Choice! Power, L.P. v. Feeley, 01-15-00821-CV

• Decision Date: 04 August 2016
• Docket Number: NO. 01-15-00821-CV,01-15-00821-CV
• Citation: 501 S.W.3d 199
• Parties: Choice! Power, L.P., Appellant v. Michael Feeley, Appellee
• Court: Texas Court of Appeals

501 S.W.3d 199

Choice! Power, L.P., Appellant

v.Michael Feeley, Appellee

NO. 01-15-00821-CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued August 4, 2016

Jonathan M. Hyman, Chance K. Decker, Gray Reed & McGraw, P.C., Houston, TX, Jim Moseley, Gray Reed & McGraw, P.C., Dallas, TX, for appellant.

Andrew L. Mintz, Andrew L. Mintz, PLLC, Joseph Y. Ahmad, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing P.C., Houston, TX, for appellee.

Panel consists of Justices Higley, Bland, and Brown.

OPINION

Laura Carter Higley, Justice

The trial court found in favor of appellee, Michael Feeley, on his breach of contract claim against appellant, Choice! Power, L.P., and awarded $353,705.57 in damages. In three issues on appeal, Choice argues that the trial court erred in its interpretation of the contract and that the evidence is legally and factually insufficient to support the trial court's finding of breach of contract.¹ In his cross-appeal, Feeley argues the trial court erred by granting summary judgment against him on his claim for attorneys' fees.

We affirm.

Background

In June 2011, Feeley entered into an employment agreement with Choice. Feeley was employed to be a broker for Choice. The agreement provided that the term of his employment began June 1, 2011, and continued for 54 months. The agreement also provided, "This Agreement may not be terminated by either party except (i) by Employer for Cause (as defined below) or (ii) by Employee for any material breach of this Agreement by Employer ...." The termination provision lists nine categories of actions by Feeley that would constitute cause for termination. One of those categories permitted termination if Feeley "materially violate[d] any specific written instructions or policies of Employer." The agreement established that "[t]he Parties understand that this Agreement creates an employment relationship for a term and shall not be construed as creating an ‘at will’ employment relationship."

When he began working with Choice, Feeley primarily worked on brokering what are known as financially-settled contracts. A smaller portion of his work concerned what are known as physically-settled contracts. During Feeley's employment with Choice, financially-settled contracts were reclassified as futures contracts, pursuant to federal regulations. In order for a broker to work on futures contracts, the broker had to be "Series 3 registered" by a certain date. In order to be Series 3 registered, the broker had to pass the Series 3 examination. Physically-settled contracts were not affected by this change, and brokers for those contracts did not require Series 3 registration.

On September 7, 2011, Choice emailed its brokers about the change in regulations. The email discussed the regulatory changes designating financially-settled contracts as futures and the requirement to pass the Series 3 exam in order to broker futures. The email continued,

As you know, a broker must be NFA registered in order to orchestrate block/EFS trades. By having all of our employees who broker cleared trades register as Aps, we will eliminate the risk that a non-registered broker will inadvertently enter a block/EFS trade, which could result in significant penalties to both the broker and our firms.

Obviously, the brokerage of block/EFS trades also represents a significant source of bonus revenue that is not available to non-registered brokers.

Every OTCGH broker should be NFA registered by the end of this year.

The regulatory deadline to be Series 3 registered subsequently changed. On September 12, 2012, Choice emailed its brokers, again discussing the requirements of the changed regulations. It continued,

By changing the listing of all swap contracts to futures by the CME and ICE, it has also created a MANDATORY OBLIGATION FOR ALL OTCGH BROKERS TO BE SERIES 3 REGISTERED, ASSOCIATED PERSONS OF OUR INTRODUCING BROKER EOX. Only Series 3 registered Futures Brokers can Broker Futures. If you currently broker natural gas options, crude options, fixed price, basis, PJM, Ercot power etc.—you have to be a series 3 registered broker.

Choice sent the last email pertinent email on December 17, 2012. The email was brief and said, in pertinent part,

If you are receiving this email, you have not registered for the series 3 exam and/or previously failed; YOU MUST SCHEDULE AND REGISTER AN EXAM DATE—PRIOR TO 12/31/2012.

Subsequently, you must take the text and pass by March 31st.

If you fail to register for the exam by the end of the year, WE CANNOT EMPLOY YOU TO BROKER FUTURES AS OF 1/1/2013.

