                                                                                       ACCEPTED
                                                                                   03-15-00025-CV
                                                                                           7016623
                                                                        THIRD COURT OF APPEALS
                                                                                   AUSTIN, TEXAS
                                                                              9/21/2015 2:13:08 PM
                                                                                 JEFFREY D. KYLE
                                                                                            CLERK
                        No. 03-15-00025-CV
          ______________________________________________
                                                        FILED IN
                                                  3rd COURT OF APPEALS
                    IN THE COURT OF APPEALS           AUSTIN, TEXAS
                FOR THE THIRD DISTRICT OF TEXAS 9/21/2015 2:13:08 PM
                          AUSTIN, TEXAS             JEFFREY D. KYLE
          ______________________________________________Clerk

    APPELLANTS, LAKEWAY REGIONAL MEDICAL CENTER, LLC AND
    SURGICAL DEVELOPMENT PARTNERS, LLC// CROSS-APPELLANT,
     LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A LAKE TRAVIS
                   SPECIALTY HOSPITAL, LLC

                                 v.

   APPELLEES, LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A LAKE
  TRAVIS SPECIALTY HOSPITAL, LLC// CROSS-APPELLEES, LAKEWAY
    REGIONAL MEDICAL CENTER, LLC, SURGICAL DEVELOPMENT
       PARTNERS, LLC, BRENNAN, MANNA, & DIAMOND, LLC
                       AND FRANK T. SOSSI
           ___________________________________________

                    BRIEF OF CROSS-APPELLANT
           LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A
          LAKE TRAVIS SPECIALTY HOSPITAL, LLC (“LTT”)
            ___________________________________________

                                      Jane M.N. Webre
                                      S. Abraham Kuczaj, III
                                      Robyn B. Hargrove
                                      SCOTT DOUGLASS
                                            & MCCONNICO LLP
                                      303 Colorado Street, 24th Floor
                                      Austin, TX 78701
                                      (512) 495-6300
                                      (512) 495-6399 Fax

                                      COUNSEL FOR LTT

ORAL ARGUMENT REQUESTED

1226029
                  IDENTITY OF PARTIES AND COUNSEL

Defendants-Appellants/Cross-Appellees
Lakeway Regional Medical Center, LLC
Surgical Development Partners, LLC

Counsel for Defendants-Appellants/Cross-Appellees
Jeff Cody
Barton Wayne Cox
Norton Rose Fulbright
2200 Ross Avenue, Suite 2800
Dallas, TX 75201-2784

Joy Soloway
Norton Rose Fulbright
1301 McKinney, Suite 5100
Houston, TX 77010-3095

Additional Appellate Counsel for Surgical Development Partners, LLC
Jessica Z. Barger
Raffi Melkonian
Wright &Close, LLP
One Riverway, Suite 2200
Houston, TX 77056

Plaintiff-Cross-Appellant/Appellee
Lake Travis Transitional LTCH, LLC n/k/a Lake Travis Specialty Hospital, LLC

Counsel for Defendant-Cross-Appellant
Jane M.N. Webre
S. Abraham Kuczaj III
Robyn B. Hargrove
Paige A. Amstutz
Steven J. Wingard
Scott Douglass & McConnico LLP
303 Colorado, Suite 2400
Austin, Texas 78701




                                        ii
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Defendants-Appellees
Brennan, Manna & Diamond, LLC
Frank T. Sossi

Counsel for Defendants-Appellees
Robert A. Bragalone
B. Ryan Fellman
Gordon & Rees LLP
2100 Ross Ave., Suite 2800
Dallas, TX 75201




                                   iii
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                                          TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ........................................................... ii

INDEX OF AUTHORITIES................................................................................... vii

STATEMENT OF THE CASE ................................................................................ xi

STATEMENT OF JURISDICTION....................................................................... xii
RECORD................................................................................................................. xii
APPENDIX ............................................................................................................ xiii

ISSUES ON CROSS-APPEAL ............................................................................. xiv
OVERVIEW ..............................................................................................................1

STATEMENT OF FACTS ........................................................................................2

          A.      The Hospital Defendants receive LTT’s confidential
                  information subject to a confidentiality agreement for the
                  purpose of evaluating a joint hospital project. ......................................2

          B.      Defendants use LTT’s confidential information to secure
                  lucrative hospital mortgage insurance from HUD, then abandon
                  the LTT project......................................................................................4

SUMMARY OF THE ARGUMENT ........................................................................7

ARGUMENT .............................................................................................................7
          A.      Standard of review on summary judgment. ..........................................7

          B.      There are significant material fact issues that preclude summary
                  judgment on LTT’s claim for misappropriation of trade secrets. .........9

                  1.        LTT submitted evidence that its confidential information
                            was a trade secret. .....................................................................10

                            a.       Texas law recognizes that trade secret status is
                                     generally a fact question. ................................................10



                                                            iv
1245899
                     b.       There is plenty of evidence of LTT’s trade secrets. .......13

               2.    There is evidence that Defendants acquired LTT’s trade
                     secrets through breach of a confidential relationship or
                     through improper means. ..........................................................18

                     a.       Confidential relationship ................................................18
                     b.       Improper means ..............................................................20
               3.    There is evidence that Defendants disclosed or used
                     LTT’s trade secrets without authorization. ...............................22

                     a.       Defendants “used” the trade secrets. ..............................22
                     b.       Defendants “disclosed” the trade secrets........................26

               4.    There is evidence of damages as a result of the
                     misappropriation. ......................................................................27

                     a.       Loss of market value.......................................................28
                     b.       Reasonable royalty damages ..........................................29

                     c.       Benefits obtained ............................................................30
                     d.       No HUD reliance necessary ...........................................31

          C.   Summary judgment was improper as to Section 2 of the LOI. ...........32

               1.    Section 2 of the LOI is a binding agreement. ...........................32
                     a.       The detailed provisions are more than an
                              agreement to agree. .........................................................32

                     b.       The parties intended for all provisions of the LOI
                              to be binding. ..................................................................35

                     c.       Section 2 contains all essential terms. ............................36

               2.    The Hospital Defendants cannot rely on unsatisfied
                     conditions precedent to avoid complying with Section 2
                     because their own conduct prevented performance. .................38


                                                    v
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          D.      The trial court abused its discretion in sustaining objections to
                  some of LTT’s summary judgment evidence......................................41

                  1.       The court improperly sustained objections that had
                           become moot. ............................................................................42

                  2.       LTT adequately cited to the entirety of the Project File. ..........45
                  3.       The court erred in sustaining an objection to argument
                           that the Project File as a whole is a trade secret. ......................46

                  4.       Berry’s testimony about the Project File was proper................48

CONCLUSION AND PRAYER .............................................................................51
CERTIFICATE OF SERVICE ................................................................................53

CERTIFICATE OF COMPLIANCE .......................................................................53

APPENDIX ..............................................................................................................54




                                                           vi
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                                       INDEX OF AUTHORITIES

Cases
Bastrop Cent. Appraisal Dist. v. Acme Brick Co.,
      428 S.W.3d 911 (Tex. App.—Austin 2014, no pet.).......................................8

Bertolli v. C.E. Sheperd Co.,
      752 S.W.2d 648 (Tex. App.—Houston [14th Dist.] 1998, no writ)..............12

Bishop v. Miller,
      412 S.W.3d 758 (Tex. App.—Houston [14th Dist.] 2013, no pet.) ...... passim

Bohnsack v. Varco, L.P.,
     668 F.3d 262 (5th Cir. 2012) .........................................................................30

Bracey v. City of Killeen,
     417 S.W.3d 94 (Tex. App.—Austin 2013, no pet.) .....................................7, 8
CKB & Assocs., Inc. v. Moore McCormack Petroleum, Inc.,
    809 S.W.2d 577 (Tex. App.—Dallas 1991, writ denied) ..............................33
Clear Lake City Water Auth. v. Friendswood Dev. Co., Ltd.,
      344 S.W.3d 514 (Tex. App.—Houston [14th Dist.] 2011,
      pet. denied) ............................................................................................. 39, 41

Cudd Pressure Control, Inc. v. Roles,
     328 Fed.Appx. 961 (5th Cir. 2009) ....................................................... passim
Daniels Health Sciences, LLC v. Vascular Health Sciences, LLC,
     710 F.3d 579 (5th Cir. 2013) .........................................................................19
DTM Research, LLC v. AT&T Corp.,
    245 F.3d 327 (4th Cir. 2001) .........................................................................49

Foreca, S.A. v. GRD Dev. Co.,
     758 S.W.2d 744 (Tex. 1988) .........................................................................36
Fuqua v. Fuqua,
     750 S.W.2d 238 (Tex. App.—Dallas 1988, writ denied) ..............................38




                                                         vii
1245899
Geophysical Micro Computer Applications (Int’l) Ltd. v. Paradigm
     Geophysical Ltd.,
     No. 05-98-02016, 2001 WL 1270795 (Tex. App.—Dallas
     Oct. 24, 2001, pet. denied).............................................................................37

Georgia–Pacific Corp. v. United States Plywood Corp.,
     318 F.Supp. 1116 (S.D.N.Y. 1970), mod. and aff’d, 446 F.2d 295
     (2d Cir. 1971).................................................................................................30
Gonzales v. Zamora,
     791 S.W.2d 258 (Tex. App.—Corpus Christi 1990, no writ) .......................12

H.E. Butt Grocery Co. v. Moody’s Quality Meats, Inc.,
      951 S.W.2d 33 (Tex. App.–Corpus Christi 1997, pet. denied) .....................19
Haggar Clothing Co. v. Hernandez,
     164 S.W.3d 386 (Tex. 2005) ...........................................................................8
Hinojosa v. Columbia/St. David’s Healthcare Sys., L.P.,
      106 S.W.3d 380 (Tex. App.—Austin 2003, no pet.).....................................46
Hyde Corp. v. Huffines,
     314 S.W.2d 763 (Tex. 1958) ...........................................................................9

II Deerfield Limited Ltd. P’ship v. Henry Bldg., Inc.,
      41 S.W.3d 259 (Tex. App.—San Antonio 2001, pet. denied) ............... 38, 41
In re Bass,
       113 S.W.3d 735 (Tex. 2003) .................................................................. 11, 18

In re Cayman Island Firm of Deloitte & Touche,
       No. 04-01-00491-cv, 2001 WL 1042233 (Tex. App.—San Antonio
       Sept. 12, 2001, no pet.) ..................................................................................49

Investment Retrievers, Inc. v. Fisher,
      No. 03-13-00510-CV, 2015 WL 3918503 (Tex. App.—Austin
      June 25, 2015, no pet.) ...................................................................................42
Johnson v. Brewer & Pritchard, P.C.,
     73 S.W.3d 193 (Tex. 2002) .............................................................................9



                                                        viii
1245899
Jones v. Ray Ins. Agency,
      59 S.W.3d 739 (Tex. App.—Corpus Christi 2001, pet. denied) ...................42

Karns v. Jalapeno Tree Holdings, LLC,
     459 S.W.3d 683 (Tex. App.—El Paso 2015, pet. denied)...................... 34, 35

King Ranch, Inc. v. Chapman,
      118 S.W.3d 742 (Tex. 2003) ...........................................................................8

Krainz v. Kodiak Resources, Inc.,
      436 S.W.3d 325 (Tex. App.—Austin 2013, pet. denied) ..............................44

Lamont v. Vaquillas Energy Lopeno Ltd., LLP,
     421 S.W.3d 198 (Tex. App.—San Antonio 2013, pet. denied) ....... 20, 25, 27

Loy v. Harter,
      128 S.W.3d 397 (Tex. App.—Texarkana 2004, pet. denied) ........................44
McCalla v. Baker’s Campground, Inc.,
    416 S.W.3d 416 (Tex. 2013) .................................................................. 34, 38
McCulley Fine Arts Gallery, Inc. v. “X” Partners,
    860 S.W.2d 473 (Tex. App.—El Paso 1993, no writ)............................ 37, 38
Metallurgical Indus., Inc. v. Fourtek, Inc.,
      790 F.2d 1195 (5th Cir. 1986) .......................................................................12
Nguyen v. Citibank N.A.,
     403 S.W.3d 927 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) .......51
Oryon Technologies, Inc. v. Marcus,
     429 S.W.3d 762 (Tex. App.—Dallas 2014, no pet.) .....................................49

Phillips v. SACHEM, Inc.,
       03-13-00346-CV, 2014 WL 7464035 (Tex. App.—Austin
       Dec. 31, 2014, no pet.).....................................................................................8

Reid Road Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd.,
      337 S.W.3d 846 (Tex. 2011) .........................................................................29
Scott v. Ingle Bros. Pac., Inc.,
       489 S.W.2d 554 (Tex. 1972) .........................................................................37


                                                        ix
1245899
Sharifi v. Steen Automotive, LLC,
      370 S.W.3d 126 (Tex. App.—Dallas 2012, no pet.) .............................. 39, 41

Southwestern Energy Prod. Co. v. Berry-Helfand,
     411 S.W.3d 581 (Tex. App.–Tyler 2013, pet. granted)......................... passim

Taco Cabana, Int’l v. Two Pesos, Inc.,
     932 F.2d 1113 (5th Cir. 1991) ........................................................................12

Tewari De-Ox Systems, Inc. LLP v. Mountain States/Rosen, LLC,
     637 F.3d 604 (5th Cir. 2011) .........................................................................12
Tex. Integrated Conveyor Sys., Inc. v. Innovative Concepts, Inc.,
       300 S.W.3d 348 (Tex. App.—Dallas 2009, pet. denied) ..........................9, 18

Univ. Computing Co. v. Lykes-Youngstown Corp.,
      504 F.2d 518 (5th Cir. 1974) .................................................................. 27, 29

Wellogix, Inc. v. Accenture, LLP,
     716 F.3d 867 (5th Cir. 2013) .........................................................................12
West Beach Marina, Ltd. v. Erdeljac,
      94 S.W.3d 248 (Tex. App.—Austin 2002, no pet.) .......................................36
Woodhaven Ptnrs, Ltd. v. Shamoun & Norman, LLP,
    422 S.W.3d 821 (Tex. App.—Dallas 2014, no pet.) .............................. 41, 50

Statutes
12 U.S.C. § 1715z-7(a) ........................................................................................4, 31

24 C.F.R. § 242.16 ...............................................................................................4, 31
Tex. Gov’t Code § 22.220....................................................................................... xii




                                                          x
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                        STATEMENT OF THE CASE

Nature of the Case:    This case involves claims for breach of contract and
                       misappropriation of trade secrets between two hospital
                       projects in Lakeway, Texas. Lake Travis Transitional
                       LTCH, LLC (“LTT”) sued Lakeway Regional Medical
                       Center, LLC (“LRMC”) and Surgical Development
                       Partners, LLC (“SDP”) (together, the “Hospital
                       Defendants”), as well as certain Lawyer Defendants
                       involved in the transaction, for improperly taking LTT’s
                       confidential information obtained pursuant to a binding
                       Letter of Intent and using it to secure a government-
                       backed mortgage that allowed them to build a competing
                       hospital. The Letter of Intent had contemplated that LTT
                       and Defendants would work together on the LTT project,
                       and did not permit the use of LTT’s information for any
                       other purpose. The Letter of Intent is attached at App. 1.

