, 101.3.1 In fact, PJC
section 101.1 explicitly instructs that “[t]he court should include in PJC 101.1 . . .all
disputed terms essential to create an enforceable agreement.”
Here, however, n0 essential terms were included in Question 1. Cf. Commercial
Bank of Texas, N.A. v. Luce, 92 S.W.3d 686, 640 (TeX. App.—Beaumont 2002, no pet.)
(reversing jury’s verdict and remanding for new trial Where breach 0f contract
question to the jury simply asked Whether the jury found in favor of the plaintiff on
the question of breach of contract and failed to include any 0f the controlling facts at
issue in that claim). Whether Murphy “was entitled t0 be compensated for his
employment” in some general sense was never at issue? Murphy was compensated
for his employment With bi—monthly wages, and those wages were never at issue. The
issue instead was Whether Murphy was entitled a particular kind 0f compensation
(Le. stock in Pavecon Holding Co.) as a result 0f a binding agreement between he and
Pavecon that Murphy says required Pavecon Ltd. C0. and Public Works to realize the
value 0f two capital accounts and then use that realized value t0 purchase stock from
Pavecon Holding C0. 0n Murphy’s behalf and for his benefit. Indeed, Murphy and his
damages expert, Mr. Sibley, conceded that this was the sole factual basis for Murphy’s
1
PJC section 101.1 asks “Did Paul Payne and Don Davis agree [insert all disputed terms]?”
(emphasis added).
2
Jury Charge at 5 (filed Dec. 12, 2019).
DEFS.’ MOT. FOR NEW TRIAL Page 3
contract claim. Yet, despite Defendants’ objection and proposed instruction,3 none of
those controlling facts made it into Questions 1 or 2.
The omission 0f these controlling facts harmed Defendants and caused the
rendition of an improper jury verdict. Instead 0f asking about the controlling facts
that were hotly disputed at trial, Questions 1 and 2 simply inquired about immaterial
issues—a general agreement t0 compensate Murphy in some general way. That
wasn’t the issue Murphy presented at trial. And the purported agreement Murphy
did place at issue—the agreement to realize capital account values t0 purchase
additional stock in Pavecon Holding C0.—Was hotly contested and disputed.
Accordingly, if Murphy has any breach 0f contract claim at all (Which he does not),
Defendants are entitled t0 a new trial on that claim. See, e.g., Matlock Place
Apartments, LP v. Druce, 369 S.W.3d 355, 383 (TeX. App.—F0rt Worth 2012, pet.
denied) (holding that where factual issues were hotly contested at trial and the
evidence could have permitted the jury t0 find for the other party, the charge’s
omission 0f those contested issues required a new trial).
II. The Charge’s Omission of an Element of Murphy’s Claim—Conditions
Precedent—Was Harmful.
Another controlling issue that the charge omitted—despite Defendants’
express request and 0bjection4—Was the element of conditions precedent, an element
Which Murphy bore the burden of proving given Defendants’ express denial 0f
conditions precedent in their answer.5 See, e.g., TeX. R. CiV. P. 54. The omission of
this element from that charge probably affected the verdict and limited Defendants’
ability to present their case t0 the jury. The lynchpin 0f Murphy’s contract claim at
3
See, for example, Defendants’ Second Amended Proposed Jury Charge, which the Court rejected and
which would have asked the jury “Did Murphy and Pavecon Holding, Pavecon Ltd., or Pavecon Public
Works agree that after January 1, 2015, Murphy receive an equity bonus whereby Pavecon Public
Works and Pavecon Ltd. would take allocations made to capital accounts and use them to purchase
stock in Pavecon Holding 0n Murphy’s behalf?” Id. at 13 (filed Dec. 11, 2019).
4 Defs.’ 2d Am. Proposed
Jury Charge at 14.
5 Defs.’ Answer t0 Pl.’s Third Am. Pet. fl 3 (filed Sept. 24, 2018).
DEFS.’ MOT. FOR NEW TRIAL Page 4
trial was the parties’ purported agreement to monetize partnership assets—the
Pavecon Ltd. C0. and Public Works capital accounts—in order to purchase stock in
Pavecon Holding Co. Accordingly, one contested issue factual issue in Defendants’
pleadings and at trial was Whether Murphy satisfied the conditions precedent t0 his
obtaining a right to the value 0f those accounts. Defendants submitted the evidence
to show that Murphy failed to satisfy those conditions. They should have received an
instruction requiring a jury finding on those conditions. In fact, as Pavecon has
argued elsewhere, Murphy’s failure t0 obtain a finding 0n these conditions precedent
entitles Defendants t0 judgment as a matter of law. See, e.g., Walker, 730 S.W.2d at
7’73 (holding that defendant was entitled t0 judgment as a matter 0f law where it
disputed in its answer plaintiff’s satisfaction 0f all conditions precedent and plaintiff
failed t0 obtain a finding that she satisfied all conditions precedent).
