Acadia Healthcare Co. v. Horizon Health Corp.

• Decision Date: 23 July 2015
• Docket Number: NO. 02–13–00339–CV,02–13–00339–CV
• Citation: 472 S.W.3d 74
• Parties: Acadia Healthcare Company, Inc.; Psychiatric Resource Partners, Inc. ; Michael A. Saul; Timothy J. Palus; Peter D. Ulasewicz; Barbara H. Bayma; and John M. Piechocki, Appellants and Appellees v. Horizon Health Corporation, Appellee and Appellant
• Court: Texas Court of Appeals

472 S.W.3d 74

Acadia Healthcare Company, Inc.; Psychiatric Resource Partners, Inc. ; Michael A. Saul; Timothy J. Palus; Peter D. Ulasewicz; Barbara H. Bayma; and John M. Piechocki, Appellants and Appellees

v.Horizon Health Corporation, Appellee and Appellant

NO. 02–13–00339–CV

Court of Appeals of Texas, Fort Worth.

DELIVERED: July 23, 2015

Rehearing Overruled September 10, 2015

Reconsideration En Banc Overruled September 17, 2015

Grace Weatherly, R. William Wood, Jesse L. Cromwell, Wood, Thacker & Weatherly, P.C., Denton, Stephen J. Roppolo, Alia S. Wynne, Fisher & Phillips LLP, Houston, Jeffery T. Nobles, Kelly H. Leonard, Beirne, Maynard & Parsons, LLP, Houston, for Appellant.

Kendyl T. Haynes, Greenberg Trurig LLP, , Austin, for Appellee.

PANEL: LIVINGSTON, C.J.; WALKER and GABRIEL, JJ.

OPINION ON REHEARING

LEE GABRIEL, JUSTICE

Horizon Health Corporation (Horizon) moved for a rehearing of this panel's February 26, 2015 memorandum opinion and judgment. See Tex. R. App. P. 49.1. We grant the motion, withdraw our February 26, 2015 memorandum opinion and judgment, and substitute the following. We dismiss Horizon's motion for en banc reconsideration as moot. See Tex. Dep't of Public Safety v. Nail, 305 S.W.3d 673, 674 (Tex.App.–Austin 2010, no pet.) (op. on reh'g).

This appeal raises multiple questions involving a trial court's judgment based on the jury's answers to a 55–page charge. We are asked to review alleged jury-charge error, the sufficiency of the evidence to support the jury's findings, exemplary damages, attorneys' fees, and how preservation of error or lack thereof can affect our review of all of these issues. Because we conclude the evidence is legally insufficient to support future lost-profits damages and because exemplary damages may not be awarded jointly and severally under the facts of this case, we reverse those portions of the trial court's judgment. Because we also substantially reduce the exemplary-damages award based on the reduction of compensatory damages upon a suggestion of remittitur, we reverse the issue of attorneys' fees and remand that issue for a new trial. Otherwise, we will affirm the remainder of the trial court's judgment subject to our suggestion of a remittitur regarding exemplary damages.

I. BACKGROUND

A. HORIZON AND PROJECT SHAMROCK

Horizon Mental Health Management, Inc. was formed in 1981 to manage mental-health programs for healthcare entities such as hospitals. In 2007, Horizon Mental Health Management, Inc. became Horizon Health Corporation (Horizon) and was acquired by Psychiatric Solutions, Inc. (PSI). PSI's chief executive officer at the time was Joey Jacobs.

In early 2010, PSI considered going private and, thus, no longer being publicly traded. Several members of Horizon's executive-management team met shortly thereafter to discuss the possibility of buying Horizon from PSI. These team members, who called themselves "Project Shamrock," were Mike Saul (the president of Horizon), Barbara Bayma (the chief clinical officer for Horizon), Peter Ulasewicz (a senior vice-president of business development for Horizon), Cory Thomas (Horizon's chief financial officer), Jack DeVaney (a senior vice-president of operations for Horizon), and Tim Palus (also a senior vice-president of operations for Horizon). Saul approached Jacobs to express Project Shamrock's interest in buying Horizon if PSI went private. Jacobs told Saul that "certain things would remain exactly as they were and that PSI, instead of being a publicly traded company, would just be a privately held company."

Contrary to Jacobs's belief, however, PSI ultimately was acquired by Universal Health Services (UHS), a large, publicly-traded company. Project Shamrock then tried to negotiate buying Horizon from UHS. In late 2010, UHS rejected Project Shamrock's proposal and kept Horizon under UHS's ownership umbrella. The members of Project Shamrock remained employed by Horizon after UHS rejected their buy-out offer.

