John Black v. James Redmond

Filing

UNPUBLISHED OPINION FILED. [17-20132 Affirmed] Judge: WED, Judge: EBC, Judge: GJC. Mandate pull date is 10/13/2017 [17-20132]

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 17-20132
Summary Calendar

United States Court of Appeals
Fifth Circuit

FILED
September 22, 2017

JOHN L. BLACK,

Lyle W. Cayce
Clerk

Plaintiff - Appellee
v.
JAMES P. REDMOND,
Defendant - Appellant

Appeals from the United States District Court
for the Southern District of Texas
USDC No. 4:14-CV-1036
Before DAVIS, CLEMENT, and COSTA, Circuit Judges.
PER CURIAM: *
A jury found for the plaintiff in this partnership dispute and awarded
$200,000.

The defendant seeks a new trial on the grounds that the jury’s

findings on causation and breach were against the great weight of the evidence.
He also challenges the damages award. Because the district court did not
abuse its discretion in denying the motion for a new trial, we AFFIRM.

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
*

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I.
John Black patented a unique design for wind resistant billboard frames
called “Universal Flex Frames.” He traveled from his home in Florida to
Houston with the hopes of marketing and selling his invention. It was on this
trip to Houston that Black met with James Redmond. The two had worked
together before, and had been partners in both a sign business and several bars
starting in the late 70s and into the 80s. The two men agreed to create
Universal Flex Frames of Texas for the purpose of building, marketing, and
selling Black’s patented frames and splitting the profits. They entered into an
oral agreement to start this venture “on a 50/50 basis.” Under this agreement,
Black would contribute his patent, building materials, tools, and “sweat
equity” to the venture. Redmond would contribute cash, facilities, and office
support through his other companies.

Redmond also hired Black as a

subcontractor working for a separate company owned solely by Redmond
named Houston Sign and Service, Inc.
After entering into the oral agreement, Black and Redmond began
setting up the business. They registered Universal Flex Frames of Texas as
an unincorporated business and opened a bank account in its name. They also
set up a workspace where they would construct 150 Universal Flex Frames.
About a year and a half later, Black and Redmond’s relationship began
to sour when Black learned that Redmond had been selling Universal Flex
Frames to Houston Sign and Service, his own company, at wholesale prices.
Black was concerned that the frames were being sold for only $50 more than
their cost to build. Following Black’s discovery that Redmond had been selling
the Flex Frames to his own business, Black proposed written terms over e-mail
to clarify what Black believed were the terms of the original oral partnership.
Redmond says this email was sent to a defunct address and was never received.
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Five days after Black sent the email attempting to clarify the
partnership terms, Black and Redmond met in Redmond’s office. According to
Black, the meeting lasted about a minute. Black asked to talk about the prices
and Redmond allegedly “kicked [him] out of the office, and told [him] to go back
to Florida.” The next day, Redmond sent Black an e-mail stating the
partnership was over and that the inventory would remain in Redmond’s
possession unless Black wished to purchase the remaining frames. Black
contends he was never shown financial statements for the partnership, and
was never compensated for his interest in the partnership.
Following the termination of the partnership, Black filed suit alleging
that the two had formed an oral partnership agreement; that Redmond had
breached that agreement; and that Black was entitled to $248,714.50, half the
alleged value of the assets of the partnership at the time it terminated. A jury
found in Black’s favor and awarded him $200,000. Redmond unsuccessfully
sought a new trial.
II.
We review a district court's ruling on a motion for new trial for abuse of
discretion. Int'l Ins. Co. v. RSR Corp., 426 F.3d 281, 300 (5th Cir. 2005).

We

give great deference to the district court ruling when it has denied the new
trial motion and upheld the jury's verdict. Int'l Ins. Co., 426 F.3d at 300. “New
trials should not be granted on evidentiary grounds unless, at a minimum, the
verdict is against the great weight of the evidence.” Conway v. Chem. Leaman
Tank Lines, Inc., 610 F.2d 360, 363 (5th Cir. 1980).

A jury's damage award

will stand unless clearly erroneous. Myers v. Griffin–Alexander Drilling Co.,
910 F.2d 1252, 1255 (5th Cir. 1990).
III.
Redmond’s request for a new trial ultimately fails because the jury was
entitled to make its own determinations in weighing the evidence and deciding
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whose testimony was more credible.

The trial featured two competing

narratives and the jury was asked to pick sides in a he said/he said dispute
about the nature of their oral agreement.

The jury was presented with

conflicting evidence, such as inventory accounting documents and e-mails
about the nature of the partnership. After considering all of the evidence, the
jury “could have reached a number of different conclusions, all of which would
have sufficient support in this evidence to be upheld.” Conway, 610 F.2d at 367.
A.
One of those permissible conclusions was that a partnership agreement
existed. The Texas Business Organizations Code outlines the following five
factors that indicate whether a partnership has been formed: “(1) receipt or
right to receive a share of profits in the business; (2) expression of an intent to
be partners in the business; (3) participation or right to participate in control
of the business; (4) agreement to share or actual sharing of: losses of the
business, or liability for claims by third parties against the business; and (5)
agreement to contribute or contributing money or property to the business.
Tex. Bus. Orgs. Code Ann. § 152.052. These factors are nonexclusive and even
one factor standing on its own can be strong enough to support the existence
of a partnership. See Tex. Gov't Code Ann. § 311.005 (defining “includes”
within the Texas Code to not denote “limitation or exclusive enumeration”);
Enter. Prod. Partners, L.P. v. Energy Transfer Partners, L.P., 2017 WL
3033312, at *6 (Tex. App.—Dallas July 18, 2017).
The evidence allowed the jury to find that three of the five factors
supported the existence of a partnership. 1