III. The Charge’s Omission of Any Instruction on the Proper Measure of
Damages Harmed Defendants.
Question 3 requires a new trial as a matter of law because it provided no
guidance Whatever t0 the jury about how t0 measure Murphy’s purported damages.
“Damages,” the Texas Supreme Court held decades ago, “must be measured by a legal
standard, and that standard must be used to guide the fact finder in determining
What sum would compensate the injured party.” Jackson, 499 S.W.2d at 90.
Accordingly, “[a] submission is fatally defective if it fails to guide the jury to
a finding on any proper legal measure of damages.” Sawyer v.Fitts, 630 S.W.2d
8’72, 875 (TeX. App.—F0rt Worth 1982, n0 writ) (emphasis added).
A11 that Question 3 provided the jury was a question: “What sum 0f money, if
any, if paid now in cash, would fairly and reasonably compensate Marty Murphy for
his damages, if any, that resulted from such failure t0 comply?” Instructions on any
legal standard—much less the correct one—that the jury could apply t0 determine
what sum would compensate Murphy were Wholly omitted. Defendants objected to
DEFS.’ MOT. FOR NEW TRIAL Page 5
this omission and supplied a substantially correct instruction. 6 But Murphy
submitted an instruction that lacked any measure whatsoever. Murphy’s omission
requires a new trial. Jackson, 499 S.W.2d at 90 (holding that the charge’s failure to
include any instruction to the jury about how t0 calculate plaintiff’s purported loss of
net profits “require[d] reversal 0f the judgments below”); Arthur Andersen & Co. v.
Perry Equip. Corp, 945 S.W.2d 812, 817 (TeX. 1997) (“Because the charge failed to
instruct the jury 0n the proper measure 0f direct damages, the submission was
reversible error.”); Sawyer, 630 S.W.2d at 875 (reversing the verdict and remanding
for a new trial Where the charge failed t0 instruct the jury 0n the proper legal measure
0f plaintiff’s damages, the difference between the cash market value 0f the business
before and after the injury). Indeed, courts have required new trials in cases Where
questions like Question 3 were submitted to the jury nearly verbatim and, as here,
lacked any instructions 0n the proper legal measure of damages. See, e.g., Stewart v.
Moody, 597 S.W.2d 556, 558 (TeX. CiV. App.—Beaum0nt 1980, writ refd n.r.e.).
Moreover, the charge harmed Defendants by omitting the instruction
Defendants actually proposed, which would have instructed the jury—correctly—on
the legal measure 0f damages in this case. The gravamen 0f Murphy’s breach 0f
contract claim was indisputably Pavecon’s purported failure to purchase (and realize
the value 0f) stock in Pavecon Holdings C0. for Murphy. That is the only theory
Murphy tried t0 the jury. And the Texas Supreme Court has definitively established
the measure of such damages: “the fair market value 0f the stock at the time 0f
[Murphy’s] termination.” Willis v. Donnelly, 199 S.W.3d 262, 275—76 (TeX. 2006).
And, as the Texas Supreme Court further held in Willis, the omission 0f that correct
measure “probably caused the rendition of an improper judgment” and therefore
requires a new trial. Id. at 2’75.
6 Defs.’ 2d Am. Proposed Jury Charge at 34—35.
DEFS.’ MOT. FOR NEW TRIAL Page 6
IV. The Evidence in the Record Required that Defendants’ Affirmative
Defenses Be Submitted to the Jury.
Under Texas Rule 0f Civil Procedure 278, “[t]he court shall submit the
questions, instructions and definitions in the form provided by Rule 277, Which are
raised by the written pleadings and evidence.” “This rule provides a substantive, non-
discretionary directive to trial courts requiring them t0 submit requested questions
to the jury if the pleadings and any evidence support them.” Elbaor v. Smith,
845 S.W.2d 240, 243 (TeX. 1992). “A trial court may refuse t0 submit an issue only if
no evidence exists to warrant its submission.” Id. And under Rule 278, Defendants
were entitled t0 submit questions t0 the jury about their affirmative defenses 0f
release, modification, estoppel, and waiver because both Defendants’ pleadings and
the evidence in the record support those defenses.
