Power Reps, Inc. v. Cy Cates, Power Reps Indus., LLC, 01-13-00856-CV

CourtCourt of Appeals of Texas
Writing for the CourtHarvey Brown Justice
Docket NumberNO. 01-13-00856-CV,01-13-00856-CV
Decision Date11 August 2015

AND JEFF JACQUIN, Appellants / Cross-Appellees

NO. 01-13-00856-CV

Court of Appeals For The First District of Texas

August 11, 2015

On Appeal from the 400th District Court Fort Bend County, Texas
Trial Court Case No. 10-DCV-183723


Power Reps, Inc., Bob Bergin, Jr., and Jeff Jacquin appeal from a judgment on a jury verdict that resulted in a net award to Cy Cates, Power Reps Industrial, LLC, and Global Transformer Specialists, Inc. For clarity and in accordance with

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the parties' conventions, we will refer to Power Reps, Inc., as "PRI" and to Global Transformer Specialists as "GTS." We will refer to Power Reps Industrial, LLC, also known as Cy Cates Energy Reps, LLC, as "Industrial." Cates, Industrial, and GTS cross-appeal.

Bergin, Jacquin, and PRI assert 11 issues on appeal: (1) the trial court erred by asking the jury whether a document signed on April 12, 2010, was an agreement, rather than ruling on that issue as a matter of law; (2) the trial court erred by failing to award Bergin, Jacquin, and PRI damages for Cates's breach of the April 12 "agreement," despite the fact that the jury was not asked about such damages; (3) there was no or insufficient evidence to support the jury's verdict that Bergin and Jacquin were fiduciaries of Cates; (4) there was no or insufficient evidence to support the jury's damages findings with respect to Cates's claim for tortious interference with prospective contracts; (5) the trial court erred in awarding damages on the commission split and rent agreement because any such agreement was subsumed in the April 12 "agreement"; (6) there was no or insufficient evidence to support the jury's verdict that PRI converted Cates's property; (7) there was no or insufficient evidence to support the jury's verdict that Bergin and Jacquin engaged in oppressive conduct towards Cates; (8) the attorney's fees awarded to Cates, Industrial, and GTS by the jury were unreasonable and excessive, not properly segregated, and not recoverable because

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Cates did not prevail on any claim for which fees are recoverable; (9) the trial court should have disregarded the jury's verdict that PRI was not damaged by Cates's breach of his employment agreement and therefore should have awarded Bergin, Jacquin, and PRI their attorney's fees; (10) the trial court erred in awarding Cates ownership and control of the PRIHouston.com domain, website, and email addresses; and (11) the trial court erred by awarding Cates, Industrial, and GTS prejudgment interest on the jury's "net" award, inclusive of both damages and attorney's fees, and by awarding interest on the awards against Bergin and Jacquin individually.

Cates, Industrial, and GTS respond that Bergin, Jacquin, and PRI waived their issues 1 through 3, 5, and 7 through 10; that all 11 issues lack merit; and that, even if Bergin, Jacquin, and PRI could demonstrate error, they have not demonstrated reversible error with respect to any issue. See TEX. R. APP. P. 44.1(a)(1).

Cates, Industrial, and GTS also raise two issues on their cross-appeal: (1) the trial court erred as a matter of law by failing to award Cates the damages found by the jury for Bergin and Jacquin's breach of the April 12 agreement because Cates's breach did not excuse performance by Bergin and Jacquin; and (2) the trial court erred by refusing to award as costs of court the cost of the accounting expert retained by Cates, Industrial, and GTS and the cost of the discovery special master.

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We affirm in part, reverse in part, and remand for the trial court to recalculate the correct amounts of prejudgment interest and any offsets between awards.


A. Bergin, Jacquin, and Cates do business together

This case arises from a falling-out between Bergin and Jacquin on the one side and Cates on the other side over the management of Power Reps, Inc. PRI, a closely-held Texas corporation, operates as an independent sales representative for a number of manufacturers and distributing companies that sell electrical equipment, parts, and accessories. PRI has two general categories of customers or clients, which it classifies as "utility" or "industrial," depending on the business of that customer or client and the type of customers or clients that it, in turn, serves. Within the "utility" classification, PRI serves two subtypes of customers: (1) "public power" companies, including cooperatives and municipal utilities, and (2) investor-owned utility companies.