Trial Court:           343rd District Court of Travis County, Texas. Hon.
                       Steven Yelenosky rendered a pretrial partial summary
                       judgment. Hon. Lora Livingston presided over the
                       subsequent jury trial and rendered the final judgment.
Course of Proceedings: Judge Yelenosky rendered partial summary judgment as
                       to (1) LTT’s claims against all Defendants for
                       misappropriation of trade secrets; and (2) LTT’s claim
                       that the Hospital Defendants breached section 2 of the
                       Letter of Intent. App. 2, 3. Judge Yelenosky also
                       sustained the Hospital Defendants’ (but not the Lawyer
                       Defendants’) objections to some of LTT’s summary
                       judgment evidence. App. 4.
                       LTT’s remaining claims against the Hospital Defendants
                       were tried to a jury, which found that the Hospital
                       Defendants breached the Letter of Intent. App. 5. Judge
                       Livingston rendered judgment on the jury’s verdict
                       against the Hospital Defendants for $7.9 million in actual
                       damages, together with $2 million in attorneys’ fees, pre-
                       and post- judgment interest, and costs of court. App. 6.


                                      xi
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                         LTT filed a notice of appeal. 6/18CR6-8. LTT’s cross-
                         appeal is limited to the rulings on partial summary
                         judgment that Judge Yelenosky made before trial. App.
                         2, 3, 4.



                       STATEMENT OF JURISDICTION
       This Court has jurisdiction over this appeal from a final judgment of a
district court pursuant to Texas Government Code § 22.220.


                                    RECORD

       The record on appeal includes a 3-volume Clerk’s Record and four 1-volume
supplemental Clerk’s Records, only one of which is labeled “supplemental.”
Citations to the 3-volume Clerk’s Record will be to volume and page: ___CR___.
Citations to the one-volume Clerk’s Records will be to date and page: 5/21CR___,
6/18CR___, 7/17CR___, or 7/21CR___.

       There is a 20-volume Reporter’s Record, a 1-volume supplemental
Reporter’s Record, and a 1-volume Reporter’s Record that is not labeled
“supplemental.” Volume 1 of the 20-volume Reporter’s Record is a Master Index.
Volumes 2 and 3 are pretrial hearings held on 2/4/14 and 7/2/14, respectively.
Volumes 4 through 15 include the jury trial. Volumes 16 and 17 include the
exhibits from the 2/4/14 pretrial hearing. Volumes 18 through 20 include the trial
exhibits. The Supplemental Reporter’s Record includes additional trial exhibits.
The 1-volume Reporter’s Record (filed 1/22/15) is the same 7/2/14 hearing
transcript as Volume 3 of the 20-volume Reporter’s Record.

     Citations to the Reporter’s Record will be to volume and page number:
___RR___. Citations to trial exhibits will be to party and exhibit number: PX___,
DX___.




                                       xii
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                                       APPENDIX

          The following items are included in the Appendix to this brief:

App. 1:         Letter of Intent (PX2; 2CR7623-29)
App. 2:         Order on summary judgment as to the Lawyer Defendants
                (7/17CR201-02)

App. 3:         Order on summary judgement as to the Hospital Defendants
                (3CR12266-67)
App. 4:         Order on the Hospital Defendants’ objections to LTT’s summary
                judgement evidence (3CR12261)

App. 5:         Charge of the Court (3CR12997-13009)
App. 6:         Judgment (6/18CR3-5)

App. 7:         Declaration of Robert Berry, without exhibits (2CR7604-7617)
App. 8:         Confidentiality Agreement (2CR7619-21)




                                           xiii
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                             ISSUES ON CROSS-APPEAL

1.        Did the trial court err in granting summary judgment as to LTT’s claims for

misappropriation of trade secrets?

2.        Did the trial court err in granting summary judgment as to LTT’s claim

against the Hospital Defendants for breach of section 2 of the Letter of Intent?

3.        Did the trial court abuse its discretion in excluding some of LTT’s summary

judgment evidence?




                                          xiv
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          LTT files this Brief of Cross-Appellant addressing the trial court’s orders on

partial summary judgment.

                                       OVERVIEW
          This cross-appeal presents a simple, plain-vanilla question: did LTT adduce

sufficient evidence to raise a fact issue and avoid summary judgment on its claims

for misappropriation of trade secrets and breach of section 2 of the LOI? The

summary judgment rulings, particularly regarding the claim for misappropriation

of trade secrets, are wholly based on the evidence and do not turn on legal issues.

And the evidence supporting LTT’s claims is substantial. The summary judgment

record includes evidence that LTT’s confidential information is a trade secret, and

that LTT developed it at substantial cost and takes measures to ensure that it is kept

confidential. The record includes evidence that Defendants were given access to

the confidential information subject to confidentiality agreements for the purpose

of acquiring LTT’s hospital facility, but Defendants instead used the information to

secure a government-backed mortgage to develop their own competing hospital

and then abandoned the LTT project. There is substantial evidence supporting

each element of a claim for misappropriation of trade secrets, more than enough to

raise a fact question and overcome Defendants’ traditional and no-evidence

motions for summary judgment. This Court should give the evidence its due

regard and reverse the summary judgments.

                                             1
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                               STATEMENT OF FACTS

A.        The Hospital Defendants receive LTT’s confidential information subject to a
          confidentiality agreement for the purpose of evaluating a joint hospital
          project.

          In 2009, LTT was developing Lake Travis Specialty Hospital (“Lake Travis

Hospital”) in the Lakeway area. Lake Travis Hospital would compete directly with

a larger hospital—called Lakeway Regional—that the Hospital Defendants hoped

to develop nearby. During this time, the Hospital Defendants were represented by

Frank Sossi and his law firm, Brennan, Manna & Diamond, LLC (together, the

“Lawyer Defendants”). Sossi also co-founded SDP, served on SDP’s board of

managers, was an officer of SDP, and served as general counsel for SDP while also

serving as an officer and general counsel for LRMC. 2CR7743-52.

          In April 2009, Defendants approached LTT about acquiring Lake Travis

Hospital to serve as Lakeway Regional’s initial campus. App. 7 ¶ 2. At the time,

Lake Travis Hospital had a big head start on construction: it was almost 80%

complete, while Lakeway Regional “was still just a lot.”           Id.   The parties

anticipated Lake Travis Hospital would be completed up to two years before

Lakeway Regional.

          When initially approached by Defendants, LTT’s principals were reluctant

to share any information about their plans with a competing hospital less than a

half-mile away. App. 7. ¶2. To facilitate the discussion of a possible acquisition,


                                           2
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SDP executed a Confidentiality Agreement with LTT on May 11, 2009. App. 8.

The Confidentiality Agreement recited that “SDP has an interest in a potential

development…opportunity as presented by LTT and will have access to certain

Confidential Information regarding these opportunities,” so “SDP and LTT desire

to memorialize their understandings regarding SDP’s disclosure and use of

Confidential Information.” App. 8 at 1. The Confidentiality Agreement defined

“Confidential Information” to mean “all information concerning the Project and

LTT’s business.” App. 8 ¶1. SDP agreed to “use Confidential Information only for

informational purposes to evaluate the participation in the Project….Both parties

agree that…neither it nor its employees, agents, or business or professional

associates will disclose or use any Confidential Information in any manner

whatsoever.” App. 8 ¶2.

          After some information was exchanged pursuant to the Confidentiality

Agreement, in September 2009, the parties executed a Letter of Intent (“LOI”).

App. 1; App. 7 ¶¶4-5. Like the Confidentiality Agreement, the LOI confirmed that

the sole purpose for providing LTT’s proprietary information was for Defendants

to evaluate the hospital project. LOI §9.2. Pursuant to the LOI, and subject to its

confidentiality provisions, LTT’s confidential, proprietary and trade secret

information was provided to Defendants through March 2010. App. 7 ¶5.



                                        3
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B.        Defendants use LTT’s confidential information to secure lucrative hospital
          mortgage insurance from HUD, then abandon the LTT project.

          Unbeknownst to LTT, weeks after executing the Confidentiality Agreement,

Defendants met with officials at HUD in Washington, D.C. to discuss obtaining

Section 242 hospital mortgage insurance for LRMC. Section 242 insurance is only

available for hospitals in areas that are underserved. See 12 U.S.C. § 1715z-7(a);

see also 24 C.F.R. § 242.16 (allowing HUD hospital mortgage insurance only

where competing capacity and services “are clearly not adequate to meet the needs

of the population in the service area.”). This requirement is important to help the

federal government avoid risking taxpayer dollars to improperly influence

competition where, as in the case of LRMC, HUD is asked to insure a $166.9

million mortgage for a for-profit hospital.

          In March 2010, Defendants terminated negotiations with LTT, making the

deal—as Defendants described it—”effectively dead.” See 1CR208. Defendants

nevertheless continued to use LTT’s confidential information in order to nail down

the HUD guarantee when, soon after HUD’s preliminary approval of the guaranty

for LRMC was announced, others began to question whether the needs of the

Lakeway area justified a taxpayer-sponsored Section 242 guaranty. On May 8,

2010, the CEO of an unrelated hospital wrote to HUD and informed it that LTT’s

Lake Travis Hospital was nearing completion only a half-mile away from Lakeway

Regional, and that “[t]his area is clearly NOT underserved.”           2CR8015-19
                                           4
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(emphasis in original).       That prompted HUD to contact LRMC’s lender to

determine whether LTT’s Lake Travis Hospital was in fact a competitive facility.

2CR8026. To convince HUD that it was not, and thereby secure the pending

$166.9 million mortgage, the Lawyer Defendants, on behalf of the Hospital

Defendants, emailed HUD on May 10, 2010 (“May 10th Email”). 1 2CR8024-25.

          In the May 10th Email, Sossi used the LTT confidential information and

made the following representations to HUD about LTT’s Lake Travis Hospital:

            • “[t]he structure is very small and has numerous code issues related to

                the construction and design;”

            •   “any conversion from what was essentially a residential facility to a

                true acute care will cost a great deal of money;” and

            •   “[o]ur issue with the facility was the ability to work out all the design

                issues, the need for major retro fits to get it to open, the lack of

                physician interest for the facility, the zoning issues to allow the

                conversion to acute care status and what to do with the facility when

                LRMC opens. … [t]he costs and technical problems of conversion


1
  After receiving HUD’s questions about LTT’s Lake Travis Hospital, LRMC’s lender forwarded
them to Sossi and SDP’s CEO Eddie Alexander. 2CR8026. Defendants do not dispute that
Sossi’s May 10th Email to HUD was sent on behalf of LRMC. 2CR6032, 5614, 5254-55. Sossi
also copied SDP CEO Eddie Alexander and LRMC CMO Sam Demaio on the May 10th Email.
2CR8024. Sossi’s simultaneous roles at SDP and LRMC, his inclusion of both LRMC and SDP
principals in the communication, and his admission that other correspondence with HUD was
sent on behalf of both SDP and LRMC, raise a reasonable inference that the May 10th Email was
sent on behalf of SDP as well as LRMC. Id. at 8024; see also 2CR8061-65.
                                             5
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                made the facility inappropriate to help LRMC or to be able to succeed

                as a separate facility.”

2CR8024-25.

          The next day, HUD responded to the inquiring hospital CEO, repeating what

HUD internally considered “Mr. Sossi’s facts” from the May 10th Email and

stating that HUD did not believe the LTT facility was truly a competitor hospital

because it could not meet “general acute licensing standards without expensive

redesign/reconstruction and will not achieve general acute care zoning because of

site limitations.” 2CR8021-22. Ten days later, HUD agreed to go forward on the

loan insurance and issue the amendments Defendants had requested to their loan

insurance commitment. 2CR8482-83. The next day, the LRMC hospital mortgage

loan closed and funded. 2CR7729.

          Defendants’ use of LTT’s confidential information continued. For example,

Sossi sent a letter to HUD about the LTT facility to convince HUD to defend its

decision to insure LRMC’s mortgage. 2CR8108-11. Defendants again represented

to HUD alleged code compliance issues Defendants developed after acquiring

LTT’s confidential information: “the [LTT] facility requires numerous upgrades

and modification to meet Texas licensing standards for providing true acute care

services…” Id. They reiterated the alleged cost of conversion issues Defendants

calculated after acquiring LTT’s information in confidence.          Id.   They also

                                           6
1245899
reminded HUD that “[t]he existence of the plans for [the LTT facility] were

discussed in detail with the HUD Client Service team.” Id. As a result, HUD

emailed Sossi, saying “be assured that HUD intends to defend the decision to issue

a loan guarantee for the LRMC project…” 2CR8042.

                         SUMMARY OF THE ARGUMENT

          This court should reverse the partial summary judgment as to LTT’s claims

for misappropriation of trade secrets. There is substantial summary judgment

evidence of LTT’s trade secrets, that Defendants acquired LTT’s trade secrets

pursuant to various confidentiality agreements for the express purposes of

acquiring LTT’s Lake Travis Hospital, that Defendants used that trade secret

information instead for their own benefit to secure the lucrative HUD federal

mortgage insurance and build a competing hospital, and that LTT suffered

damages as a result.

          Summary judgment was also improper as to LTT’s claims for breach of

section 2 of the LOI. That provision contains all of the necessary elements of an

enforceable contract and is not an agreement to agree.

                                    ARGUMENT

A.        Standard of review on summary judgment.

          An order granting summary judgment is reviewed de novo. Bracey v. City

of Killeen, 417 S.W.3d 94, 103 (Tex. App.—Austin 2013, no pet.). Summary

judgment is proper when there are no disputed issues of material fact and the
                                          7
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movant is entitled to judgment as a matter of law. Id. Because LTT was the non-

movant, this Court must take as true all evidence favorable to LTT, and must

indulge every reasonable inference and resolve every doubt in LTT’s favor.

Bastrop Cent. Appraisal Dist. v. Acme Brick Co., 428 S.W.3d 911, 915 (Tex.

App.—Austin 2014, no pet.).

          Defendants moved for both traditional and no-evidence summary judgment.

A no-evidence summary judgment is proper “when (a) there is a complete absence

of evidence of a vital fact, (b) the court is barred by rules of law or evidence from

giving weight to the only evidence offered to prove a vital fact, (c) the evidence

offered to prove a vital fact is no more than a mere scintilla, or (d) the evidence

conclusively establishes the opposite of the vital fact.” Phillips v. SACHEM, Inc.,

03-13-00346-CV, 2014 WL 7464035, at *2 (Tex. App.—Austin Dec. 31, 2014, no

pet.) (quoting King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750–51 (Tex.

2003)). A no-evidence summary judgment is improper “if the nonmovant brings

forth more than a scintilla of probative evidence to raise a genuine issue of material

fact.” Id. More than a scintilla of evidence exists where the evidence, as a whole,

“rises to a level that would enable reasonable and fair-minded people to differ in

their conclusions.” Haggar Clothing Co. v. Hernandez, 164 S.W.3d 386, 388

(Tex. 2005).



                                          8
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B.        There are significant material fact issues that preclude summary judgment
          on LTT’s claim for misappropriation of trade secrets.