It cannot be credibly argued that Defendants had “n0 evidence” t0 support
these defenses. Defendants admitted the Stock Purchase Agreement into evidence
and Murphy conceded that he signed that agreement for consideration, Which
included a broad release.7 Accordingly, to the extent the release was not a legal issue
for the court t0 decide, Defendants were entitled t0 its submission t0 the jury so that
they could argue Murphy was entitled to nothing; or, at least, no further shares 0f
stock in Pavecon Holding C0. given the Stock Purchase Agreement’s unequivocal
release of any further claims 0n that score.
There was ample evidence in the record t0 support Defendants’ defense 0f
modification. Indeed, Murphy’s testimony alone was sufficient t0 justify the
submission of this issue t0 the jury. Murphy conceded at trial—and several
documents showed (e.g., the Pavecon Holding Co. stock 1edger)—that everyone Who
had previously received shares 0f Pavecon Holding C0. stock prior to January 1, 2015,
received no further shares after January 1, 2015, but received instead only equity
7
The release isspelled out further in Defendants’ Motion for J.N.O.V.
DEFS.’ MOT. FOR NEW TRIAL Page 7
positions in Pavecon Ltd. Co. and Public Works. Murphy conceded that he was made
aware 0f that change through a binder full 0f documents, and had, in fact, signed one
0f those agreement but never tendered that executed version to Pavecon due t0 his
concerns about its provisions. Murphy further conceded he was told repeatedly that
he needed t0 sign those documents, and that everyone Who had previously received
shares had signed those agreements and had even been allowed t0 make changes t0
them. That evidence is some evidence of modification. See, e.g., White v. Aguirre, Ina,
N0. O5-00-OO593-CV, 2002 WL 987930 (TeX. App.—Da11as May 15, 2002, n0 pet).
Defendants should therefore have been permitted t0 submit their defense t0 the jury.
There was also some evidence (at least) t0 support defenses of estoppel and
waiver. In support 0f Defendants’ estoppel defense, Defendants introduced evidence
through Don Heierman and Murphy himself that Murphy, by words and conduct,
knowingly concealed material facts that, had Defendants known, would have
precluded Murphy from asserting a breach of contract: namely, that Murphy would
have been fired as early as June of 2015 had Defendants known about his clandestine
operation at “Murphy Farm” or its other code names. And Murphy’s signature on the
Stock Purchase Agreement was itself evidence 0f waiver, i.e., Murphy’s knowing
surrender of any further right t0 stock in Pavecon Holding C0. (in exchange for
hundreds of thousands of dollars) and intentional conduct that is inconsistent with
any claimed right more Pavecon Holding Co. stock. Accordingly, the omission 0f these
questions t0 the jury—despite their submission by Defendants and over Defendants’
objections—requires a new trial. See, e.g., Elbaor, 845 S.W.2d at 248 (holding
omission 0f defendant’s question 0n an affirmative defense required a new trial given
presence of some evidence to support the defense in the record); Fort Worth ISD v.
Palazzolo, 498 S.W.3d 6’74, 682—83 (TeX. App.—Fort Worth 2016, pet. denied) (same);
Thomas-Smith v. Mackin, 238 S.W.3d 503, 508 (TeX. App.—H0uston [14th Dist]
2007, n0 pet.) (same).
DEFS.’ MOT. FOR NEW TRIAL Page 8
V. Defendants Were Entitled to Submit a Question to Jury as to Whether
Murphy Obtained a Benefit as a Result of His Breach of Fiduciary
Duty Because that Issue Was a Disputed Fact in the Case.
Although the remedy of disgorgement is an equitable issue that a court must
decide, Defendants are entitled t0 have the jury decide all disputed issues 0f fact that
may bear 0n the disgorgement inquiry. Hill v. Shamoun & Norman, LLP, 544 S.W.3d
724, 741 (TeX. 2018). And when, as here, “the case contains material fact questions,
the wrongful denial of a jury trial is harmful,” and requires a neW trial. Hayes v. State,
518 S.W.3d 585, 592 (TeX. App.—Tyler 2017, n0 pet).
Here, Defendants asked that the jury be allowed t0 resolve a disputed issue 0f
material fact: Whether “a benefit was conferred upon Murphy as a result 0f his breach
0f fiduciary duty[.]” Defendants were entitled to have this material fact question
decided by the jury because they introduced evidence, through the testimony 0f Don
Heierman, establishing that Defendants did confer a benefit on Murphy as a result
0f his breach 0f fiduciary duty—the stock 0r equity amounts for which he later sued.
