Capital Metro. v. Central of Tenn. Ry.

• Decision Date: 11 July 2003
• Docket Number: No. 03-02-00483-CV.,03-02-00483-CV.
• Citation: 114 S.W.3d 573
• Parties: CAPITAL METROPOLITAN TRANSPORTATION AUTHORITY/CENTRAL OF TENNESSEE RAILWAY AND NAVIGATION COMPANY, INC. d/b/a Longhorn Railway Company, Appellants, v. CENTRAL OF TENNESSEE RAILWAY AND NAVIGATION COMPANY, INC. d/b/a Longhorn Railway Company/Capital Metropolitan Transportation Authority, Appellees.
• Court: Texas Court of Appeals

114 S.W.3d 573

CAPITAL METROPOLITAN TRANSPORTATION AUTHORITY/CENTRAL OF TENNESSEE RAILWAY AND NAVIGATION COMPANY, INC. d/b/a Longhorn Railway Company, Appellants, v. CENTRAL OF TENNESSEE RAILWAY AND NAVIGATION COMPANY, INC. d/b/a Longhorn Railway Company/Capital Metropolitan Transportation Authority, Appellees.

No. 03-02-00483-CV.

Court of Appeals of Texas, Austin.

July 11, 2003.

Rehearing Overruled October 2, 2003.

Andrew M. Taylor, Eric B. Storm, Bracewell & Patterson, L.L.P., Austin, Tracy C. Temple, Bracewell & Patterson, L.L.P., Houston, for appellants.

Timothy J. Herman, Matthew R. Beatty, Herman, Howry & Breen, LLP, Austin, for appellees.

Justices B.A. SMITH, PURYEAR and ABOUSSIE.^*

OPINION

DAVID PURYEAR, Justice.

This is an appeal following a jury trial in a breach-of-contract case. Capital Metropolitan Transportation Authority ("Capital Metro") sued Longhorn Railway Company ("Longhorn") for breach of a "Restated Contract for Rail Freight Services on the Giddings Llano Line" ("Restated Contract"). Longhorn brought a counterclaim for breach of the same contract. At the close of Capital Metro's case, the trial court granted a directed verdict against Capital Metro on its claim for damages, other than nominal damages and attorney's fees, arising from Longhorn's breach of contract. The jury found that both Capital Metro and Longhorn breached the Restated Contract but that Longhorn's breach was excused. The jury awarded Longhorn $1.2 million in benefit-of-the-bargain damages, $1.5 million in lost profits, and $300,000 in attorneys' fees. Capital Metro filed a motion to disregard jury answers and for judgment notwithstanding the verdict, attacking among other things, the damages found by the jury. The trial court granted Capital Metro's motion in part, determining that there was legally insufficient evidence to support the jury's finding of $1.2 million in benefit-of-the-bargain damages. The court then rendered judgment in favor of Longhorn on the $1.5 million in lost profits and the $300,000 in attorney's fees. Capital Metro appeals by five issues, claiming that there is: (1) legally and factually insufficient evidence to support the jury's findings of $1.5 million in lost profits and $300,000 in attorney's fees; (2) legally and factually insufficient evidence to support the jury's findings that Capital Metro breached the contract or that Longhorn's breach was excused; and (3) the trial court erred in granting a directed verdict in favor of Longhorn because Capital Metro raised a genuine issue of fact as to the amount of actual damages it suffered from Longhorn's breach. We will reverse the judgment of the trial court and render judgment that Longhorn take nothing.

FACTUAL BACKGROUND

On March 15, 1996, Longhorn, a private rail carrier, entered into a contract with the City of Austin to provide rail freight and maintenance services on the Giddings-Llano rail line (the "Line"). In 1998, Capital Metro purchased the Line from the City of Austin and assumed the City's rights under the contract with Longhorn. Under the 1996 contract, Longhorn was to provide freight service to the shippers on the Line to satisfy Capital Metro's common carrier obligation. However, due to the poor condition of the Line, Longhorn's ability to satisfy the common carrier obligation and earn an additional profit was impaired. Because of the poor condition of the track, the rail cars moved at a slower rate, causing productivity to suffer. In an effort to keep operations going, Longhorn made improvements to the Line at its expense.

When Capital Metro formally took title to the Line in May 1998, it hired Karen Rae to act as its general manager. Shortly thereafter, one of the bridges on the Line collapsed under the weight of one of Longhorn's cars. Ms. Rae met with Longhorn, was informed about the poor condition of the line, and was told that Longhorn was in serious financial trouble as a result of the Line's poor condition. At this point, Capital Metro hired two consultants to examine the economic viability of the freight system and its operations.