          The elements of a claim for misappropriation of trade secrets are: (1) the

trade secret existed; (2) the trade secret was acquired through a confidential

relationship or discovered by improper means; (3) the defendant disclosed or used

the trade secret without authorization; and (4) damages. Tex. Integrated Conveyor

Sys., Inc. v. Innovative Concepts, Inc., 300 S.W.3d 348, 366-67 (Tex. App.—

Dallas 2009, pet. denied); see also Hyde Corp. v. Huffines, 314 S.W.2d 763, 769-

70 (Tex. 1958) (“One who discloses or uses another’s trade secrets, without a

privilege to do so, is liable to the other if (a) he discovers the secret by improper

means, or (b) his disclosure or use constitutes a breach of confidence reposed in

him by the other in disclosing the secret to him.”).

          The Hospital Defendants and Lawyer Defendants moved for traditional and

no-evidence summary judgment as to LTT’s misappropriation of trade secrets

claim on essentially the same three grounds: (1) they did not disclose LTT’s trade

secrets; (2) they did not misuse LTT’s secrets; and (3) LTT did not sustain injury

from improper use of its trade secrets. 2           2CR5625-31 (LRMC); 2CR6045-52


2
  The Hospital Defendants’ motions create an odd wrinkle. They combine LTT’s claim for
misappropriation of trade secrets with its claim for breach of contractual confidentiality
provisions into something the Hospital Defendants refer to as the “Proprietary Information
Claim,” thereby unilaterally conflating separate causes of action into a new hybrid “claim” that
they then attack on summary judgment. 2CR5615, 6033; see Johnson v. Brewer & Pritchard,
P.C., 73 S.W.3d 193, 204 (Tex. 2002) (court cannot grant summary judgment on grounds not
presented in the motion). While not the model of clarity, the Hospital Defendants appear to seek
                                               9
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(SDP); 2CR5248-49, 54-59 (Lawyer Defendants). The Lawyer Defendants also

alleged that there is no evidence that “any of Plaintiff’s purported trade secrets are

trade secrets” or that they “acquired Plaintiff’s trade secrets.” 2CR5249.

          Judge Yelenosky granted summary judgment as to LTT’s claim for

misappropriation of trade secrets. App. 2, 3. That was error, because the summary

judgment evidence—outlined above—raises genuine issues of material fact that

preclude summary judgment.

          1.    LTT submitted evidence that its confidential information was a trade
                secret.

          The critical threshold question is whether LTT brought forward some

evidence that its confidential information is a trade secret. There was plenty of

evidence.3

                a.    Texas law recognizes that trade secret status is generally a fact
                      question.

          “A trade secret is any formula, pattern, device or compilation of information

which is used in one’s business and presents an opportunity to obtain an advantage


no-evidence summary judgment on the hybrid “Proprietary Information Claim” by alleging that
there is “no evidence to support disclosure, use, or causation” in respect to LTT’s “Protected
Information” (which the Hospital Defendants define as “Proprietary Information or trade
secrets.”). 2CR5625-31, 6046-52. The trial court denied summary judgment as to the Hospital
Defendants’ breaches of contractual confidentiality obligations comprising the remainder of the
hybrid “Proprietary Information Claim.” 3CR12252 (Yelenosky letter explaining that
“defendants conflate two distinct claims” regarding confidentiality); App. 3.
3
  Judge Yelenosky sustained some of the Hospital Defendants’ objections to LTT’s summary
judgment evidence. App. 4. As is discussed more fully below in section D of the Argument, that
ruling was in error, so the evidence should be fully considered in support of LTT’s summary
judgment response. Even without the disputed evidence, summary judgment was improper.
                                              10
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over competitors who do not know or use it.” In re Bass, 113 S.W.3d 735, 739

(Tex. 2003).        Courts look at the following factors to determine whether

information constitutes a trade secret: “(1) the extent to which the information is

known outside the claimant’s business; (2) the extent to which the information is

known by employees and others involved in the claimant’s business; (3) the extent

of the measures taken by the claimant to guard the secrecy of the information; (4)

the value of the information to the claimant and to its competitors; (5) the amount

of effort or money expended by the claimant in developing the information; and (6)

the ease or difficulty with which the information could be properly acquired or

duplicated by others.” In re Bass, 113 S.W.3d at 739. Recognizing that trade

secrets do not fit neatly into each factor every time, the Court held that the party

claiming a trade secret need not satisfy all six factors. Id. at 740.

          Under Texas law, a compilation of distinct information may be protected as

a trade secret, even if some of the components of that compilation are not,

individually, confidential.    See Bishop v. Miller, 412 S.W.3d 758, 767 (Tex.

App.—Houston [14th Dist.] 2013, no pet.) (“[T]he fact that some or all of the

components of the trade secret are well-known does not preclude protection for a

secret combination, compilation, or integration of the individual elements.”)

(quoting Restatement (Third) of Unfair Competition § 39 cmt. f). In addition, the

fact that some aspects of a trade secret may be publicly available does not preclude

                                           11
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the existence of a trade secret, since a “trade secret can exist in a combination of

characteristics and components[,] each of which, by itself, is in the public domain,

but the unified process, design and operation of which in unique combination[ ]

affords a competitive advantage, is a protected trade secret.” Southwestern Energy

Prod. Co. v. Berry-Helfand, 411 S.W.3d 581, 597 (Tex. App.–Tyler 2013, pet.

granted); Metallurgical Indus., Inc. v. Fourtek, Inc., 790 F.2d 1195, 1202 (5th Cir.

1986). Consequently, courts have found that a wide array of information may

qualify as a trade secret. See, e.g., Taco Cabana, Int’l v. Two Pesos, Inc., 932 F.2d

1113, 1124 (5th Cir. 1991) (architectural drawings); Southwestern Energy, 411

S.W.3d at 597-98 (compilation and analysis of technical information);

Metallurgical Indus., 790 F.2d at 1203 (know how); Gonzales v. Zamora, 791

S.W.2d 258, 265 (Tex. App.—Corpus Christi 1990, no writ) (business methods);

Bertolli v. C.E. Sheperd Co., 752 S.W.2d 648, 654 (Tex. App.—Houston [14th

Dist.] 1998, no writ) (market information); Cudd Pressure Control, Inc. v. Roles,

328 Fed.Appx. 961, 965 (5th Cir. 2009) (financial information).

          Given the breadth of information that can be a trade secret, it is not

surprising that the “existence of a trade secret is properly considered a question of

fact to be decided by the judge or jury as fact-finder.” Wellogix, Inc. v. Accenture,

LLP, 716 F.3d 867, 875 (5th Cir. 2013); see also Tewari De-Ox Systems, Inc. LLP

v. Mountain States/Rosen, LLC, 637 F.3d 604, 613 (5th Cir. 2011) (“[W]hether

                                         12
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certain information constitutes a trade secret ordinarily is best ‘resolved by a fact

finder after full presentation of the evidence from each side.’”).

                b.    There is plenty of evidence of LTT’s trade secrets.
          The summary judgment record includes substantial evidence of the existence

of LTT’s trade secrets. In its response to Defendants’ motions, LTT included

(among other things) the Project File, which is a compilation of all the

documentary evidence reflecting LTT’s trade secrets and proprietary information.4

In addition, the summary judgment record includes a detailed declaration from

LTT’s Chief Executive Officer and Managing Member, Robert Berry, which

establishes that the materials contained in the Project File constitute LTT’s trade

secrets. App. 7 ¶¶5-8. The Berry Declaration demonstrates that the trade secrets

included in that compilation were “provided to Defendants during the course of the

project review,” pursuant to either the Confidentiality Agreement or the LOI with

its additional confidentiality provisions. Id. at ¶¶4-5.

          The Berry Declaration identifies the Project File by bates numbers and

explains the categories of documents contained within it as including, among other

things, “a deal subfile; correspondence; contracts; drawings and specifications;


4
  The Project File was Exhibit 33 in LTT’s combined summary judgment Appendix, and it
includes subparts 33-A through 33-F. 2CR7598-7600. The Project File is out of order in the
Clerk’s Record. The subparts appear in the Clerk’s Record at: Ex. 33-A (3CR8678-8810); Ex.
33-B (3CR8811-54); Ex. 33-C (3CR8855-9020); Ex. 33-D (3CR9021-9269); Ex. 33-E
(3CR9272-9298, 9708-10320); Ex. 33-F (3CR8581-8669).

                                           13
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financial information and business plans; and other miscellaneous information

pertaining to the Project.” App. 7 ¶6. Berry further identified the trade secret

information in the Project File compilation as including “architectural plans;

program design and operations; financial information; hospital organization;

mission; staff recruitment and retention; physician support; sources and uses of

funds and other ‘cost based’ information; preliminary financial feasibility and

other information about projected revenues and costs for the initial operation of

Lake Travis Hospital; current state of construction; and preliminary financial

feasibility ratios and other information about projected key operational ratios of

Lake Travis Hospital.” Id., ¶7. Based on those documents, Berry stated that the

compilation “contains information that LTT used in its business that provided LTT

with an advantage over competitors who did not know or use it.” Id. ¶7.

          LTT not only filed the Project File and Berry Declaration; its summary

judgment responses also identified specific examples of trade secrets from within

the compilation that were provided to, and misappropriated by, Defendants:

          The evidence shows this information was used by Defendants in their
          improper disclosures to HUD. For example, and without limitation,
          during the project review, LTT provided Defendants with
          confidential, proprietary, and trade secret information regarding MEP
          specifications (Ex. 33 at LTT008217-8393), architectural
          specifications (Id. at LTT008666-9088), architectural drawings (Id. at
          LTT008464-8521, LTT008541-8634 & LTT008652-8665), site
          inspection (Id. at LTT008032-8033), meetings with staff and
          contractors (Id. at LTT007911-7913), response to PSP issues (Id. at
          LTT009872-9885), and plat (Id. at LTT009100). Utilizing that
                                           14
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          information, Defendants internally drew conclusions about potential
          conversion costs: PSP plan of action (Id. at LTT008033); PSP Report
          and Drawings re: necessary changes (Id. at LTT009831-9854); and
          estimated costs for conversion (Id. at LTT009800-9806). Defendants
          then used that information in their improper May 10, 2010 use and
          disclosure to HUD regarding their view of conversion costs.
          Defendants also utilized the information identified above to internally
          draw conclusions about code compliance in their PSP Report and
          Drawings re: necessary changes (Id. at LTT009831-9854), and then
          used that information in their improper May 10, 2010 use and
          disclosure to HUD regarding their view of alleged code compliance
          issues (Ex. 12). Each of the documents above is contained in the
          Project File (Ex. 33) and is identified by Bates number for ease of
          reference.
See, e.g., 3CR11919-20.

          As part of the confidential project review, LTT also provided its trade

secrets to Defendants in other ways, during on-site inspections and meetings. App.

7 ¶5; 3CR8836-37 (e-mail correspondence regarding site inspections); 3CR8714-

16 (e-mail correspondence reflecting meetings with staff and contractors).

          The Berry Declaration confirms that LTT’s trade secrets were not generally

known or readily available to the public. App. 7 ¶8. They were valuable to LTT,

which spent a great deal of time, energy, and money developing the information.

Id. at ¶11. For example, Berry and LTT’s other principal, Keith McDonald, spent

12,000 hours over six years and more than $2,650,000 in the development of LTT.

Id. Berry explained that LTT’s trade secrets developed as part of that process

“would be extremely difficult to duplicate, if possible at all.” Id.



                                            15
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          LTT also took steps to protect the confidential nature of its trade secrets.

App. 7 at ¶¶8 & 10. Internally, LTT limited employee access to the information.

Id. at ¶10. Regarding outside parties, it was LTT’s practice to require those

seeking access to LTT’s trade secrets to agree to keep the information confidential.

Id. at ¶8. The Defendants agreed through the Confidentiality Agreement and the

LOI to maintain the confidentiality of LTT’s trade secrets and other information

provided during the project review. 5 2CR7619-21; LOI §9. In addition, LTT

secured confidentiality agreements from the other parties involved in the financing,

development, and construction of LTT’s facility, including LTT’s landlord,

architect, and general contractor. App. 7 ¶8; 2CR7653-54, 7656-59. The parties

understood that the information exchanged during the review process was to be

kept confidential. For example, a representative of LTT’s landlord, William Hurd,

e-mailed to SDP’s president Eddie Alexander, SDP’s Ed Bivins, LTT’s Berry and

LTT’s contractor, stating: “This information is for the project review, please keep

it confidential along with all of the information generated during this review

process.” 2CR7631; see also App. 7 ¶ 8. Because Defendants had notice that


5
  The Lawyer Defendants were bound, as agents of the Hospital Defendants, to maintain the
confidentiality of LTT’s trade secrets. Under the Confidentiality Agreement, each party agreed
that, except for “evaluat[ing] participation in the Project,” neither that party “nor its employees,
agents, or business or professional associates will disclose or use any Confidential Information in
any manner whatsoever.” App. 8 ¶2. Similarly, the LOI imposed confidentiality obligations on
“any director, officer, employee, member, shareholder, or agent of LRMC or SDP engaged in the
evaluation of the Project.” LOI ¶9.1. At the relevant times, Sossi was an owner, member, and
agent of SDP as well as an officer and agent of LRMC. 2CR7743-47.
                                                16
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LTT’s information was provided in confidence, they are liable for any disclosure

or use after such notice. See Restatement (First) of Torts §§ 757 & 758 (1939).

          Defendants recognized that all the parties involved in the contemplated

transaction were under a duty of confidence. For example, Sossi sent an e-mail to

ensure Healthcare REIT (LTT’s landlord) knew that information exchanged during

the project review was confidential:

          Based on our Letter of Intent with your Tenant, including the payment
          of over $50,000 to your tenant, we are greatly concerned that the
          Section 6 (Standstill and Non-Circumvention) and Section 9
          (Confidentiality) provisions of that Letter of Intent, both of which
          survive any termination of that Letter of Intent, require your Tenant to
          have positive obligations to SDP and LRMC regarding any
          information exchanged related to that Letter of Intent. Those
          obligations specifically require that the Parties act in good faith and
          that any knowledge gained in the discussions not be used by the
          Parties for their own benefit. Further we believe that based on the
          nature of the discussions and negotiations these provisions also
          include any third party who was included in these discussions as
          agreed to by the Parties.
2CR8016 (emphasis added).

          Berry was personally involved in securing the Confidentiality Agreement

and LOI, as well as LTT’s confidentiality agreements with third parties, and stated

that even after Defendants terminated the transaction, LTT continued to require

third parties to agree to keep LTT’s information confidential. App. 7 ¶8. Berry

did not recall any instance in which LTT disclosed its trade secrets to a third party

without an agreement to keep the information confidential. Id.

                                            17
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          A plaintiff does not need to satisfy all six Bass factors to establish the

existence of a trade secret; rather, trade secret status is “ascertained through a

comparative evaluation of all the relevant factors,” and that “other circumstances

could be relevant to the analysis.” In re Bass, 113 S.W.3d at 739-40. Here, LTT

provided evidence supporting all six of the Bass factors. Viewing this evidence

and indulging all reasonable inferences in LTT’s favor, there is, at the very least, a

genuine issue of material fact as to whether LTT’s misappropriated information

constitutes trade secrets. The trial court erred by ruling otherwise.