And that disputed fact would have carried significant weight in later questions about
the propriety of an award 0f disgorgement. The failure t0 submit the question t0 the
jury in the first instance is itself harmful and requires a new trial. Hayes, 518 S.W.3d
at 592.
CONCLUSION
Defendants are entitled t0 judgment as a matter 0f law 0n Murphy’s claim for
breach 0f contract. But even if the Court determines they’re not, they’re entitled to a
new trial 0n that claim and 0n their claim for breach 0f fiduciary duty. The charge
was erroneous because it omitted not only questions 0n controlling issues 0f fact but
also instructions of law that the jury needed t0 answer the charge. Given how hotly
these issues were contested at trial, these errors and omissions likely affected the
jury’s verdict While precluding Defendants from making their case. At a minimum,
then, Defendants are entitled t0 a new trial.
DEFS.’ MOT. FOR NEW TRIAL Page 9
Date: March 13, 2020 Respectfully submitted,
/s/J. Robert Arnett II
J. Robert Arnett II
Texas Bar No. 01332900
barnett@carterarnett.com
Stacey Cho Hernandez
Texas Bar No. 24063953
shernandez@carterarnett.com
Joshua J. Bennett
Texas Bar No. 24059444
jbennett@carterarnett.com
CARTER ARNETT PLLC
8150 N. Central EXpy, Ste. 500
Dallas, Texas 75206
Telephone: (214) 550-8188
Facsimile: (214) 550-8185
ATTORNEYS FOR DEFENDANTS
CERTIFICATE OF SERVICE
I hereby certify that, 0n March 13, 2020, all counsel 0f record were served With
this filing through the Court’s electronic filing system.
/s/ J. Robert Arnett II
J. Robert Arnett II
DEFS.’ MOT. FOR NEW TRIAL Page 10
Preview
FILED 3/13/2020 7:05PM FELICIA PITRE DISTRICT CLERK DALLAS CO.,TEXAS DEPUTY Terri Kilgore CAUSE NO. DC-17-10592 MARTY MURPHY, IN THE DISTRICT COURT Plaintiff and Counterclaim- Defendant V. PAVECON HOLDING C0,, INC., PAVECON LTD. CO., 192nd JUDICIAL DISTRICT mmmmmmmmmmmmmmmm PAVECON PUBLIC WORKS LP, PAVECON PUBLIC WORKS GP LLC, LABCON, INC., DAVID WALKER, Defendants and Counterclaim- Plaintiffs, DALLAS COUNTY, TEXAS DEFENDANTS’ MOTION FOR NEW TRIAL If Defendants are not entitled t0 judgment as a matter 0f law, as shown in their Motion for J.N.O.V., then Defendants are entitled t0 a new trial. Errors and omissions in the jury charge prevented Defendants from properly presenting their case t0 the jury and caused the jury t0 render an improper verdict. Question Numbers 1 and 2 0n contract formation and breach were both defective because, as Defendants pointed out in their obj ections, neither instruction followed the PJC, both instructions omitted the controlling fact issues the jury should have been asked t0 decide, and the questions lacked necessary instructions 0n elements 0n Which Murphy bore the burden of proof (such as conditions precedent). Question Number 3 on breach-of— contract damages was defective because the question failed t0 follow the PJC 0r to provide even the most basic instructions 0n the proper measure of damages (i.e. the value of stock—at the time 0f injury—Murphy alleged he was owed). Moreover, the jury should have been given several additional questions 0n Defendants’ affirmative defenses (e.g., modification, release, estoppel) and on the issue 0f Murphy’s receiving a benefit despite his breach of fiduciary duty because each of those well-pleaded defenses and claims had ample support in the evidentiary record. At a minimum, then, Defendants are entitled t0 a new trial and the verdict should be set aside. DEFS.’ MOT. FOR NEW TRIAL Page 1 ARGUMENT Defendants are entitled to a new trial When errors in a jury charge probably caused the jury to render an improper verdict or probably prevented the defendants from presenting their case t0 the jury 0r a reviewing court. See, e.g., Romero v. KPH Consol., Inc., 166 S.W.3d 212, 230 (TeX. 2005). Here, there are five categories 0f charge error that either caused the jury t0 render an improper verdict or prevented Defendants from presenting their case t0 the jury. First, omitting controlling and disputed fact questions from Questions 1 and 2 0n contract formation and breach, the charge failed to follow the PJC, encompassed immaterial issues, and thus probably caused the jury t0 render an improper verdict. See, e.g., Sw. Bell Tel. Co. v. John Carlo Texas, Ina, 843 S.W.2d 470, 472 (TeX. 1992). Second, by refusing Defendants’ instruction on breach of contract that included an instruction on conditions precedent, the charge failed t0 instruct the jury 0n controlling issues that might have resulted in a different verdict given Murphy’s concessions that he didn’t satisfy certain conditions. See, e.g., Walker v. Comdata Network, Ina, 730 S.W.2d 769, 778 (TeX. App.