PRI has three principal shareholders and officers, each of whom works as a sales representative. Bergin, an original shareholder, serves as PRI's president and handles primarily "public power" accounts. Cates, another original shareholder, is a vice president and serves primarily "industrial" accounts. Jacquin became a shareholder when his company merged with PRI approximately 10 years ago; he is

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a vice president and serves primarily investor-owned utility accounts. The only other shareholder, Robert E. Bergin, Sr., is retired and inactive in the corporation's affairs. Cates was assisted in his work by another PRI employee, Celine Wilson.

By convention, commissions received by PRI were divided as follows: approximately 70% of each commission went to the salesman or team that generated the sale, and the remainder went to PRI for overhead. At least one document indicates that Bergin, Jacquin, and Cates discussed fixing the split at precisely 70-30 from December 2009 forward, although it does not indicate that they reached an actual agreement.1

Cates also owned and controlled Global Transformer Specialists, a company that offered accessories for the types of equipment that PRI sold.2 Cates was the sole owner, officer, director, and bank signatory of GTS. According to Jacquin, Cates, at his own discretion, used PRI funds to meet GTS's needs and used GTS funds to meet PRI's needs.

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B. The shareholders negotiate their disagreements

In 2009, PRI found itself unable to make its full payroll on several occasions. Bergin and Jacquin came to believe that the blame for the shortfalls in PRI's finances lay with Cates. Specifically, they believed that Cates was misusing corporate funds and engaging in undisclosed deals with PRI clients, both through GTS and otherwise.

Bergin, Jacquin, and Cates attempted to resolve their differences by negotiating a spin-off of the "industrial" component of PRI's business, to be run by Cates. To that end, they exchanged a series of emails in late March 2010. Cates drafted the first email, proposing "[m]y idea of this spin-off" and suggesting terms for a sale of his PRI shares to PRI, payment of PRI debts, allocation of expenses and income, allocation of clients, separation of the corporate data into two sets, and other terms. Bergin responded, interspersing his own comments amongst Cates's statements, distinguishing them by typing them in an orange font. Cates replied, interspersing additional comments among the existing statements, this time in a bold font. On April 12, 2010, Cates, Bergin, and Jacquin each signed their names to a printed copy of this email chain.

At first, Bergin, Jacquin, and Cates apparently treated the April 12 document as reflecting an agreement among the three of them and began taking actions to divide PRI's existing business between PRI and a new entity to be operated by

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Cates. Cates formed a new entity, Power Reps Industrial, LLC, in April 2010 and registered the internet domain name PRIHouston.com in August 2010.

It soon became clear, however, that the parties did not agree on the terms of their agreement. For example, Cates paid for the domain name PRIHouston.com and stated that he intended to use it for Industrial, although Bergin and Jacquin saw the initials "PRI" as capable of referring only to Power Reps, Inc., such that the domain name would cause confusion. In addition, Cates interpreted the document as requiring Bergin and Jacquin to form their own entity, Power Reps Utility, but Bergin and Jacquin did not do so and disputed that they had an obligation to do so. In fact, Bergin and Jacquin maintain that the April 12 document had no binding effect, while Cates maintains that it constitutes an enforceable agreement. Despite these disagreements—and despite Bergin and Jacquin's insistence that the April 12 document was not a contract—Bergin and Jacquin, on one side, and Cates, on the other, each concluded that the other side had breached obligations set forth in the April 12 document.

Meanwhile, when Cates created Industrial, he hired Wilson, who had worked with him at PRI, as an Industrial employee. Wilson began working for Industrial in April or May 2010. She resigned, however, in September 2010 and returned to PRI shortly thereafter. According to Cates, when Wilson left, she took Industrial property with her, including office equipment and confidential

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information. According to Wilson, however, the property in question all belonged to PRI.

C. PRI files suit

In September 2010, PRI filed suit against Cates, Industrial, and GTS, alleging breach of fiduciary duty, fraud, conversion, conspiracy...

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