          2.    There is evidence that Defendants acquired LTT’s trade secrets
                through breach of a confidential relationship or through improper
                means.
                a.    Confidential relationship
          A misappropriation claim requires breach of a confidential relationship or

that the trade secret was discovered by improper means. Tex. Integrated, 300

S.W.3d at 366-67. In respect to breach of a confidential relationship, both SDP

and LRMC were parties to the LOI, and the Lawyer Defendants fell within the

definition of “Representative” of a “Party.” LOI at 1, §9.1.            As such, each

Defendant was subject to the nondisclosure and confidentiality obligations of that

agreement as well as the earlier Confidentiality Agreement. App. 8 §2.

          In addition, it is well-settled that “[t]rade secret information disclosed

pursuant to negotiations for the sale of a business are disclosed under a duty of


                                           18
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confidence imposed as a matter of law.” H.E. Butt Grocery Co. v. Moody’s

Quality Meats, Inc., 951 S.W.2d 33, 36 (Tex. App.–Corpus Christi 1997, pet.

denied) (“HEB”); see also Daniels Health Sciences, LLC v. Vascular Health

Sciences, LLC, 710 F.3d 579, 584 (5th Cir. 2013) (under Texas law, “[a]n express

agreement [is] not necessary where the actions of the parties, the nature of their

arrangement, the ‘whole picture’ of their relationship established the existence of a

confidential relationship”) (citing HEB). The examples quoted by the Court in

Hyde Corp. are instructive here:

          A has a trade secret which he wishes to sell with or without his
          business. B is a prospective purchaser. In the course of negotiations, A
          discloses the secret to B solely for the purpose of enabling him to
          appraise its value. Or, A requests a loan from B, a banker, for the
          purpose of aiding the manufacture of a product by A’s secret process.
          In order to assure B about the soundness of the loan, A discloses the
          secret to him in confidence. In both cases B is under a duty not to
          disclose the secret or use it adversely to A.

314 S.W.2d at 770 (quoting Restatement of Torts, § 757, cmt. (b)).

          Here, the evidence shows that Defendants received LTT’s trade secrets in

confidence in the course of negotiations for the acquisition of LTT’s primary asset

(the Lake Travis Hospital facility), and the “whole picture” of the parties’

relationship establishes the existence of a confidential relationship between each of

the Defendants and LTT as a matter of law. App. 7 ¶¶ 2-10, 12. Defendants

recognized as much before this suit was ever filed. 2CR8016 (Sossi e-mail stating

that LOI provisions applied to LTT, LRMC, SDP, and “any third party who was
                                            19
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included in these discussions as agreed to by the Parties.”) Thus, while the LOI

and Confidentiality Agreement are each sufficient to establish a confidential

relationship between all of the parties, even without those agreements, the context

of the parties’ negotiations is sufficient, at a minimum, to create material fact issue

as to the confidential relationship between each of the parties.

               b.    Improper means

          In respect to acquiring a trade secret through improper means, courts

recognize that “[a] complete catalogue of improper means is not possible. … [i]n

general they are means which fall below the generally accepted standards of

commercial morality and reasonable conduct.”           Lamont v. Vaquillas Energy

Lopeno Ltd., LLP, 421 S.W.3d 198, 213 (Tex. App.—San Antonio 2013, pet.

denied).      “Improper means” includes, but is not limited to “theft, fraud,

unauthorized interception of communications, inducement of or knowing

participation in a breach of confidence, and other means either wrongful in

themselves or wrongful under the circumstances of the case.” Wellogix, Inc., 716

F.3d at 876.

          Under Texas law, “the question is not ‘How could [Defendants] have

secured the knowledge?’ but ‘How did [they]?’” Lamont, 421 S.W.3d at 213.

There is more than sufficient summary judgment evidence to raise a fact question

as to whether Defendants improperly acquired the trade secret information from

                                          20
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LTT in addition to breaching their obligations of confidence. See App. 7 ¶¶4-5 and

3CR11919-20 and evidence cited therein.

          That fact question is not resolved by Sossi’s contention that he acquired LTT

information through communications with LTT’s landlord, Healthcare REIT, when

he provided legal advice to Healthcare REIT in respect to LTT. 6 At most, this

evidence raises a fact question whether the Lawyer Defendants breached their duty

of confidence by disclosing to the Hospital Defendants and HUD information

provided confidentially by or on behalf of LTT during the course of the Lawyer

Defendants’ representation of Healthcare REIT. In fact, the trial court noted that

“[t]he existence of the confidential, attorney-client relationship between REIT and

Mr. Sossi” meant that the Defendants “must prove the information was available

from another, non-confidential source” to establish it was in the public domain and

thus no longer proprietary. 3CR12252.

          In short, the evidence is sufficient to show a genuine issue of material fact as

to whether Defendants acquired LTT’s trade secrets through a confidential

relationship or improper means, and the trial court erred to the extent it granted

summary judgment on this ground.



6
  Notably, no Defendant tied the limited information Sossi claims he obtained through that
confidential attorney-client relationship to any trade secret information identified in LTT’s
summary judgment responses. Compare 2CR5238-39 to 3CR11912-20 and evidence cited
therein.
                                             21
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          3.    There is evidence that Defendants disclosed or used LTT’s trade
                secrets without authorization.

          Under Texas law, “one who discloses or uses another’s trade secrets, without

a privilege to do so, is liable to the other if … his disclosure or use constitutes a

breach of confidence reposed in him by the other in disclosing the secret to him.”

Hyde Corp., 314 S.W.2d at 770. Either disclosure or use is sufficient to impose

liability. Id. Both apply here.

                a.    Defendants “used” the trade secrets.
          As a general matter, “any exploitation of [a] trade secret that is likely to

result in injury to the trade secret owner or enrichment to the defendant is a ‘use.’”

Wellogix, Inc., 716 F.3d at 877 (emphasis added). “‘Use’ can include ‘activities

other than the actual selling of the product.’” Id. “Any misappropriation of trade

secrets, followed by an exercise of control and domination, is considered a

commercial use.” Cudd Pressure Control, 328 Fed.Appx. at 965. This can include

“an act that ‘lower[s] the market value’ of a trade secret.” Wellogix, 716 F.3d at

877. Unauthorized use “need not extend to every aspect or feature of the trade

secret; use of any substantial portion of the secret is sufficient to subject the actor

to liability.’” Bishop v. Miller, 412 S.W.3d at 774. “Use of a modified … version

of the trade secret will not avoid liability if the version is substantially derived

from the protected information.” Restatement (Third) of Unfair Competition § 40

cmt. c (1995). Even if a final product “differs significantly from that of the

                                           22
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plaintiff, substantial use of the trade secret in the course of the defendant’s research

can be sufficient to constitute an appropriation.” Id.; accord Bishop v. Miller, 412.

S.W.3d at 774.

          In Cudd Pressure Control, the Fifth Circuit reversed summary judgment

based on “use” analogous to this case. 328 Fed.Appx. at 965-66. The plaintiffs’

former employee, Roles, used some of the plaintiff’s financial information to

create a business plan circulated to investors for his new company, Great White.

Id. at 966. That financial information was false as it related to Great White. Id.

Roles also showed investors plaintiff’s profit and loss statement “to validate [that]

what I was telling them was true.” Id. Reversing the district court’s summary

judgment based on an alleged lack of “use,” the Fifth Circuit held that Roles

“exercised control over [plaintiff’s] confidential information to convince investors

to finance Great White.… He therefore sought to profit from using the confidential

information, and so ‘used’ it.” Id. Accordingly, the Fifth Circuit held there was a

question of material fact as to “use.” Id.

          Defendants similarly exercised domination and control over LTT’s trade

secrets in order to disparage LTT’s Lake Travis Hospital as a competitor and

convince HUD to insure LRMC’s $166.9 million hospital mortgage. By doing so,

Defendants obtained financing for their hospital (thus enriching themselves) while

also diminishing the value of LTT’s trade secrets. Just as in Cudd, Defendants’

                                             23
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actions create a question of material fact as to “use.” Id. (“Use encompasses using

a trade secret to procure financing.”).

          As is discussed more fully above in the statement of facts, during the project

review, LTT provided Defendants with confidential, proprietary, and trade secret

information it used to build and develop its hospital.           App. 7 ¶¶6-7.     This

information, provided as documents or through site inspections and meetings,

included mechanical and electrical specifications, architectural specifications,

architectural drawings, responses to Defendants’ architect PSP, and plats. See,

e.g., 3CR11919-20 and evidence cited therein. The information was not publicly

available, was created for the development of LTT’s hospital at considerable

expense, and gave LTT a competitive advantage over those who did not know or

use it. App. 7. This information, individually and in combination with each other,

were trade secrets of LTT. See Southwestern Energy, 411 S.W.3d at 597.

          After being provided LTT’s trade secrets in confidence for the limited

purpose of evaluating the feasibility of acquiring the LTT facility (LOI §§6, 9),

Defendants used that information to draw conclusions about alleged conversion

costs associated with the LTT facility. The summary judgment evidence shows

that the review process resulted in a lengthy report from the Hospital Defendants’

architect detailing alleged civil, architectural, mechanical, electrical, and other

“noncompliance” issues and recommending various changes.               3CR8593-8616.

                                            24
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This resulted in a detailed response from LTT’s architect, 3CR8637-47, as well a

conference call among the Lawyer Defendants, the Hospital Defendants, PSP, and

LTT’s architect addressing the issues. 3CR8648-52. Defendants then used the

information from LTT to determine the pricing of their proposed modifications.

          To convince HUD that LTT was not a competitive facility, and thereby fund

LRMC’s $166.9 mortgage, Defendants used LTT’s trade secrets in the May 10th

Email and subsequent correspondence with HUD. 2CR8024-25. LTT did not

consent to Defendants’ use of LTT’s trade secrets for that purpose. App. 7 ¶¶15-

16. Defendants used the trade secrets to obtain significant economic benefits for

themselves, and LTT was injured as a result. At a minimum, this evidence raises a

fact question as to “use” of the trade secrets. See Cudd Pressure Control, 328

Fed.Appx. at 966; see also Wellogix, 716 F.3d at 877 (“any exploitation of [a]

trade secret that is likely to result in injury to the trade secret owner or enrichment

to the defendant is a ‘use,’” including “an act that ‘lower[s] the market value’ of a

trade secret”); see also Lamont, 421 S.W.3d at 215 (despite defendants’ testimony

that they did not use trade secrets, the circumstantial evidence of the defendants’

access to the information and conduct immediately afterward supported the jury’s

finding of misappropriation); see also Bishop v. Miller, 412 S.W.3d at 773

(attempts to use misappropriated information to attract investors constitutes

impermissible “use”).

                                          25
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                b.    Defendants “disclosed” the trade secrets.

          Disclosure means making something known or public. See BLACK’S LAW

DICTIONARY 562 (10th ed. 2014). The trial court justified its summary judgment

ruling by stating “[a]ll of the alleged secrets, in LTT’s own presentation, are at

least one step removed from any disclosure.” 3CR12252. The summary judgment

evidence raises a fact question as to Defendants’ disclosure of LTT’s trade secrets.

          Sossi testified that he “shepherded” the LRMC application through HUD

and handled “any and all communications related to the HUD loan and LRMC.”

2CR7776-77. As part of “shepherding” the application, the Lawyer Defendants

participated in a number of in-person meetings and telephone calls with HUD. Id.

at 7777-80, 7813, 7815. Sossi admitted that he discussed LTT in sufficient detail

to allow HUD to determine whether LTT would be a significant competitor to

LRMC’s proposed hospital:

          The existence of the plans for the [LTT factility] were discussed in
          detail with the HUD Client Service Team and [they concluded] the
          facility as planned would not appear to meet the general acute care
          needs for the Lakeway Community.

2CR8110. Sossi’s unequivocal admission raises a question of fact as to disclosure.

          Sossi also asserted that he and the other Defendants “expect HUD to defend

the decision to issue the Guarantee,” and that HUD’s due diligence process was

“proper.” Id. Sossi’s May 10th Email was written in response to some of HUD’s

due diligence. Given the substance of the May 10th Email, HUD’s parroted

                                           26
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response in reliance on it, and the fact that HUD never communicated with LTT

prior to making that response, it is reasonable to infer that SDP’s verification of

“Mr. Sossi’s facts” included LTT’s confidential trade secrets. See Lamont, 421

S.W.3d at 215 (circumstantial evidence of defendants’ access to the information

and conduct immediately afterward supported finding of misappropriation). The

evidence also shows that LTT never authorized Defendants’ disclosures. App. 7

¶16. Judge Yelenosky erred to the extent he found no evidence of Defendants’

unauthorized disclosures.

          4.    There is evidence of damages as a result of the misappropriation.

          In respect to damages, “the established rule is that the plaintiff is not

required to prove lost profits; rather it need only prove misappropriation of its

valuable trade secret and prove that it was put to some commercial use.” Univ.

Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 540 (5th Cir. 1974). As

discussed above, there is evidence of Defendants’ misappropriation and

commercial use of LTT’s valuable trade secrets. Once that showing is made,

“[d]amages in trade secret cases can take a variety of forms.”           Southwestern

Energy, 411 S.W.3d at 608 (citing Univ. Computing, 504 F.2d at 535).                For

example, even if a plaintiff cannot prove that it suffered a specific injury caused by

the defendant’s use (which is not the case here), the court may instead award

damages based on the defendant’s actual profits gained by using the trade secret.

                                           27
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Id. at 609. In addition, “a lack of profit from [defendant’s] misappropriation will

not exempt the wrongdoer from liability in the amount of the trade secret’s value

when it was misappropriated.” Id. Rather, the court may award a reasonable

royalty, based on what the parties would have agreed to for the use of the trade

secret at the time of the misappropriation if both had been reasonably trying to

reach an agreement. Id.

                a.     Loss of market value

          There is evidence that LTT suffered losses in market value to both itself and

to its trade secrets as a result of Defendants’ misappropriation. Berry, CEO and

Managing Member of LTT, was familiar with and had personal knowledge of LTT

as an entity, its value, and the loss of market value suffered by LTT as a result of

Defendants’ misappropriations at issue. App. 7 ¶15. Based on that knowledge,

Berry stated that a conservative price a willing buyer would pay a willing seller in

respect to LTT before Defendants’ misconduct would have been $13,794,834.

App. 7 ¶19. As a result of Defendants’ misconduct, LTT lost nearly all of its value

as an enterprise. Id.