Black testified that he and

Redmond had orally agreed to form a “50/50 partnership,” and further stated

No evidence was presented suggesting an agreement to share either losses or liability
of the business, and the evidence presented concerning management suggests that Redmond
exercised most or all of the management authority of the venture.
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he was going to provide his patent, construction expertise, and uncompensated
work to the partnership as part of the agreement. Concerning profit sharing,
both Black and Redmond testified that they had discussed splitting the profits
from selling the Universal Flex Frames. Furthermore, in Redmond’s final
email to Black, he wrote “Looks like the frame partnership is over with.” There
was more than sufficient evidence of a partnership to support the jury’s verdict.
B.
The jury’s determination that the partnership agreement was breached
is also not against the great weight of evidence. Black alleges that Redmond
breached the agreement in numerous ways including: (1) kicking Black out of
the partnership, (2) failing to split funds generated from the sales of the
billboards, (3) refusing to properly account for the partnership business, (4)
engaging in self-dealing by selling to his own business at wholesale prices, and
(5) neglecting to deposit money into the partnership’s joint account.
There is sufficient evidence to support these breach allegations. Most
importantly, there is direct evidence that Redmond unilaterally terminated the
partnership agreement in January 2014. The jury’s finding of breach is further
supported by Black’s testimony that Redmond had been self-dealing by selling
the Universal Flex Frames to his own company for $50 over cost. The evidence
also supports a finding that Black never received complete financial reports
that he had requested as a partner in the business.
Redmond argues that the terms of the contract were not “sufficiently
definite” to demonstrate a breach and implies that the jury was “rewrit[ing]
the contract.” These arguments fail because the authorities Redmond cites
address the interpretation of written contracts. See Fort Worth Indep. Sch.
Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000); LG Ins. Mgmt.
Servs., L.P. v. Leick, 378 S.W.3d 632, 638 (Tex. App.—Dallas 2012, pet.
denied). As this jury was interpreting an oral contract, it was entitled to
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determine the terms of the agreement, and what constitutes breach, based on
“either circumstantial or direct evidence.” Turner v. NJN Cotton Co., 485
S.W.3d 513, 521 (Tex. App.—Eastland 2015, pet. denied). That evidence is not
so strongly against the jury’s finding of a breach to warrant a new trial.
C.
Redmond’s final challenge is to the damages awarded. He contends there
was insufficient evidence to find the parties agreed to an equal division of the
partnership assets upon dissolution, which was the basis for the award. The
Texas Business Organizations Code specifies default rules for what should
happen upon the termination and winding up of a partnership. Tex. Bus. Orgs.
Code Ann. § 152.707.

Once terminated, the partnership is expected to

distribute to each partner the balance of his or her “capital account.” Id. A
“capital account” is computed by “adding the amount of a partner's original and
additional contributions of cash to a partnership, the agreed value of any other
property that that partner originally or additionally contributed to the
partnership, and allocations of partnership profits to that partner; and
subtracting the amount of distributions to that partner and allocations of
partnership losses to that partner.” Tex. Bus. Orgs. Code Ann. § 151.001(1)
(West).
Redmond is likely correct that the mere fact that the partnership was on
a “50/50 basis” did not necessarily entitle Black to a straight split of the
remaining partnership assets 2 at the time of dissolution. Regardless, there is

There is disagreement about the valuation of the remaining assets of Universal Flex
Frames of Texas. As is often the case, it is not entirely clear how the jury came to its valuation
considering it was lower than the damages proposed by the plaintiff. The starting point,
however, is the valuation of the partnership assets. Black presented significant testimony
concerning the total value of Universal Flex Frames of Texas as of November 2013,
concluding that it was $497,429. The jury was entitled to give this testimony the weight and
credibility it thought it deserved, and we do not find that this valuation was too speculative
or conclusory.
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enough evidence to support a finding that Black suffered $200,000 in damages
(the award was almost $50,000 less than the 50% share he sought based on his
valuation of the company).

Black testified that the value of the tools,

machinery, jigs, and parts he contributed had a value of $50,000. Black also
testified that he valued the license to use his patent, which he granted to the
partnership, at $100,000 per year. Black also argues he put significant “knowhow and sweat equity” into the partnership and never received payments for
his contributions to the partnership. Given this testimony, the award was not
against the great weight of evidence or otherwise in error. 3
Redmond further challenges the award on the ground that this was not
an action to account for the dissolution of the partnership and thus he argues
any payout of Black’s capital account should be decided in a separate trial.
Akuna Matata Invs., Ltd. v. Texas Nom Ltd. P’ship., 814 F.3d 277 (5th Cir.
2016). This argument is untimely as it was not raised in Redmond’s initial
brief. For obvious reasons, our court generally will not consider an issue raised
for the first time in a reply brief. See United States v. Rodriguez, 602 F.3d 346,
360 (5th Cir. 2010). But if this court were to consider Redmond’s Akuna
argument, it would fail. Akuna dealt with a question of res judicata when a
prior trial had awarded damages but made no official determination on the
dissolution of the partnership. 814 F.3d at 281. In contrast, Black was asking
in a single trial for a finding of breach, and, as damages for that breach, a
payout of Black’s capital account.

The computation is made particularly difficult because the agreement was oral and
Redmond denies the existence of the partnership. Therefore, issues such as whether there
were losses that should be subtracted from Black’s account were not fully developed because
it would have required Redmond acknowledge the partnership’s existence and present an
alternative accounting of each partner’s capital account.
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***
We AFFIRM the district court’s denial of Redmond’s motion for a new
trial.

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