—Dallas 1987, writ dism’d). Third, the omission 0f any instructions 0n the measure 0f Murphy’s damages—the value 0f the stock at the time 0f injury that Murphy alleged he was owed—was itself harmful error. See, e.g., Jackson v. Fontaine’s Clinics, Ina, 499 S.W.2d 87, 90 (TeX. 1973). Fourth, the omission 0f any 0f Defendants’ well-pleaded defenses, such as modification and release, was itself harmful error requiring a new trial. Elbaor v. Smith, 845 S.W.2d 240, 243 (TeX. 1992). Fifth, the rejection 0f Defendants’ question about benefits Murphy received as a result 0f his breach 0f fiduciary duty deprived Defendants 0f their right t0 have a jury decide a disputed issue 0f fact, one that would have been integral t0 Defendants’ case about the propriety 0f disgorgement. See, e.g., Hill v. Shamoun & Norman, LLP, 544 S.W.3d 724, 741 (TeX. 2018). DEFS.’ MOT. FOR NEW TRIAL Page 2 I. The Omission of Controlling Facts from Questions 1 and 2 that Defendants Specifically Asked Be Inserted Harmed Defendants and Therefore Requires a New Trial. “Controlling fact questions supported by the pleadings and the evidence should be submitted t0 the jury for determination.” Conquest Drilling Fluids, Inc. v. Tri-Flo Int’l, Ina, 137 S.W.3d 299, 308 (TeX. App.—Beaumont 2004, n0 pet). This is Why the PJC expressly requires litigants t0 provide some factual detail in the charge about the substance 0f the parties’ contractual dispute. See Texas Pattern Jury Charge, Business, Consumer, Insurance & Employment PJC §§ 101.1, 101.3.1 In fact, PJC section 101.1 explicitly instructs that “[t]he court should include in PJC 101.1 . . .all disputed terms essential to create an enforceable agreement.” Here, however, n0 essential terms were included in Question 1. Cf. Commercial Bank of Texas, N.A. v. Luce, 92 S.W.3d 686, 640 (TeX. App.—Beaumont 2002, no pet.) (reversing jury’s verdict and remanding for new trial Where breach 0f contract question to the jury simply asked Whether the jury found in favor of the plaintiff on the question of breach of contract and failed to include any 0f the controlling facts at issue in that claim). Whether Murphy “was entitled t0 be compensated for his employment” in some general sense was never at issue? Murphy was compensated for his employment With bi—monthly wages, and those wages were never at issue. The issue instead was Whether Murphy was entitled a particular kind 0f compensation (Le. stock in Pavecon Holding Co.) as a result 0f a binding agreement between he and Pavecon that Murphy says required Pavecon Ltd. C0. and Public Works to realize the value 0f two capital accounts and then use that realized value t0 purchase stock from Pavecon Holding C0. 0n Murphy’s behalf and for his benefit. Indeed, Murphy and his damages expert, Mr. Sibley, conceded that this was the sole factual basis for Murphy’s 1 PJC section 101.1 asks “Did Paul Payne and Don Davis agree [insert all disputed terms]?” (emphasis added). 2 Jury Charge at 5 (filed Dec. 12, 2019). DEFS.’ MOT. FOR NEW TRIAL Page 3 contract claim. Yet, despite Defendants’ objection and proposed instruction,3 none of those controlling facts made it into Questions 1 or 2. The omission 0f these controlling facts harmed Defendants and caused the rendition of an improper jury verdict. Instead 0f asking about the controlling facts that were hotly disputed at trial, Questions 1 and 2 simply inquired about immaterial issues—a general agreement t0 compensate Murphy in some general way. That wasn’t the issue Murphy presented at trial. And the purported agreement Murphy did place at issue—the agreement to realize capital account values t0 purchase additional stock in Pavecon Holding C0.—Was hotly contested and disputed. Accordingly, if Murphy has any breach 0f contract claim at all (Which he does not), Defendants are entitled t0 a new trial on that claim. See, e.g., Matlock Place Apartments, LP v. Druce, 369 S.W.3d 355, 383 (TeX. App.