          In addition, Berry was familiar with the trade secret information LTT

provided to Defendants, and stated the price a willing buyer would pay a willing

seller for LTT’s trade secrets at the time of the misappropriation was at least $7.9

million.      Id.    This market value was based on Berry’s familiarity with the

                                              28
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discussions between LTT and the Defendants, the value LTT placed on its trade

secrets and its reluctance to disclose them to competitors, his review of

communications from HUD raising questions about competition in the Lakeway

area, and evidence suggesting uncertainty about whether Defendants could get

other sources of funding. App. 7 ¶¶ 19, 11. As a result of Defendants’ conduct,

LTT’s trade secrets lost nearly all of their market value. Id. This unchallenged

evidence of trade secret damages is sufficient to create a question of material fact

as to damages. See Reid Road Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores,

Ltd., 337 S.W.3d 846, 853 (Tex. 2011) (officer of a company may testify as to the

value of a company and its assets).

               b.    Reasonable royalty damages
          The evidence of the market value also provides evidence of the amount of

reasonable royalty damages. In measuring reasonable royalty damages, courts

consider, among others, the following factors: the resulting and foreseeable

changes in the parties’ competitive posture; prices paid by licensees in the past; the

total value of the secret to the plaintiff, including the plaintiff’s development cost

and the importance of the secret to the plaintiff’s business; the nature and extent of

the use the defendant intended for the secret; and whatever other unique factors in

the particular case might have been affected by the parties’ agreement, such as the

ready availability of alternatives. Univ. Computing, 504 F.2d at 539; Southwestern

                                         29
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Energy, 411 S.W.3d at 610 (citing Georgia–Pacific Corp. v. United States

Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970), mod. and aff’d, 446

F.2d 295 (2d Cir. 1971), and the “fifteen factors considered in other leading cases

in determining a reasonable royalty”).

          Berry considered many of these factors when determining the value of

LTT’s trade secrets at the time of misappropriation to be “at the least the

consideration of $7.9 million contemplated by the LOI.”          App. 7 ¶15; see

Bohnsack v. Varco, L.P., 668 F.3d 262, 275-76 & 280 (5th Cir. 2012) (reversing

$600,000 benefit-of-the-bargain fraud award but upholding $600,000 reasonable

royalty award for misappropriation since “terms negotiated between [the parties]

are sufficient evidence to prove the value” of the confidential information to a

reasonably prudent investor).

                c.    Benefits obtained
          Finally, Defendants profited handsomely from their misappropriation. They

used the misappropriations in the May 10th Email to convince HUD to disregard

LTT as a competitor and quickly fund the $166.9 million loan. See 2CR8017.

Benefits obtained by the Defendants are recoverable as damages for LTT’s

misappropriation claim. Southwestern Energy, 411 S.W.3d at 609.




                                          30
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               d.    No HUD reliance necessary

          It is not necessary that LTT prove that HUD relied on the information in

order to recover for trade secret misappropriation. Even if there was not sufficient

evidence of HUD’s reliance (and there was), the evidence raises questions of fact

as to reasonable royalty damages, which are not dependent on proof that HUD

relied on Defendants’ improper disclosure of LTT’s trade secrets.           Instead,

royalties are based on the value of the trade secret information at the time it was

misappropriated. Southwestern Energy, 411 S.W.3d at 609.

          Moreover, the summary judgment evidence easily raises a question of fact

on the issue of HUD’s reliance, as the trial court itself recognized: “LTT has met

its summary judgment burden of providing circumstantial evidence that

defendants’ communications with HUD resulted in receipt of the loan guarantee

and some evidence that the loan guarantee resulted in damages to LTT.”

3CR12252.        By law, HUD may only insure mortgages for “urgently needed

hospitals.” 12 U.S.C. § 1715z-7(a). It therefore can only insure mortgages for

hospitals in underserved areas, 24 C.F.R. § 242.16, and information about

potentially competing hospitals such as LTT was therefore material to whether

HUD had the legal authority to insure the LRMC loan. Defendants’ HUD expert

observed that it would be “negligent” for HUD not to consider the information




                                         31
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about LTT in authorizing the loan, and HUD “would have been crucified for not

doing due diligence; taxpayers would demand full review.” 2CR8169-73.

          In sum, there is sufficient evidence to raise a genuine issue of material fact

as to each challenged element of LTT’s claim for misappropriation of trade secrets.

The trial court erred in granting summary judgment.

C.        Summary judgment was improper as to Section 2 of the LOI.

          LTT alleged that the Hospital Defendants breached Section 2 of the LOI,

which includes various provisions regarding the terms of the Project. LOI §2.7

Judge Yelenosky granted summary judgment as to LTT’s Section 2 claims. App. 3

¶1. That was error. Section 2 is a binding provision, it includes all the terms

necessary for its enforcement, and any alleged failure of conditions precedent to its

enforcement was caused by the Hospital Defendants’ own conduct.

          1.     Section 2 of the LOI is a binding agreement.

                 a.     The detailed provisions are more than an agreement to agree.

          LTT pled that the Hospital Defendants breached various terms of the LOI,

including specifically Section 2.        Section 2 of the LOI outlines the parties’

agreement on the key terms for the proposed lease assignment (“Project”) between

LTT and LRMC. It includes detailed provisions regarding LRMC’s assumption of

LTT’s lease, including the nature and intended legal effect of the assignment,

terms of payment, and the reimbursement of costs. LOI §2. The LOI provides that
7
    The LOI is attached at App. 1.
                                            32
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the Section 2 terms are subject to the satisfaction of specific conditions, such as

approval of LRMC’s Board, the approval of HCN (LTT’s landlord), and the

mutual development of definitive documents “that fully reflect the intention of the

parties expressed in this Letter of Intent.” LOI §3. And the LOI obligates the

parties to “use their respective best efforts to satisfy each of the foregoing

conditions as soon as reasonably practicable....” LOI §3. In other words, Section

2 contains a comprehensive list of terms that were triggered by satisfaction of the

five conditions precedent set out in Section 3 of the LOI. 8

          The Hospital Defendants moved for summary judgment that Section 2 of the

LOI was not enforceable because it was merely an “agreement to agree.”9

2CR5618. This argument fails under Texas law and the plain language of the LOI.

          A recent opinion by the Supreme Court of Texas makes clear that an

agreement is not an unenforceable “agreement to agree” simply because it


8
  Despite their argument that Section 2 was never intended to be enforceable, the Hospital
Defendants also moved for summary judgment that “[c]onsummation of Section 2 of the LOI
was based upon five conditions precedent” but “two of the five conditions were never satisfied.”
2CR5622. If the parties intended for Section 2 to be “consummated” upon satisfaction of certain
enumerated conditions, they necessarily also intended for Section 2 to be a binding contractual
provision once those conditions were met.
9
  Judge Yelenosky rejected the Hospital Defendants’ argument that the “best efforts” provision
in Section 3 of the LOI was too vague, and thus rendered Section 2 of the LOI unenforceable.
3CR12250 (“I will grant the motions with respect to LTT’s breach of Section 2 of the LOI, but
not with respect to the “best efforts” provision in Section 3.”); App. 3 (Order). Best efforts
clauses, such as the clause here, that “set some kind of goal or guideline against which best
efforts may be measured” are enforceable. CKB & Assocs., Inc. v. Moore McCormack
Petroleum, Inc., 809 S.W.2d 577, 581 (Tex. App.—Dallas 1991, writ denied). The Hospital
Defendants have acknowledged that the confidentiality and noncircumvision provisions of the
LOI are binding. See 2CR8016.
                                              33
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contemplates future contracts. McCalla v. Baker’s Campground, Inc., 416 S.W.3d

416 (Tex. 2013). The McCalla Court held that an “agreement that includes all of

the terms necessary for the contract’s enforcement is an enforceable contract as a

matter of law, even if some of its terms seem to imply that the parties contemplate

forming an additional contract in the future.” 416 S.W.3d at 416. The Court

repeated the well-settled principal that “[a]greements to enter into future contracts

are enforceable if they contain all material terms.” Id. at 418. While the contract

in that case stated that the parties agreed “to execute any documents that [were]

reasonable and necessary to carry out the terms and provisions of this Agreement,”

the Court noted that the agreement also “stated that it ‘shall be binding upon … the

parties ….” Id. at 417 (ellipsis in original). The Court noted: “[i]f a court was

trying to enforce the settlement agreement, it could find all the terms necessary for

its enforcement,” and thus held that the agreement was binding. Id. at 418.

          McCalla was recently applied in the context of a letter of intent for a

complicated commercial transaction. See Karns v. Jalapeno Tree Holdings, LLC,

459 S.W.3d 683, 691 (Tex. App.—El Paso 2015, pet. denied). The court of

appeals held that if an LOI “contains all essential terms as contemplated by the

parties and the only remaining issue is formalization of the agreement or

negotiation of ancillary terms, then the LOI may be an enforceable contract if the



                                         34
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parties intended to be bound.” Id. at 692 (emphasis added). The provisions of the

LOI easily meet this standard.

                b.     The parties intended for all provisions of the LOI to be binding.
          The LOI plainly reflects the parties’ intent to be bound. The introductory

paragraph states, without exception, that it is a “Binding Letter of Intent.” LOI at

1. And although Section 2 contains an “outline of terms” for the Project, its

language makes clear that the detailed terms outlined therein were fully negotiated

and agreed,10 and it does not state that its terms may later be altered in future

negotiations. LOI §2. Section 3 contains conditions precedent to the terms in

Section 2, again demonstrating that the parties intended for Section 2’s terms to

become binding upon satisfaction of those conditions. LOI §3. The fact that one

of the conditions was the “mutual development of definitive documents that fully

reflect the intention of the Parties expressed in this Letter of Intent” further

demonstrates the finality of the parties’ substantive agreement on the key Project

terms, as does the parties’ agreement to use their “respective best efforts” to satisfy

the conditions to consummation of Section 2. Id.




10
   See, e.g., Section 2.1 (“LRMC will assume the Lease . . . and become the tenant. . .LRMC
shall ensure that all such liabilities in favor of any third parties are released . . .”); Section 2.2
(“LRMC will refund at closing of the assignment of the Lease all deposits made by the Principals
. . .[and] shall assume all liabilities and contractual obligations of the Principals . . .”); and
Section 2.3 (“. . . LRMC will make a single lump sum cash payment at closing to the Principals,
or their designated assignee, equal to $1.5 million.”) (emphasis added).
                                                 35
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          In addition, Section 10 states that “if any Party to this Letter of Intent

breaches any provision of this Letter of Intent” irreparable harm shall be presumed.

And Section 10.6 states:

          The persons executing this Letter of Intent personally represent and
          warrant that they have been duly authorized to do so by their
          respective Party and that, upon full execution hereof, this Letter of
          Intent shall be a binding obligation of said Party.

LOI §10.6 (emphasis added).

          In sum, through the provisions of the LOI itself, the parties recognized and

intended all provisions of the “Binding Letter of Intent,” including section 2, to be

binding and enforceable, not simply an “agreement to agree.” At a minimum,

these provisions create a question of fact as to whether the parties intended for

Section 2 to be binding, making summary judgment on that issue improper. See,

e.g., Foreca, S.A. v. GRD Dev. Co., 758 S.W.2d 744, 746 (Tex. 1988) (holding that

the question of whether a letter agreement that was “subject to legal

documentation” was intended to be binding was a question of fact properly

presented to the jury).

                c.    Section 2 contains all essential terms.

          To be enforceable, an agreement “must contain sufficient terms to determine

the parties’ obligations but is not required to resolve all disputed issues.” West

Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d 248, 259 (Tex. App.—Austin 2002, no

pet.). The parties may agree upon certain contractual terms and leave other matters
                                            36
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for later negotiations. See Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 555

(Tex. 1972). “It is only when an essential term of a contract is left open for future

negotiations that there is no binding contract . . .” Geophysical Micro Computer

Applications (Int’l) Ltd. v. Paradigm Geophysical Ltd., No. 05-98-02016, 2001

WL 1270795, at *3 (Tex. App.—Dallas Oct. 24, 2001, pet. denied) (not designated

for publication) (citing McCulley Fine Arts Gallery, Inc. v. “X” Partners, 860

S.W.2d 473, 477 (Tex. App.—El Paso 1993, no writ)).

          Section 2 of the LOI contains all essential terms for its enforcement. Section

2.1 states that LRMC “will assume the existing Lease,” relieve the Principals of all

liability under the Lease, and indemnify the Principals and their affiliates of any

liabilities after the assignment of the Lease. Section 2.2 states that LRMC “will

refund at closing of the assignment of the Lease all deposits made by the Principals

and their respective affiliates and reimburse to the Principals and their respective

affiliates all reasonable and documented costs that have been advanced by them to

develop the Facility.” Section 2.2 then further defines such costs to include,

among other things, reimbursement of compensation of certain employees and

other development-related expenses. Section 2.3 provides that, in exchange for

assignment of the Lease, LRMC “will make a single lump sum cash payment at

closing to the Principals or their designated assignee, equal to $1.5 million.”



                                            37
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          In short, Section 2 defines the specific obligations that must occur and

explains when they must occur. “If a court was trying to enforce the [agreement],

it could find all the terms necessary for its enforcement,” and, just as in McCalla,

the LOI contains the material terms for Section 2 to be enforceable. 11 416 S.W.3d

at 418. Section 2 of the LOI is thus a binding and enforceable provision, subject

only to satisfaction of the conditions precedent in Section 3. As discussed below,

the Hospital Defendants prevented these conditions from occurring, so they

became legally responsible for failing to comply with Section 2.

          2.    The Hospital Defendants cannot rely on unsatisfied conditions
                precedent to avoid complying with Section 2 because their own
                conduct prevented performance.
          It is an “elementary” rule of contract law that “one who prevents or makes

impossible the performance of a condition precedent on which his liability under a

contract is made to depend cannot avail himself of its nonperformance.”                         II

Deerfield Limited Ltd. P’ship v. Henry Bldg., Inc., 41 S.W.3d 259, 265 (Tex.

App.—San Antonio 2001, pet. denied). One court of appeals recently looked at a

set of conditions precedent that the defendant claimed the plaintiff had not

satisfied. Sharifi v. Steen Automotive, LLC, 370 S.W.3d 126, 146 (Tex. App.—

11
  The Hospital Defendants’ argument below that the LOI does not contain specific amounts for
compensation, severance, and reimbursement does nothing to prevent the enforceability of those
obligations. First, such details relate to the form and not the substance of the transaction; they
are not essential terms. See McCulley, 860 S.W.2d at 477. Second, under Texas law, such
provisions are enforceable even without specific figures. See Fuqua v. Fuqua, 750 S.W.2d 238,
245 (Tex. App.—Dallas 1988, writ denied) (holding that an agreement to pay rent at a
“reasonable rate” is not too indefinite to be enforced).
                                               38
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Dallas 2012, no pet.). Three conditions in particular involved the defendant’s

payment of debts to a third party. Id. The court held the defendant could not rely

on the non-occurrence of the conditions, which was due to the defendant’s “choice

not to perform.” Id.

          Similarly, in another case plaintiffs had an agreement with a water authority

where plaintiffs would receive seventy percent reimbursement of certain costs if

the voters passed a required bond measure.           Clear Lake City Water Auth. v.

Friendswood Dev. Co., Ltd., 344 S.W.3d 514, 517 (Tex. App.—Houston [14th

Dist.] 2011, pet. denied). The defendants failed to include the measure on the

ballot, thereby prevented the occurrence of the condition precedent, and argued

that “nonoccurrence of this condition…is not excused if the [defendant] can

establish that the voters would not have approved the 2004 bond measure had it

been included on the ballot.” Id. The court rejected that argument and held that

“the Authority cannot rely on a projected failure of voter approval, which it

prevented or made impossible…to escape its liability to purchase the Developers’

facilities.” Id.