Following Capital Metro's investigation, both consultants concluded that the Line was economically viable and that Capital Metro should retain Longhorn as its operator. However, the consultants' conclusions were based on the assumption that some key changes would be made. First, a new interchange would have to be constructed to connect the Line with the Burlington Northern Santa Fe Railway. This interchange was referred to as the "McNeil Interchange" and would provide Longhorn with additional freight traffic and thus more revenue. Second, Capital Metro was told by its consultants that it was essential to use the funds budgeted in 1999 for capital improvements in order to rehabilitate the Line to a condition that would support efficient freight service.¹ Finally, a weigh scale needed to be relocated in order to provide more efficient transportation on the Line. On March 30, 1999, after several weeks of evaluation and negotiation, Capital Metro and Longhorn executed the Restated Contract and a "Mutual Release of Claims and Obligations," which incorporated revised financial arrangements, provided mutual releases of claims arising under the original contract, and incorporated new terms of the relationship.

Several months after executing the Restated Contract, Longhorn experienced financial trouble and approached Capital Metro with a request for $2.3 million in additional funds and an operating subsidy. Capital Metro denied the request, in part because the Restated Contract did not provide for this assistance.

From October 1999 to January 2000, Capital Metro sent Longhorn several notices of default under the Restated Contract. Finally, on March 8, 2000, Capital Metro sent Longhorn a notice of termination due to Longhorn's failure to cure its material defaults under the Restated Contract. Pursuant to this notice of termination, Capital Metro requested that Longhorn confirm that it would vacate the Line, but Longhorn failed to confirm that it would do so. Capital Metro sued for an injunction against Longhorn and sought damages for breach of the Restated Contract. After Capital Metro filed the suit, Capital Metro and Longhorn negotiated Longhorn's removal from the Line and Longhorn then filed its counterclaim for breach of contract against Capital Metro.

DISCUSSION

Lost Profits

In its first issue, Capital Metro argues that there is legally and factually insufficient evidence of lost profits to sustain Longhorn's award. In reviewing a no-evidence issue, we are to consider only the evidence favoring the finding, disregarding all evidence and inferences to the contrary. Lenz v. Lenz, 79 S.W.3d 10, 13 (Tex.2002); Holt Atherton Indus., Inc. v Heine, 835 S.W.2d 80, 84 (Tex.1992). If more than a scintilla of evidence exists, any challenges go merely to the weight to be accorded the evidence. See Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex.1993). Evidence that is mere suspicion or surmise is no evidence. Id. When reviewing a challenge to the factual sufficiency of the evidence, we must consider, weigh, and examine all of the evidence in the record. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex.1989). The jury finding should be set aside only if the evidence is so weak as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).

Capital Metro argues that the trial court's judgment awarding damages for lost profits should be reversed as a matter of law. It relies on General Devices, Inc. v. Bacon, for the proposition that lost profit calculations must be based on "either a history of profitability or the actual existence of future contracts from which lost profits can be calculated with reasonable certainty." 888 S.W.2d 497, 502 (Tex. App.-Dallas 1994, writ denied) (quoting D/FW Commercial Roofing Co. v. Mehra, 854 S.W.2d 182, 187 (Tex.App.-Dallas 1993, no writ)). Capital Metro argues that because Longhorn failed to present any evidence that it had a history of profitability or any evidence of identifiable future contracts on which to base its claims, Longhorn has failed to prove with reasonable certainty that it lost any profits.

Longhorn counters that Capital Metro has waived its right to challenge the sufficiency of Longhorn's expert's testimony on lost profits by failing to make a Robinson/Havner objection at trial. See Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706 (Tex. 1997); E.I. duPont de Nemours v. Robinson, 923 S.W.2d 549 (Tex.1995).² However, Capital Metro counters that it is not challenging the reliability of Longhorn's expert's methodology; rather, it challenges the expert's conclusions, claiming they are not based on the facts of the case but on his own speculation and surmise. In fact, at the pretrial hearing, when discussing a motion in limine relating to the possible testimony of Longhorn's expert, Harvey Corn, Capital Metro stated that it was not challenging the reliability of Corn's testimony and in fact was relying on the reliability of his testimony.

Capital Metro argues that, because it is not challenging the reliability of the methodology of the expert, it was not required to make a Robinson/Havner challenge below in order to assert a no-evidence challenge on appeal. We agree. An attack on an expert opinion on the basis that it is premised on unsupported assumptions, speculation, and surmise does not constitute an attack on the reliability of the methodology of the expert. Therefore, a Robinson/Havner challenge is not required. See General Motors Corp. v. Harper, 61 S.W.3d 118, 129 (Tex.App.-Eastland 2001, no pet.) (citing General Motors Corp. v. Sanchez, 997 S.W.2d 584, 591 (Tex.1999) and Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 409 (Tex.1998)).

Having decided that under the facts of this case, a Robinson/Havner challenge is not necessary to make a no-evidence challenge on appeal, we turn to...