—F0rt Worth 2012, pet. denied) (holding that where factual issues were hotly contested at trial and the evidence could have permitted the jury t0 find for the other party, the charge’s omission 0f those contested issues required a new trial). II. The Charge’s Omission of an Element of Murphy’s Claim—Conditions Precedent—Was Harmful. Another controlling issue that the charge omitted—despite Defendants’ express request and 0bjection4—Was the element of conditions precedent, an element Which Murphy bore the burden of proving given Defendants’ express denial 0f conditions precedent in their answer.5 See, e.g., TeX. R. CiV. P. 54. The omission of this element from that charge probably affected the verdict and limited Defendants’ ability to present their case t0 the jury. The lynchpin 0f Murphy’s contract claim at 3 See, for example, Defendants’ Second Amended Proposed Jury Charge, which the Court rejected and which would have asked the jury “Did Murphy and Pavecon Holding, Pavecon Ltd., or Pavecon Public Works agree that after January 1, 2015, Murphy receive an equity bonus whereby Pavecon Public Works and Pavecon Ltd. would take allocations made to capital accounts and use them to purchase stock in Pavecon Holding 0n Murphy’s behalf?” Id. at 13 (filed Dec. 11, 2019). 4 Defs.’ 2d Am. Proposed Jury Charge at 14. 5 Defs.’ Answer t0 Pl.’s Third Am. Pet. fl 3 (filed Sept. 24, 2018). DEFS.’ MOT. FOR NEW TRIAL Page 4 trial was the parties’ purported agreement to monetize partnership assets—the Pavecon Ltd. C0. and Public Works capital accounts—in order to purchase stock in Pavecon Holding Co. Accordingly, one contested issue factual issue in Defendants’ pleadings and at trial was Whether Murphy satisfied the conditions precedent t0 his obtaining a right to the value 0f those accounts. Defendants submitted the evidence to show that Murphy failed to satisfy those conditions. They should have received an instruction requiring a jury finding on those conditions. In fact, as Pavecon has argued elsewhere, Murphy’s failure t0 obtain a finding 0n these conditions precedent entitles Defendants t0 judgment as a matter of law. See, e.g., Walker, 730 S.W.2d at 7’73 (holding that defendant was entitled t0 judgment as a matter 0f law where it disputed in its answer plaintiff’s satisfaction 0f all conditions precedent and plaintiff failed t0 obtain a finding that she satisfied all conditions precedent). III. The Charge’s Omission of Any Instruction on the Proper Measure of Damages Harmed Defendants. Question 3 requires a new trial as a matter of law because it provided no guidance Whatever t0 the jury about how t0 measure Murphy’s purported damages. “Damages,” the Texas Supreme Court held decades ago, “must be measured by a legal standard, and that standard must be used to guide the fact finder in determining What sum would compensate the injured party.” Jackson, 499 S.W.2d at 90. Accordingly, “[a] submission is fatally defective if it fails to guide the jury to a finding on any proper legal measure of damages.” Sawyer v.Fitts, 630 S.W.2d 8’72, 875 (TeX. App.—F0rt Worth 1982, n0 writ) (emphasis added). A11 that Question 3 provided the jury was a question: “What sum 0f money, if any, if paid now in cash, would fairly and reasonably compensate Marty Murphy for his damages, if any, that resulted from such failure t0 comply?” Instructions on any legal standard—much less the correct one—that the jury could apply t0 determine what sum would compensate Murphy were Wholly omitted. Defendants objected to DEFS.’ MOT. FOR NEW TRIAL Page 5 this omission and supplied a substantially correct instruction. 