          Here, the Hospital Defendants moved for summary judgment that “two of

the five conditions” in the LOI were not satisfied. 12 2CR5622. First, they claimed

that “the approval of HCN as landlord under the Lease to the assignment thereof”

12
    The Hospital Defendants did not allege that the parties’ failure to develop definitive
agreements was an unsatisfied condition.
                                            39
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was never satisfied. 2CR5623. “Lease” is defined as the lease for the LTT

hospital facility. LOI at 1. Section 2 requires LRMC to “assume the existing

Lease” between LTT and the landlord. LOI § 2.1 Section 3 requires LRMC to

make best efforts to secure approval from “the landlord under the Lease to the

assignment thereof.”        Sossi’s uncontroverted testimony, however, shows that

Defendants never sought approval for assignment of the “existing Lease” as

required by the LOI:

          Q. Did you negotiate with HCN as landlord under the lease on behalf
          of LRMC to the assignment of Exhibit 1?


          A. Yes. But for an amended and restated lease.

          Q. As a lawyer, Mr. Sossi, do you understand the difference between
          the assignment of an existing document and the renegotiation and
          execution of a new document?


          A. If a specific document is identified, yes.
                *****

          Q. Did you negotiate with HCN as landlord under the lease on behalf
          of LRMC to the assignment of Exhibit 1 without modification?
          A. No, not without modification.

2CR7771-72; see also 7766-71.

          In other words, the evidence shows that Defendants made no effort, much

less a best effort, to get approval from the Landlord for the assignment of the

existing Lease. The Hospital Defendants did not satisfy this condition, and cannot
                                             40
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rely on its nonoccurrence to avoid liability for breach. See II Deerfield, 41 S.W.3d

at 265; Clear Lake, 344 S.W.3d at 517; Sharifi, 370 S.W.3d at 146.

          The Hospital Defendants alleged that one other condition was not satisfied,

that of “full and formal approval by the Board of Managers of LRMC…”

2CR5624.        LRMC’s corporate representative Eddie Alexander admitted that

LRMC’s Board never took a vote on approval of the project. 2CR7721. Just as in

City of Clear Lake Water Authority, the Hospital Defendants cannot rely on the

lack of a vote they failed to take to avoid compliance with Section 2 of the LOI.

344 S.W.3d at 517 (holding defendant “cannot rely on a projected failure of voter

approval, which it prevented or made impossible…to escape its liability”).

          The evidence creates at least a question of fact on whether the Hospital

Defendants prevented the two conditions precedent from occurring. These were

the only conditions precedent that the Hospital Defendants relied on in moving for

summary judgment. Judge Yelenosky erred in granting the Hospital Defendants’

motions and dismissing LTT’s claims for breach of Section 2 of the LOI.

D.        The trial court abused its discretion in sustaining objections to some of
          LTT’s summary judgment evidence.

          This Court reviews rulings on summary judgment evidence for abuse of

discretion. Woodhaven Ptnrs, Ltd. v. Shamoun & Norman, LLP, 422 S.W.3d 821,

829 (Tex. App.—Dallas 2014, no pet.). Judge Yelenosky abused his discretion by



                                           41
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excluding portions of LTT’s summary judgment evidence. App. 4. 13 The excluded

evidence relates to LTT’s ownership of the proprietary and trade secret information

(Exhibits 1, 33), and to Defendants’ misuse of that information in their

communications with HUD (Exhibits 23-29).                Because the evidence was not

objectionable, this Court should consider it in ruling on summary judgments.

          1.    The court improperly sustained objections that had become moot.

          As a threshold procedural matter, the court erred in excluding portions of the

Project File (Exhibit 33), as well as Exhibits 23-29, because LTT’s Amended MSJ

Responses mooted some of the Hospital Defendants’ objections. 14

          LTT responded to the Hospital Defendants’ motions for summary judgment

(“Original MSJ Responses”) and filed an Appendix and Supplemental Appendix

(“Appendix”) of supporting evidence.15              3CR9542-9626 (SDP), 9627-9706


13
   The trial court ruled on the Hospital Defendants’ objections to LTT’s summary judgment
evidence, but it did not rule on the Lawyer Defendants’ objections. App. 4 (order addressed to
the Hospital Defendants’ objections only). There are thus no rulings for LTT to appeal because
the court did not exclude any evidence in connection with the Lawyer Defendants’ summary
judgment motions. See Investment Retrievers, Inc. v. Fisher, No. 03-13-00510-CV, 2015 WL
3918503, at *4 (Tex. App.—Austin June 25, 2015, no pet.) (mem. op.) (“[A] trial court’s ruling
on an objection to summary-judgment evidence is not implicit in its ruling on the motion for
summary judgment.”). Further, the Lawyer Defendants waived their objections to procedural
defects in LTT’s evidence by failing to obtain a ruling. Jones v. Ray Ins. Agency, 59 S.W.3d
739, 753 (Tex. App.—Corpus Christi 2001, pet. denied). Regardless, the Lawyer Defendants’
objections to the evidence fail for the same reasons as the Hospital Defendants’ Objections.
14
   Regarding Exhibit 23—the May 10th Email—the Hospital Defendants also filed that exhibit,
so it is properly in the summary judgment record irrespective of any objection to it in LTT’s
summary judgment appendix. Compare 2CR5716-19 (LRMC Ex. 8) and 8267-70 (LTT Ex. 23).
15
    The Appendix is out of order in the Clerk’s Record and appears in several non-sequential
chunks: 2CR7598-8555, 3CR8580-9541, 3CR9707-11421, 3CR11882-98. Exhibits 23-29
appear at 2CR8265-8480.
                                             42
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(LRMC). The Appendix identified all of the evidence on which LTT relied in

responding, including a detailed index of the categories of information in

Exhibit 33, the Project File, and it stated that the “summary judgment evidence in

this Appendix is hereby incorporated” into the responses. 2CR7598.

          The Hospital Defendants filed objections to LTT’s summary judgment

evidence (3CR11486-524), arguing that LTT should have specifically cited to each

page of the Project File, so the court should not consider any pages in the Project

File “other than the 189 pages specifically referred to and identified in the”

Original MSJ Responses. 3CR11487 (Objection 2). The Hospital Defendants also

objected to Exhibits 23-29 because LTT had not specifically cited to those Exhibits

in its Original MSJ Responses. Id. at 11489 (Objection 5).

          LTT later filed amended responses to the Hospital Defendants’ motions for

summary judgment (“Amended MSJ Responses”).                  3CR11790-881 (SDP),

3CR11899-982 (LRMC). In the Amended MSJ Responses, LTT added specific

citations to hundreds of additional pages—totaling over 775 pages—in the Project

File. See, e.g., 3CR11919-20 (identifying specific materials within the Exhibit 33

Project File by bates number). LTT also added specific citations to Exhibits 23-29.

See, e.g., 3CR11906 n.26, 11918 n.63, 11919 n.66. The Hospital Defendants did

not file amended objections, even after LTT pointed out that the Amended MSJ

Responses had mooted objections to the lack of page citations in the Original MSJ

                                          43
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Responses. 3CR12017, 12022.           Nevertheless, the court sustained the Hospital

Defendants’ Objections 2 and 5, which were based solely on a lack of citation to

the evidence in the Original MSJ Responses. App. 4.

          The impact of the trial court’s ruling on this point is unclear. Given that the

stated objections were only to pages and exhibits not cited by LTT, the ruling

sustaining the objections cannot actually exclude any evidence because LTT cited

to all the challenged evidence in its Amended MSJ Responses. However, if the

ruling is construed to exclude any portions of these exhibits, then the trial court’s

ruling was plainly in error.

          First, LTT’s Amended MSJ Responses mooted the Hospital Defendants’

objections to the lack of sufficient citation in the Original MSJ Responses. The

trial court erred in sustaining objections that were based on a superseded pleading.

See, e.g., Loy v. Harter, 128 S.W.3d 397, 407 (Tex. App.—Texarkana 2004, pet.

denied) (holding the court erred in granting summary judgment based on pleading

that had been superseded); Krainz v. Kodiak Resources, Inc., 436 S.W.3d 325, 328

(Tex. App.—Austin 2013, pet. denied) (“When amended petitions are filed timely,

trial courts must base their decision on the amended pleading, not any superseded

petition.”). Second, LTT’s specific and detailed citations to the evidence in the

Amended MSJ Responses cured the Hospital Defendants’ objections.



                                             44
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          2.    LTT adequately cited to the entirety of the Project File.

          The court independently erred in sustaining the Hospital Defendants’

objection to “uncited references” within the Project File because LTT’s citations

were sufficient.

          The Project File is a compilation of all documents that reflected LTT’s trade

secret and proprietary information at issue in the case. The Index to the Appendix

identified by bates number the categories of documents included within the Project

File, and LTT’s Amended MSJ Responses gave specific references, by bates

number, to about 775 individual pages within the Project File. LTT identified and

described the nature of the Project File as a whole and explained the basis for its

inclusion as summary judgment evidence.            See, e.g.,   3CR11922.    LTT also

provided detailed testimony on the contents of the Project File in the Berry

Declaration. App. 7. The citations and descriptions in the Appendix, the Berry

Declaration, and the body of the Amended MSJ Responses sufficiently directed the

court to the evidence on which LTT relied.

          Texas law does not require that each page of a documentary exhibit be

individually cited in a summary judgment response. “A non-movant need not set

out the exact evidence on which it relies or explain with specificity how this

evidence supports the issues it raises; summary judgment is not a trial by affidavit

or deposition. Evidence need only be referenced or attached in order for a court to

                                            45
1245899
consider it.” Hinojosa v. Columbia/St. David’s Healthcare Sys., L.P., 106 S.W.3d

380, 387-88 (Tex. App.—Austin 2003, no pet.) (emphasis added)(citations

omitted).

          Here, the Project File, although by its nature a large exhibit, was well

organized and supported by detailed testimony explaining why its contents

supported LTT’s claims. Further, all the documents in the Project File collectively

comprised LTT’s documentary evidence of its trade secret and proprietary

information. This was not a situation where an entire deposition is generically

referenced in a response without any citation to the relevant portions. All the

documents in the Project File were relevant, they were relevant as a whole, and the

Amended MSJ Responses explained in detail why this was the case.

          Judge Yelenosky’s conclusion—that only those pages in the Project File that

were specifically cited by bates number were admissible—puts an unreasonable

and unsupported obligation on the party responding to summary judgment. For

example, must all the pages in a lengthy contract be individually discussed in order

for the contract, as a whole, to be admissible? Of course not. LTT adequately

cited to the entire Project File, and the trial court’s ruling was in error.

          3.    The court erred in sustaining an objection to argument that the Project
                File as a whole is a trade secret.

          The Hospital Defendants objected to any “suggestion that Exhibit 33 [the

Project File] constitutes a trade secret.” 3CR11486 at Objection No. 1. They
                                           46
1245899
argued that the Project File was a compilation of separate documents and objected

“to any argument, suggestion, or purported evidence that the so-called Project File

is itself a combination or compilation trade secret that is at issue in this case.” Id.

at 11487. In other words, rather than objecting to the admissibility of Exhibit 33

itself, the Hospital Defendants objected to any argument that the Project File, as a

whole, was a trade secret.16

          The court sustained Objection No. 1 as follows: “Sustained to Exh. 33,

except for those Bates numbered documents actually referenced in Plaintiff’s

response.” App. 4. This ruling makes no sense in light of the objection presented

to the Court, which had nothing to do with whether LTT had cited to individual

pages. Further, the Hospital Defendants did not seek exclusion of any pages of the

Project File, but rather sought to exclude any argument that the entirety of the

Project File was a trade secret. The objection on its face is invalid—it was not an

evidentiary objection but instead challenged the merits of Plaintiff’s claim. The

question of whether the information contained in the Project File was really a trade

secret, or a collection of trade secrets, was an appropriate issue for debate in the

summary judgment briefing on the merits; it was not a proper basis for excluding

any portion of Exhibit 33.



16
   As is discussed in section B.1 of the Argument, the summary judgment evidence raises at least
a fact question as to whether the Project File, taken as a whole, is a trade secret.
                                              47
1245899
          4.    Berry’s testimony about the Project File was proper.

          The court sustained the Hospital Defendants’ objection to the following two

statements in the Berry Declaration: (1) LTT “owned the confidential, proprietary

and trade secret information contained in the Project File,” and (2) LTT’s

principals “had an ownership interest in the information as well, and were

authorized to disclose it pursuant to the LOI on behalf of” LTT. 3CR11488

(Objection No. 4); App. 4 (Order); App. 7 (Berry Declaration). The Hospital

Defendants objected that these statements were conclusory because “Mr. Berry

does not . . . actually provide any facts regarding Plaintiff’s purported acquisition,

development, or ownership of [the information].” 3CR11488. It was error to

sustain that objection, for two reasons: (1) it was based on an inaccurate

assumption about how to prove ownership of a trade secret; and (2) Berry’s

statements about ownership were based on his personal knowledge and supported

by detailed facts regarding the information at issue.

          First, proving ownership of a trade secret is different from proving fee

simple title ownership of real or personal property:

          While trade secrets are considered property for various analyses, the
          inherent nature of a trade secret limits the usefulness of an analogy to
          property in determining the elements of a trade-secret
          misappropriation claim. The conceptual difficulty arises from any
          assumption that knowledge can be owned as property . . . While the
          information forming the basis of a trade secret can be transferred, as
          with personal property, its continuing secrecy provides the value, and
          any general disclosure destroys the value. As a consequence, one
                                            48
1245899
          “owns” a trade secret when one knows of it, as long as it remains a
          secret. Thus, one who possesses non-disclosed knowledge may
          demand remedies . . . against those who ‘misappropriate’ the
          knowledge.

DTM Research, LLC v. AT&T Corp., 245 F.3d 327, 332 (4th Cir. 2001) (emphasis

added); see also In re Cayman Island Firm of Deloitte & Touche, No. 04-01-

00491-cv, 2001 WL 1042233, at *2-3 (Tex. App.—San Antonio Sept. 12, 2001, no

pet.) (relying on DTM Research and holding that party who possessed confidential

information could claim trade secret privilege irrespective of chain-of-title

ownership rights); cf. Oryon Technologies, Inc. v. Marcus, 429 S.W.3d 762, 764

(Tex. App.—Dallas 2014, no pet.) (citing DTM Research and noting that a central

feature of a trade secret is the right to exclude others from the information).

          A party may therefore prove ownership of a trade secret in multiple ways,

such as by proving that it created or developed the trade secret, Bishop v. Miller,

412 S.W.3d at 771, or by proving that it possessed the non-disclosed information,

and that the information remained a secret, DTM, 245 F.3d at 332. The Berry

Declaration does both.

          For example, Berry details the time, effort, and expense that went into LTT’s

development of the trade secrets. App. 7 ¶11. He also specifies, by detailed

descriptive categories, the confidential information that LTT possessed and used in

its business. Id. ¶7. He testifies that the documents reflecting this information

were contained in the Project File, which he references and authenticates. App. 7
                                            49
1245899
¶¶5-7. Berry also explains that LTT took steps to preserve the secrecy of this

information, both internally and externally, by limiting employee access to the

information and requiring third parties to enter confidentiality agreements before

accessing the information. App. 7 ¶¶7–10.