The evidence at trial showed that Feeley took the examination three times, but never passed the examination. As a result, Feeley could not take the examination again for six months and could not broker financially-settled contracts for that time. Choice assigned Feeley to work exclusively on physically-settled contracts after that. Specifically, they charged Feeley with developing business in emissions-related contracts. About two months later, Feeley had not succeeded in brokering any physically-settled contracts. Choice terminated Feeley, claiming it was for cause under the employment contract due to Feeley's failure to comply with Choice's instructions to pass the Series 3 examination.

Feeley brought suit against Choice, alleging breach of contract. Feeley also sought to recover his attorneys' fees from Choice. Choice filed a motion for summary judgment on Feeley's claim for attorneys' fees. Choice argued that the plain text of the statute upon which Feeley was relying did not allow recovery of attorneys' fees from Choice because it was a limited partnership. The trial court agreed and granted summary judgment against Feeley on his claim for attorneys' fees.

The parties proceeded to a bench trial on Feeley's breach of contract claim. Following trial, the trial court issued findings of fact and conclusions of law. The trial court's findings included the following:

2. Effective June 1, 2011, Feeley signed a new Employment Agreement ... under which he was employed as a "Broker" .... Feeley brokered mostly financially settled power and gas contracts, but nothing in the Employment Agreement limited his employment to just certain types of brokering. ...

....

4. ... Choice sent a September 7, 2011[ ] e-mail to its employees ... which stated "Every OTCGH broker should be NFA registered by the end of this year".... Subsequent emails from Choice reflect that the eventual deadline was moved to 2013....

5. In October of 2012, the financially settled gas and power contracts Choice brokered were reclassified by the Chicago Mercantile Exchange and the Intercontinental Exchange as "futures contracts".... Accordingly, brokers of financially settled power and gas contracts were required to become Series 3 registered .... To become Series 3 registered, brokers had to take and pass the NFA's Series 3 examination. Physically settled contracts were not impacted by this regulation.

6. Choice sent a September 12, 2012[ ] e-mail to its brokers ... stating that [certain stock exchanges] had "created the MANDATORY OBLIGATION FOR ALL OTCGH BROKERS TO BE SERIES 3 REGISTERED ".... The e-mail also states "If you currently broker natural gas options, crude options, fixed price, basis, PJM, Ercot power etc.—you have to be a Series 3 registered broker." The parties and witnesses all agreed that any broker of physical settled contracts (which by regulation were not futures) did not have to pass the Series 3 examination to settle those contracts.

7. Choice's third e-mail to its brokers went out on December 17, 2012.... In it, brokers were directed to schedule and register an exam date prior to year end, and "Subsequently, you must take the test and pass by March 31st." Feeley received this email. ... He did not pass the examination. ...

8. At trial, Choice argued that the next sentence of the December 17 e-mail did not mean what it plainly says: "If you fail to register for the exam by the end of the year, WE CANNOT EMPLOY YOU TO BROKER FUTURES AS OF 1/1/2013"....

....

10. .... Feeley failed the examination in January 2013, March 2013[,] and finally on April 29, 2013. Accordingly[,] he was prohibited by [federal] regulations from brokering financially settled gas and power contracts. Further, he could not take the examination again until October 29, 2013.

11. After Feeley's third failure[,] he met with Choice's President, Javier Loya. At this meeting[,] it was clearly communicated to Feeley that his failure may ultimately result in termination of his employment. Loya testified ... that Choice had the option to terminate if it could not find another role for an exam failing employee. ...

12. Feeley's failures did not prevent his working on physical transactions. Choice allowed Feeley to remain and attempt to start a new business desk closing physical transactions, but the effort was ultimately not profitable. ...

13. Choice terminated Feeley's employment in June 2013 for his failure to pass the Series 3 examination. Loya testified that he might not have been terminated had Feeley been profitable closing physical transactions .... Seven other brokers failed to pass the examination but were not terminated for such failure. For example, [one broker] stayed on at Choice as a physical trader, and [another broker] remained as a consultant. Mr. Loya testified that these other employees had different employment agreements, but Choice's general counsel, John Jeffers, testified there was no difference in the contracts which might be the basis for why Feeley was fired and the other seven were not. ...

Interpretation of Contract

In its first issue, Choice argues that the trial court erred in its interpretation of the contract.

A. Standard of Review

A court should construe an unambiguous contract as a matter of law, and, on appeal, the court's ruling is subject to de novo review. See J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 229 (Tex.2003) ; MEMC Elec. Materials, Inc. v. Albemarle Corp. , 241...