6 But Murphy submitted an instruction that lacked any measure whatsoever. Murphy’s omission requires a new trial. Jackson, 499 S.W.2d at 90 (holding that the charge’s failure to include any instruction to the jury about how t0 calculate plaintiff’s purported loss of net profits “require[d] reversal 0f the judgments below”); Arthur Andersen & Co. v. Perry Equip. Corp, 945 S.W.2d 812, 817 (TeX. 1997) (“Because the charge failed to instruct the jury 0n the proper measure 0f direct damages, the submission was reversible error.”); Sawyer, 630 S.W.2d at 875 (reversing the verdict and remanding for a new trial Where the charge failed t0 instruct the jury 0n the proper legal measure 0f plaintiff’s damages, the difference between the cash market value 0f the business before and after the injury). Indeed, courts have required new trials in cases Where questions like Question 3 were submitted to the jury nearly verbatim and, as here, lacked any instructions 0n the proper legal measure of damages. See, e.g., Stewart v. Moody, 597 S.W.2d 556, 558 (TeX. CiV. App.—Beaum0nt 1980, writ refd n.r.e.). Moreover, the charge harmed Defendants by omitting the instruction Defendants actually proposed, which would have instructed the jury—correctly—on the legal measure 0f damages in this case. The gravamen 0f Murphy’s breach 0f contract claim was indisputably Pavecon’s purported failure to purchase (and realize the value 0f) stock in Pavecon Holdings C0. for Murphy. That is the only theory Murphy tried t0 the jury. And the Texas Supreme Court has definitively established the measure of such damages: “the fair market value 0f the stock at the time 0f [Murphy’s] termination.” Willis v. Donnelly, 199 S.W.3d 262, 275—76 (TeX. 2006). And, as the Texas Supreme Court further held in Willis, the omission 0f that correct measure “probably caused the rendition of an improper judgment” and therefore requires a new trial. Id. at 2’75. 6 Defs.’ 2d Am. Proposed Jury Charge at 34—35. DEFS.’ MOT. FOR NEW TRIAL Page 6 IV. The Evidence in the Record Required that Defendants’ Affirmative Defenses Be Submitted to the Jury. Under Texas Rule 0f Civil Procedure 278, “[t]he court shall submit the questions, instructions and definitions in the form provided by Rule 277, Which are raised by the written pleadings and evidence.” “This rule provides a substantive, non- discretionary directive to trial courts requiring them t0 submit requested questions to the jury if the pleadings and any evidence support them.” Elbaor v. Smith, 845 S.W.2d 240, 243 (TeX. 1992). “A trial court may refuse t0 submit an issue only if no evidence exists to warrant its submission.” Id. And under Rule 278, Defendants were entitled t0 submit questions t0 the jury about their affirmative defenses 0f release, modification, estoppel, and waiver because both Defendants’ pleadings and the evidence in the record support those defenses. It cannot be credibly argued that Defendants had “n0 evidence” t0 support these defenses. Defendants admitted the Stock Purchase Agreement into evidence and Murphy conceded that he signed that agreement for consideration, Which included a broad release.7 Accordingly, to the extent the release was not a legal issue for the court t0 decide, Defendants were entitled t0 its submission t0 the jury so that they could argue Murphy was entitled to nothing; or, at least, no further shares 0f stock in Pavecon Holding C0. given the Stock Purchase Agreement’s unequivocal release of any further claims 0n that score. There was ample evidence in the record t0 support Defendants’ defense 0f modification. Indeed, Murphy’s testimony alone was sufficient t0 justify the submission of this issue t0 the jury. Murphy conceded at trial—and several documents showed (e.g., the Pavecon Holding Co. stock 1edger)—that everyone Who had previously received shares 0f Pavecon Holding C0. stock prior to January 1, 2015, received no further shares after January 1, 2015, but received instead only equity 7 The release isspelled out further in Defendants’ Motion for J.N.O.V. DEFS.’ MOT. FOR NEW TRIAL Page 7 positions in Pavecon Ltd. Co. and Public Works. Murphy conceded that he was made aware 0f that change through a binder full 0f documents, and had, in fact, signed one 0f those agreement but never tendered that executed version to Pavecon due t0 his concerns about its provisions. Murphy further conceded he was told repeatedly that he needed t0 sign those documents, and that everyone Who had previously received shares had signed those agreements and had even been allowed t0 make changes t0 them. That evidence is some evidence of modification. See, e.g., White v. Aguirre, Ina, N0. O5-00-OO593-CV, 2002 WL 987930 (TeX. App.