          Berry also describes the basis for his personal knowledge: he was the

Managing Member and CEO of LTT, as well as one of its two owners. App. 7

¶¶5-6. He states that he served in this position “[a]t all relevant times, including

from the beginning of 2009 up to the present day.” ¶13. He indicates that he is

familiar with all the information in the Project File, which he describes in detail.

¶7. He testifies that he has reviewed that information, and that “[m]uch of the

information in the Project File is or reflects confidential and proprietary

information that provided LTT with a competitive advantage . . .” ¶7. Berry does

not simply state that he, as a principal, owned the trade secrets. Instead, Berry

explains that his ownership interest and his authority to disclose the information

derive from his role as a Managing Member and CEO of LTT. ¶13.

          Berry’s testimony regarding the basis for his personal knowledge is more

than sufficient under Texas law. See Woodhaven, 422 S.W.3d at 842-43 (affiant

demonstrated a sufficient basis for his personal knowledge via testimony about his

position within a law firm, and his references to attached supporting documents);

Nguyen v. Citibank N.A., 403 S.W.3d 927, 931 (Tex. App.—Houston [14th Dist.]

                                         50
1245899
2013, pet. denied) (affidavit testimony on Citibank’s ownership of an account was

admissible and non-conclusory when based on affiant’s personal knowledge as

custodian of records and her review of the records).

          When read in context with the rest of Berry’s fourteen-page declaration,

there is nothing conclusory about the two excluded statements. Berry’s statements

regarding ownership of the confidential information in the Project File are

admissible and should be considered by this Court in ruling on the merits of

summary judgment.          Given Berry’s detailed testimony on these matters, his

Declaration as a whole establishes LTT’s ownership even if this Court affirms the

trial court’s exclusion of the two challenged sentences.

                             CONCLUSION AND PRAYER
          As noted at the start of this brief, this cross-appeal presents simple, plain-

vanilla issues of summary judgment review and the existence of fact questions.

LTT’s summary judgment evidence is more than sufficient to raise a fact question

as to its claims for misappropriation of trade secrets and breach of Section 2 of the

LOI. LTT therefore respectfully prays that this Court reverse the orders granting

partial summary judgment as to those claims (App. 2, 3), as well as the order

sustaining certain of the Hospital Defendants’ objections to LTT’s summary

judgment evidence (App. 4), and remand those claims to the trial court.




                                            51
1245899
          Respectfully submitted,

          SCOTT DOUGLASS
                & MCCONNICO LLP
          303 Colorado Street, 24th Floor
          Austin, TX 78701
          (512) 495-6300
          (512) 495-6399 Fax

          By: /s/ Jane Webre_________
                Jane M.N. Webre
                State Bar No. 21050060
                jwebre@scottdoug.com
                S. Abraham Kuczaj, III
                State Bar No. 24046249
                akuczaj@scottdoug.com
                Robyn B. Hargrove
                State Bar No. 24031859
                rhargrove@scottdoug.com

                COUNSEL FOR LTT




                  52
1245899
                          CERTIFICATE OF SERVICE

      I certify that the foregoing pleading was served on the following counsel of
record via the CM/ECF electronic noticing system and e-mail, on September 21,
2015.

Jeff Cody
Barton Wayne Cox
NORTON ROSE FULBRIGHT
2200 Ross Avenue, Suite 2800
Dallas, TX 75201-2784

Joy Soloway
NORTON ROSE FULBRIGHT
1301 McKinney, Suite 5100
Houston, TX 77010-3095

Robert A. Bragalone
B. Ryan Fellman
GORDON & REES, LLP
2100 Ross Avenue, Suite 2800
Dallas, TX 75201

Jessica Z. Barger
Raffi Melkonian
Wright & Close, LLP
One Riverway, Suite 2200
Houston, TX 77056

                                                     /s/ Jane Webre______
                                                   Jane Webre


                       CERTIFICATE OF COMPLIANCE
      I certify that the foregoing instrument was prepared using Microsoft Word
2010, and that, according to its word-count function, the sections of the foregoing
pleading covered by TRAP 9.4(i)(1) contain 12,736 words.

                                      ______/s/ Jane Webre________
                                      Jane Webre
                                        53
1245899
                                       APPENDIX

          The following items are included in the Appendix to this brief:

App. 1:         Letter of Intent (PX2; 2CR7623-29)
App. 2:         Order on summary judgment as to the Lawyer Defendants
                (7/17CR201-02)

App. 3:         Order on summary judgement as to the Hospital Defendants
                (3CR12266-67)
App. 4:         Order on the Hospital Defendants’ objections to LTT’s summary
                judgement evidence (3CR12261)

App. 5:         Charge of the Court (3CR12997-13009)
App. 6:         Judgment (6/18CR3-5)

App. 7:         Declaration of Robert Berry, without exhibits (2CR7604-7617)
App. 8:         Confidentiality Agreement (2CR7619-21)




                                            54
1245899
APP. 1
                                                                        SU RGICAl OEVEUJPMHH flARHIERS




G. Edward Alexander                                         John T. Prater
Direct           Number: 615-550-2600     ext 12            Direct           Number: 615-550-2600     ext 13
Cell Ph(me Number: 615-289-9896                             Cell Phone Number: 6!5-714-1898
Direct Telefax Number· 615-550-2601                         Direct Telefax Number: 6 l 5-550 -260 I
E-Mail:                                                     E-Mail:
ealexander@surgicaldcveloprnenlpartners.co                  jprater@surgica!developmentpartners.com
m



                                VIA E-MAIL - September 15, 2009

Mr. Robert F. Berry
Mr. R Keith McDonald
I 3706 Research Blvd., Ste l 02
Austin, TX 78750
rfberryok@yahoo.com

RE: Letter of Intent for the Acquisition of the Lakeway Hospital Lease

Dear Robeti and Keith:

        Thank you for the opportunity to re-affirm our interest in the acquisition of the lease
(the "Lease") for the hospital facility currently under construction in Lakeway, Texas (the
"Facility") as the initial campus for Lakeway Regional Medical Center, LLC ("LRMC") and to
serve as a key satellite facility for LRMC after the main campus for LRMC is developed (the
"Project"). Stirgical Development Partners, LLC, ("SDP") is pleased to submit this Letter of
Intent, as the agent for LRMC, to each of you (collectively, the "Principals") (each a "Party"
and collectively the "Parties") for the Parties to work in good faith with each other to plan,
form, develop, fw1d, acquire, open and operate the Project. The objective of this Binding Letter
of Intent is to indicate SDP's interest in the Project and to establish the ground rules for the
ongoing exchange of infonnation between the Parties to facilitate the development of the
Project and the exchange of information required for such a process to succeed. To clarify this
relationship and to best protect the interests of all of the Parties, the Parties hereto agree as
follows:

t. Discussions and Negotiation of the Project. Upon the execution of this Letter of Intent
   the Parties will enter into discussions and negotiations for a period of forty-five (45) days,
          may be             by the                   of both
                               and



                                                                                                             LTT v LRMC/SDP
                                                                                                                              exhibitsticker.com




                                                                                                           No. D-1-GN-12-000983
                      20 l   5~eaboay{/            ~Suit~   I Or). ff"ank!in 'Tl·./ 3 7067
                                                                             1


                      Telephone.     (615)550-2600              Fae (6! 5} 550-2601
                                                                                                                PX0002
                                                                                 l   Exhibit
                                                                                 I      2
                                                                                 I   Berry                     LTT002154
                                                                                 I   818113
                                                                                                           Confidential
Lake Travis Specialty Hospital
Binding Leiter of Intent
September 15, 2009
     2   7


   as with any third          as agreed to by tbe         for the development and implementation
   of the Project

2. The Pronosed Outline of the Terms of the Prolcct. As we have discussed the outline of
   the terms for the Project are as follows:

   2.1. _ Acquisition of the Lease. LRMC wi!J assume the existing Lease between Lake Travis
        Transitional LTCH, LLC (or its assignee controlled by the Principals) and HCN Interra
        Lake Travis LTACH, LLC ("'HCN") and become the tenant under the Lease. The
        Principals and each and every one of their respective affiliates will be relieved of all
        liability related to the Lease and the Facility upon the assignment of the Lease to
        LRMC, including, without limitation, the release of any guaranties relating to the Lease
        by the Principals or any of their respective affiliates, and LRMC shall ensure that all
        such liabilities in favor of any third parties are released in connection with the
        assignment of the Lease and shall indemnify and hold the Principals and their
        respective affiliates harmless from any and all such liabilities from and after the
        assignment of the Lease.

   2.2.      Reimbursement of Deposits and Costs; Assumption of Obligations. LRMC will
          refi..md at closing of the assignment of the Lease all deposits made by the Principals and
          their respective affiliates and reimburse to the Principals and their respective affiliates
          all reasonable and documented costs that have been advanced by them to develop the
          Facility, including, without limitation, compensation and benefits paid to employees of
          the Principals and/or their respective affiliates responsible for the planning and
          construction of the Facility, all expenses incurred in connection with the planning and
          construction of the Facility, and interest expense associated with indebtedness incurred
          in connection with the facility. In addition to the foregoing, LRMC sha!I assume all
          liabilities and contractual obligations of the Principals and their respective affiliates
          incurred with respect to the Facility (whether relating to its development or its ongoing
          operations following its commencement of operations). In particular and without
          limiting the foregoing, LRMC shall either offer employment at their current
          compensation levels to, or shall reimburse Principals and their respective affiliates, as
          appiicable, for severance equai in the aggregate to six months' of such current
          compensation for, each of the following personnel relating to the Facility: Chief
          Operating Officer, Vice President of Facilities Management, Vice President of
          Ancillary and Support Services, Clinical Specialist (Infection Control Nurse}, Vice
          President of Medical Affairs, and Director of Facilities Management.

   2.3.     Lump Sum Payment. In exchange for the assignment of the Lease to LRMC, LRMC
          will make a single lump sum cash payment at closing to the Principals, or their
          designated assignee, equal to $1.5 million.




                                                                                                 LTT002155
                                                                                              Confidential
Lake Travis Speciaf~v Hospital
Binding Letter of lfltent
September 15, 2009
     3   7


3. Required Approvals for the Project. The above indicated terms in ~~~.:::
   subject to the             conditions: (i) full and formal approval by the Board of
   of LRMC; (ii) the approval of HCN as landlord under the Lease to the assignment thereof;
   (iii) a reasonable due diligence process related to the foasibility of the Facility to serve as a
   campus for a general acute care hospital as configured or reasonably modified; (iv) the
   ability of LRMC to obtain appropriate funding to allow for this expansion of the operational
   plans for LRMC; and (v) the mutual development of definitive documents that fully reflect
   the intention of the Pruties expressed in this Letter of Intent. The Parties agree to use their
   respective best           to satisfy each of the foregoing conditions as soon as reasonably
   practicable, subject to the other terms of this Letter ofintent.

4. Eamest Monev. In consideration of the Principals' willingness to enter into this Letter of
   Intent and disclose Proprietary Information relating to the Lease and the Facility to SOP and
   LRMC, SOP shall cause LRMC to deposit as earnest money the amount of $50,000 with an
   escrow agent mutually acceptable to the Paiiies on or before the fifth day following
   execution of this Letter of Intent. In the event this Letter of Intent is terminated by or on
   behalf of LRMC for any reason, or in the event definitive agreements for the transactions
   contemplated herein arc not executed by the paities during the Negotiation Period (unless
   the failure to execute one or more definitive agreements lies with or is attributable to the
   unreasonable deiay of Principals or the Principals' unwillingness to agree to terms
   materially consistent with this Letter of Intent), the earnest money, including all interest
   thereon, shall be forfeited to Principals. If Principals terminate this Letter of Intent, or if
   definitive agreements for the transactions contemplated herein are not executed by the
   parties due to the unreasonable delay of Principals or the Principals' unwillingness to agree
   to terms materially consistent with this Letter of Intent, the earnest money, including all
   interest thereon, shall be returned lo LRMC.

5. Term. This Letter of Intent will remain open for acceptance until September 17, 2009.
   After acceptance this LeHer of Intent may be tenninated by either Party, for any reason,
   with written notice to the other Party, subject to the provisions described above relating to
   the entitlement to the earnest money, and below related to the sharing of information gained
   in the negotiation and development process.

6. Standstill and Non-Circumvention Provisions.                Each of the Parties recognizes and
   acknowledges that in connection with such meetings and the exchange of information to
   discuss the Project, all Parties will need to act in good faith and not use any knowledge
   gained in the Project discussion process for their own benefit and exclusive of the rights or
   interests of the other Party. In order to accomplish that goal, the Parties agree: (i) that
   Principals will not enter into negotiations with any third party for the assignment of the
   Lease while this Letter of Intent is in force; (ii) LRMC wil! not enter into negotiations with
   any third party for the use of any site, other then the intended LRMC main campus site, as
   an alternative or satellite facility while this Letter of Intent is in force; and (iii) not to share
   any information with third parties gained in the negotiation and development process for the




                                                                                                  LTT002156
                                                                                               Confidential
Lake Travis Specialty llospital
Binding Letter of fotent
September 15, 2009
     4


   Project or to independently use any proprietary information of the other Party in any
                or               regarding this Project with                after the             of
   this Letter of Intent. The parties agree that        standstill                            to the
   continued work        Principals on their plans for the operation of the Facility, the continued
   recruitment of potential investors by Principals lo be equity holders in the
   project, or other operational matters relating to the Facility during the term of this Letter of
   Intent, but no such discussions shal I preclude the Principals from entering into the definitive
   agreements contemplated in this Letter of Intent or from consummating the
   contemplated herein.

7. Fees and Expenses.         Each party will bear its own expenses associated with the
   development of the overall strategy and the interaction of the Parties in developing the
   definitive terms for the agreements contemplated by this Letter of Intent

8. Relationshi11 Between the Parties. None of the provisions of this Letter of Intent are
   intended to create, nor shall be deemed or construed to create, any relationship between the
   Parties and any of the Parties' vendors or agents and any of the Parties, other than that of
   independent cntitii:s contracting with each other hereunder solely for the purpose of
   providing the services described in this Letter of Intent as independent contractors, and
   otherwise maintaining and carrying out the provisions of this Letter of Intent None of the
   Parties nor any of their respective agents or employees shall be construed to be the agent,
   employer, employee, p;:lrtner, joint venturer, or the representative of the other parties hereto,
   for any purpose of any kind or nature whatsoever. Both Parties agree to hold the other
   harmless from third-party liability resulting from acts of any Party.

9. Confidcntialitv. The Parties desire to assure the mutual confidential status of any
   information which may be disclosed to or from any Party in the evaluation of this Project
   and the indicated approach to the Project:

   9.1.    Proprietary Information.     Except as provided in Subsection 9 .7 ., below, all
           information disclosed by any Party or its Representatives at any time to any other
           Party or its Representatives in connection with the Project in any manner shall be
           deemed "Proprieiary Information." The term "Representative(s)" means, in the case
           ofLRl\.1C or SDP, any director, officer, employee, member, shareholder, or agent of
           LRMC or SDP engaged in the evaluation of the Project, and in the case of
           Principals, Robert F. Berry and R. Keith McOonald.