B. ACADIA FORMS SUBSIDIARY AND HIRES HORIZON EMPLOYEES

In May 2011, Saul approached Acadia Healthcare Company¹ "about the possibility of ... going over to Acadia." Acadia owned "freestanding psychiatric, child and adolescent, residential, chemical dependency treatment" facilities. Saul presented a business plan to Acadia's president, Brent Turner, on May 18, 2011, proposing that Acadia establish a subsidiary to manage mental-health programs for hospitals and other mental-health providers. In his presentation, Saul identified several companies that would be "competition" for the proposed subsidiary, including Horizon, which Saul indicated was "lost in UHS bureaucracy" and would lose customers "due to relationships." Acadia decided to "move forward" with the proposal, and Saul forwarded his resume and the resumes of Ulasewicz, Palus, and Bayma to Turner as a "proposed management team." Saul also told Turner that they "would go hard" after John Piechocki, a member of Ulasewicz's sales team, based on his successful sales record at Horizon. Indeed, Ulasewicz and Saul began to recruit Piechocki to work for Acadia shortly after Acadia approved Saul's proposal.

In June 2011, Saul, Ulasewicz, Palus, and Bayma met to discuss their anticipated move to Acadia and "their plans for [the planned Acadia subsidiary]."² In August and September 2011, Saul, Palus, Bayma, Piechocki, and Ulasewicz resigned from Horizon. Each began working for Psychiatric Resource Partners (PRP), which was a recently formed subsidiary of Acadia borne from Saul's May 2011 presentation. Saul began as the president of PRP. Piechocki told DeVaney, who stayed at Horizon,³ that PRP would "directly compete" with Horizon.

C. HORIZON INVESTIGATES

Based on these close-in-time resignations, Horizon conducted a forensic investigation of its computer system and discovered that all except Piechocki "had conferred with one another in reaching their individual decisions to leave, and in making preparations to leave," including discussing strategy regarding their move to Acadia, planning the exact timing of their resignations, and noting when their employment benefits with Acadia would begin. Indeed, shortly before Saul's presentation to Acadia, Ulasewicz e-mailed Saul and told him that several of their possible new clients would come "out of Horizon's hide," their departures would leave Horizon "dead," their business strategy at Acadia should be "hurting Horizon early and often," and "the real Horizon—Jacobs, Saul, Ulasewicz, Bayma, Palus, Piechocki"—would "need to gut punch [Horizon]" as they left.

It is undisputed that Saul, Palus, Ulasewicz, Bayma, and Piechocki (collectively, the individual defendants) accessed their work files and made copies of several Horizon documents before they left to work for PRP. In particular, Saul bought an external hard drive for his work computer in late 2010 and placed "a massive, massive amount" of Horizon documents on it such as policies and procedures, "non-standard" contract language, financial models, monthly account listings, sales presentations, orientation materials, and legal files. Basically, Saul copied onto his external hard drive "everything that was non-financial on [Horizon's] server."

Additionally, during a routine human-resources audit, it was discovered that Saul, Bayma, Palus, and Ulasewicz had signed employment agreements while employed at Horizon, mandating confidentiality and restricting solicitation and competition (collectively, the restrictive covenants). The agreements specifically mentioned the positions each had held at the time the agreements were signed, which were not the same positions each had held at the time of their resignations. The covenants not to compete barred the employees from seeking employment in or independently establishing "a psychiatric contract management company that is in direct competition with [Horizon]." They were further prohibited from soliciting "any employee of [Horizon]." The confidentiality covenants barred the employees from disclosing or using Horizon's trade secrets, confidential information, or proprietary information. Although the employees signed the agreements between 1997 and 2005, the agreements applied "for a period of one (1) year" after their respective employments with Horizon ended.

In September 2011, shortly after the individual defendants left their jobs with Horizon, Horizon notified Bayma, Jacobs, Palus, Piechocki, Saul, and Ulasewicz that their resignations and subsequent employments with Acadia were in violation of their employment agreements and the restrictive covenants entered into "at the inception of [their] employment" and of their common-law duties of good faith and loyalty.⁴ Horizon demanded that they end their employment with Acadia and return all documents to Horizon.

D. PRP'S SALES EFFORTS

Piechocki, using a list of Horizon sales leads he had copied before resigning, was able to secure a consulting contract for PRP with Southwest Regional Medical Center, which was an active Horizon lead noted on its list of sales leads. Although Piechocki marked some of the leads on the list "DEAD" before he resigned from Horizon, those leads were added to PRP's "master contact list" after Piechocki joined Acadia. In January 2012, Piechocki ultimately signed Westlake Regional Hospital (Westlake) to a contract with PRP over "direct competition" from Horizon. Piechocki used Horizon's financial models to "crunch[ ] numbers" to win the Westlake contract. Additionally, PRP agreed to pay Westlake $150,000 to upgrade its facility, which was not a concession Horizon had ever made before in its management contracts.

After joining PRP, Ulasewicz set up a meeting with Cottage Hospital, which was a potential client he had met with while employed by Horizon. Ulasewicz previously had learned while still employed by Horizon that Cottage Hospital's impediment to using contract-management services such as those offered by Horizon and PRP possibly would be removed; however, Ulasewicz...