—Da11as May 15, 2002, n0 pet). Defendants should therefore have been permitted t0 submit their defense t0 the jury. There was also some evidence (at least) t0 support defenses of estoppel and waiver. In support 0f Defendants’ estoppel defense, Defendants introduced evidence through Don Heierman and Murphy himself that Murphy, by words and conduct, knowingly concealed material facts that, had Defendants known, would have precluded Murphy from asserting a breach of contract: namely, that Murphy would have been fired as early as June of 2015 had Defendants known about his clandestine operation at “Murphy Farm” or its other code names. And Murphy’s signature on the Stock Purchase Agreement was itself evidence 0f waiver, i.e., Murphy’s knowing surrender of any further right t0 stock in Pavecon Holding C0. (in exchange for hundreds of thousands of dollars) and intentional conduct that is inconsistent with any claimed right more Pavecon Holding Co. stock. Accordingly, the omission 0f these questions t0 the jury—despite their submission by Defendants and over Defendants’ objections—requires a new trial. See, e.g., Elbaor, 845 S.W.2d at 248 (holding omission 0f defendant’s question 0n an affirmative defense required a new trial given presence of some evidence to support the defense in the record); Fort Worth ISD v. Palazzolo, 498 S.W.3d 6’74, 682—83 (TeX. App.—Fort Worth 2016, pet. denied) (same); Thomas-Smith v. Mackin, 238 S.W.3d 503, 508 (TeX. App.—H0uston [14th Dist] 2007, n0 pet.) (same). DEFS.’ MOT. FOR NEW TRIAL Page 8 V. Defendants Were Entitled to Submit a Question to Jury as to Whether Murphy Obtained a Benefit as a Result of His Breach of Fiduciary Duty Because that Issue Was a Disputed Fact in the Case. Although the remedy of disgorgement is an equitable issue that a court must decide, Defendants are entitled t0 have the jury decide all disputed issues 0f fact that may bear 0n the disgorgement inquiry. Hill v. Shamoun & Norman, LLP, 544 S.W.3d 724, 741 (TeX. 2018). And when, as here, “the case contains material fact questions, the wrongful denial of a jury trial is harmful,” and requires a neW trial. Hayes v. State, 518 S.W.3d 585, 592 (TeX. App.—Tyler 2017, n0 pet). Here, Defendants asked that the jury be allowed t0 resolve a disputed issue 0f material fact: Whether “a benefit was conferred upon Murphy as a result 0f his breach 0f fiduciary duty[.]” Defendants were entitled to have this material fact question decided by the jury because they introduced evidence, through the testimony 0f Don Heierman, establishing that Defendants did confer a benefit on Murphy as a result 0f his breach 0f fiduciary duty—the stock 0r equity amounts for which he later sued. And that disputed fact would have carried significant weight in later questions about the propriety of an award 0f disgorgement. The failure t0 submit the question t0 the jury in the first instance is itself harmful and requires a new trial. Hayes, 518 S.W.3d at 592. CONCLUSION Defendants are entitled t0 judgment as a matter 0f law 0n Murphy’s claim for breach 0f contract. But even if the Court determines they’re not, they’re entitled to a new trial 0n that claim and 0n their claim for breach 0f fiduciary duty. The charge was erroneous because it omitted not only questions 0n controlling issues 0f fact but also instructions of law that the jury needed t0 answer the charge. Given how hotly these issues were contested at trial, these errors and omissions likely affected the jury’s verdict While precluding Defendants from making their case. At a minimum, then, Defendants are entitled t0 a new trial. DEFS.’ MOT. FOR NEW TRIAL Page 9 Date: March 13, 2020 Respectfully submitted, /s/J. Robert Arnett II J. Robert Arnett II Texas Bar No. 01332900 barnett@carterarnett.com Stacey Cho Hernandez Texas Bar No. 24063953 shernandez@carterarnett.com Joshua J. Bennett Texas Bar No. 24059444 jbennett@carterarnett.com CARTER ARNETT PLLC 8150 N. Central EXpy, Ste. 500 Dallas, Texas 75206 Telephone: (214) 550-8188 Facsimile: (214) 550-8185 ATTORNEYS FOR DEFENDANTS CERTIFICATE OF SERVICE I hereby certify that, 0n March 13, 2020, all counsel 0f record were served With this filing through the Court’s electronic filing system. /s/ J. Robert Arnett II J. Robert Arnett II DEFS.’ MOT. FOR NEW TRIAL Page 10