   9.2.   Permissible Use. Each Party that receives Proprietary Information (referred to as the
          "Receiving Party") shall use the Proprietary Information received from any other
          Party (referred to as the "Disclosing Party") solely to evaluate the feasibility of the
          Projcd or similar transactions between the Parties. No other rights are implied or
          granted under this Letter of Intent.




                                                                                               LTT002157
                                                                                            Confidential
Lake Travis Specialty llmpitaf
Binding Letter of Intent
September 15, 2009
     5 7


   9.3.                                   information received         not be reproduced in any form
              except for internal use of the Receiving                                  and only for
              the express purpose of evaluating the Project.

   9 .4.                      The Receiving Party shail use      reasonable efforts to protect the
              Proprietary Information received with the same degree of care used to protect its
              own Proprietary Information from unauthorized use or disclosure, except that such
              Proprietary Information may be used or disclosed to the Receiving Party's
              Representatives as may be reasonably required to evaluate the Project.

   9.5.                                  All Proprietary Information, unless otherwise
              m wnrmg, shall remain the property of the Disclosing           and promptly upon
                    of either Pa1iy shall be returned to the                (including all whole
              or partial copies thereof and any written notes made regarding the Proprietary
              Information).

   9.6.                                 No rights or obligations other than those expressly recited
              herein arc to be implied. No license is granted to tJ1e Receiving Party or otherwise
              implied. by estoppel or otherwise, with respect to any property or right of Disclosing
              Party, presently existing or acquired in the future, or for any use of or interest in the
              Proprietary fnformation except such use expressly contemplated by this Letter of
              Intent.

   9.7.      Exclusions. It is understood that the term "Proptietary Information" does not
             include Information which:

          (a.) is now or herealier in the public domain through no fault of the Receiving Party;

          (b.) prior to disclosure hercllndcr, is properly within the t'ightful possession of the
               Receiving Party;

          (c.) is lawfully received from a third party with no restriction on further disclosure; or

          (d.) is obligated to be produced under applicable law or order of a court of competent
               jurisdiction, unless made the subject of a confidentiality agreement or protective
               order.

10. Miscellaneous.

   10.1.       Remedies. Based on the subject matter of this Letter of Intent and the mutual
       obligations and duties indicated herein                  and               harm shall be
       presumed, if any Party to this Letter of Intent breaches any provision of this Letter of
       Intent. The Parties agree, that in the case of the breach of any of the non-circumvention




                                                                                                  LTT002158
                                                                                                Confidential
Lake Travis Specia!(p Hospital
Binding Letter of flltent
September 15, 2009
?ll.g'!.§!![7

               or confidentiality provisions of this Letter   Intent, the                 Party will have
               the right to        that any court of competen! jurisdiction shall immediately enjoin the
               Party in breach in addition lo that Party       entitled to all other rights and
               which the Party may have al lmv or in equity.

       l 0.2.       Cornpeikd Disclosur~. ln the event a Party, any of its Representatives, or
            anyone to \·Vhorn any Party transmits the Proprietary Information, becomes legally
            compelled to disclose any of the Proprietary Information, prior to such disclosure such
             Party will provide the owner of the Proprietary Information with advance written notice
            and a copy of the documents and information relevant to such legal action, so the
            owner of the Proprietary Information may seek a protective order or other appropriate
            remedy to protect its interests in the Proprietary Information, and the compelled Party
            shal1 furnish only that portion of the requested Proprietary Information that the
            compelled Party is advised by a written opinion of counsel is legally required.

      l 0.3.                              There are no other understandings, agreements, or
            representations, express or implied, between the Parties, not herein specified until such
           time as definitive agreemen!s for proposals and letters of understanding can be
           developed ;,iml agreed to by the Parties for any individual Project. This Letter of Intent
           may not be amended except in a writing executed by all Parties.

      I 0.4.                      This Letter of Intent may not be assigned without the express
            written consent of all of the other Parties.

      10.5.       Governing_ Law. This Letter of Intent and all transactions contemplated by this
           Letter of Intent shall be governed by the laws of the State of Texas,

      l 0.6.                     This Letter of Intent may be executed in any number of copies and
           by the different Pa11ies hereto on separate counterparts.        Each counterpart shall be
           deemed an original, but all counterpa11s together shall constitute one and the same
           instrnmcnt fhe persons executing this Letter of Intent personally represent and warrant
           that     have been duly authorized to do so by their respective Party and that, upon foll
           execution hcrcoi~ this Letter of intent shaii be a binding obligation of said Party.

      10.7.        lennination. Termination of this Letter of Intent shall not relieve any of the
           Parties from !he obligations imposed by           and           above, with respect to
          Standstill, Non-Circumvention and/or Proprietary Information exchanged between the
          Parties, or as it relates to the terms, conditions, plans or discussions regarding the
          Project

1J.                     - If Principals are in agreement with the objectives indicated in Section 2
      and the conditions indicated in                of this Letter of fntent and the te1ms and
      conditions contained here[n, please sign the RETURN COPY of this Letter of Intent and




                                                                                                    LTT002159
                                                                                                  Confidential
Lake Travis Specialty llospilal
Binding Letter of Intent
September I 5, 2009
!age 7 of 7 -~~- . ,__   .. ·-···--·····--····-·····   ···················.·--··..-·-···•w··



   return it to SDP. The terms of this Proposal are         until 5:00 PM, Central
               l 7, 2009 and may be      as indicated above.

We look forward to our future meetings and the success of the Project which we can
accomplish through om mutual efforts

Sincerely,

SURGICAL DEVELOPMENT PARTNERS, LLC




G. Edward Alexander, President and CEO
                                                                 '
Accepted this      day of September, 2009 and effective September_;_, 2009.


   1/'l-
~/  /4
·--~/
Robert F Berry




                                                                                                LTT002160
                                                                                               Confidential
APP. 2
                                                       DC              BK14204 PG1425
    Jul 16 2814 16:49:89 214-461-4853                       ->                                  Paul Arnold                    Page 884
Notice sent:     final   interlocutory ~··
                                                                                                    Filed in }he District Court
Disp Parties:     bf- 3 l bf. ..5                                                                    of Travis County, Texas
Disp code: CVD       !@ 'f bt{ 0
                                                                                                         JUL 17 2014 s(J,
Redact pgs:.---:-------=-=--
Judge_~__y__              Clerk   S WG           CAUSE NO. D-1-GN-12-000983                        At     0,-'0'-         AM
                                                                                                   Amalia Rodriguez-Mendoza, c~

                LAKE TRAVIS TRANSITIONAL 1/fCJI, §                                            IN TH.}.: DISTRICT COURT
                LLC n/1</a LAK~: TRAVIS SPJ~CIALTY §
                HOSPITAL, LLC,                     §
                                                   §
                      Plaintiff,                   §
                                                   §
                v.                                 §
                                                   §
                LAKI<:WAY REGIONAL MEDICAl.                        §                          345n1JUDICIAl, DISTRICT
                CENTI:R, I...LC, SUR(;ICAl,                        §
                OEVRLOPMF~NT J> All.TNERS, L.LC,                   §
                BRENNAN, MANNA & DIAMOND,                          §
                LLC, BRENNAN, MANNA &                              §
                DIAMOND, l'.L. AND FH.ANK T.                       §
                SOSSI                                              §
                                                                   §
                         Defendants.                               §                          TRAVIS COUNTY, TEXAS




                                                                 ORDER



                         CAME: ON TO BE HEARD, this 19th day of June, 2014, DefendMts Brennan, Manna

               & J)iamond,. LLC and Prank T. Sossi's Amended 11-cTclitional and No-Evidence Motion                            .few
               Summary Judgment ("Motion"), and the Court, after reviewing the Motion, any written

               responses and replies thereto, and having heard oral argument from counsel for the parties,

               hereby AJ)JUJJGES, D.ECRimS, AND OROintS AS FOLLOWS:


               (A)       The Motion is GlUNTE.I> in respect to the misappropriation of trade secrets claim and

                         negligent misrepresentation claim alleged by Plaintiff Lake Travis Transitional L'TCH,

                         LLC n/k/a Lake Truvis Specialty Hospital, LLC against Defendants Brennan, Manna &



               ORDF.It                                                                                            l'I\.GI~   l Of 4




                                                                                        201
                                                  DC
Jul lG 2B14 lG:49:21 214-4G1-4B53                      -~
                                                               BK14204 PG1426
                                                                                      Paul Arnold   Page BBS




               Diamond, LLC and Frank T. Sossi, and those two claims are l)lSMISSl~J) WITH

               PRJ!:,JUDICE:.

      (IJ)     In all other respects, the Motion is I>·~Nlli~.D.

                                          f'"'-   ~
               SIGNE]) this     _.L.b__ day orjv._          , 2014.




      AGREED AS TO FORM:




     S. Abraham Kuczaj, U ·
     Attorney for Plaintiff L . e Travis
     Transitional LTCH, LLC n/kJa
     Lake Travis Specialty Hospital LLC




      rc)             _f~z-----,
     ____t~;~~~:!.. .£.~.--.~~~'\,~-:::::::::;.
     B. Ryan Fellman
     Attorney for Defendants Bre!lllan,
     Manna & Diamond, LLC and
     Frank T. Sossi




     OROF.Tc




                                                                                202
APP. 3
12266
12267
APP. 4
12261
APP. 5
12997
12998
12999
13000
13001
13002
13003
13004
13005
13006
13007
13008
13009
APP. 6
                                       DC       BK14294 PG476
                                                                              Filed in The District Court
                                                                               of Travis County, Texas

                                                                                    OCT 17 2014 RT
                                                                             At         1:?Jc; 4 M.
                               CAUSE NO. D-1-GN-12-000983                     Amalia Rodriguez-Mendoza, Cieri<.

 LAKE TRAVIS TRANSITIONAL LTCH,                 §               IN THE DISTRICT COURT OF
 LLC n/k/a LAKE TRAVIS SPECIALTY                §
 HOSPITAL, LLC,                                 §
                                                §
 v.                                             §                   TRAVIS COUNTY, TEXAS
                                                §
 LAKEWAY REGIONAL MEDICAL                       §
 CENTER, LLC, SURGICAL                          §
 DEVELOPMENT PARTNERS, LLC,                     §
 BRENNAN, MANNA & DIAMOND, LLC,                 §
 AND FRANK T. SOSSI,                            §                   345th JUDICIAL DISTRICT


                                        JUDGMENT

          On August I I. 2014. this cause came on to be heard.           Plaintiff Lake Travis

Transitional LTCH, LLC n/k/a Lake Travis Specialty Hospital, LLC ("Plaintiff' or "LTT"),

appeared in person and by attorney of record and announced ready for trial. Defendant

Lakeway Regional Medical Center, LLC ("LRMC") and Defendant Surgical Development

Partners, LLC ("SDP") (collectively, "Defendants" and each a "Defendant"), appeared in

person and by their attorney of record and announced ready for trial. A jury having been

previously demanded, a jury was duly empanelled and the case proceeded to trial.

          The jury heard the witnesses and the presentation of evidence. At the conclusion

of the evidence, the Court submitted the questions of fact in the case to the jury. The

charge of the court and the verdict of the jury are incorporated by reference herein for all

purposes.     On August 28. 2014, the jury returned a verdict to the Court.         Because it

appears to the Court that the verdict of the jury was for Plaintiff LTT and against




1138876




                                                                3
                                     DC          BK14294 PG477




Defendants SDP and LRMC, judgment should be rendered on the verdict in favor of the

Plaintiff LTT and against the Defendants SDP and LRMC.

          IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that Plaintiff

L TT, in respect to its breach of contract claim, have and recover actual, past damages

from Defendants SOP and LRMC. jointly and severally, in the amount of $7,900,000.00,

as well as prejudgment interest on that amount at an annual rate of five percent (5.0% ).

As of October 13. 2014. prejudgment interest on that amount, calculated as simple

interest based on the date this case was filed on April 3, 2012, totals $998,863.01, which

amount shall increase by $1,082. 19 per day until the date this judgment is signed.

          The Court finds that the parties have stipulated that the amount of reasonable

attorney fees incurred by Plaintiff LTT in the prosecution of its breach of contract claim

against Defendants SOP and LRMC is $2,000,000.00. IT IS THEREFORE ORDERED,

ADJUDGED, AND DECREED that Plaintiff L TT have and recover from Defendants

SDP and LRMC, jointly and severally, reasonable attorneys' fees incurred in the

prosecution of LTT' s breach of contract claim in the sum of $2,000,000.00 pursuant to

Chapter 38 of the Texas Civil Practice and Remedies Code.

          IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all costs of

court incurred by Plaintiff LTT in this matter are adjudged against and shall be recovered,

jointly and severally, from Defendants SDP and LRMC.

          IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Plaintiff LTT

have judgment against Defendants SDP and LRMC, and that the total amount of



                                             2
1138876




                                                                 4
                                         DC           BK14294 PG478


•




    judgment for Plaintiff LTT against Defendants SOP and LRMC, jointly and severally,

    shall be as follows:    actual damages in the sum of $7,900,000.00; plus prejudgment

    interest on that sum as set forth above; plus attorneys' fees in the stipulated amount of

    $2,000,000.00; plus costs of court; plus post-judgment interest on the sum total of each of

    the foregoing, at an annual rate of five percent (5.0% ), compounded annually, from the

    date this judgment is rendered until paid.

           IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all writs and

    processes for the enforcement and collection of this judgment or the costs of court shall

    tssue as necessary.

           IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED by the Court

    that the relief specified above is hereby granted and, as to all parties and issues in this

    case, all relief not specifically granted herein is expressly denied. This judgment is final,

    disposes of all claims and parties. and is appealable.



           SIGNED on October _    _il ~-.-
                                                                      '
                                                       ,:~~-/                 -   .
                                                                                  '




                                                 HONORABLE'LdRA .--                   INGSTON
                                                           '
                                                 PRESIDINGJUDGE




                                                  3



                                                                          5
APP. 7
                              CAUSE NO. D-1-GN-12-000983

LAKE TRAVIS TRANSITIONAL LTCH,                §          IN THE DISTRICT COURT OF
LLC n/k/a LAKE TRAVIS SPECIALTY               §
HOSPITAL, LLC,                                §
                                              §
          Plaintiff,                          §
                                              §
v.                                            §             TRAVIS COUNTY, TEXAS
                                              §
LAKEWAYREGIONALMEDICAL                        §
CENTER, LLC, SURGICAL                         §
DEVELOPMENT PARTNERS, LLC,                    §
BRENNAN, MANNA & DIAMOND,                     §
LLC, BRENNAN, MANNA &                         §
DIAMOND, P.L., AND FRANK T.                   §
soss~                                         §
                                              §
          Defendants.                         §              345th JUDICIAL DISTRICT

                         DECLARATION OF ROBERT BERRY

          1.     My name is Robert Berry. I am over twenty-one years of age, have never

been convicted of a felony or misdemeanor involving moral turpitude, and I am otherwise

competent and qualified to make this declaration. I am Chief Executive Officer and

Managing Member of Plaintiff Lake Travis Transitional L TCH, LLC n/k/a Lake Travis

Specialty Hospital, LLC, ("Plaintiff' or "LTT") in the above-styled litigation.   This

declaration is filed pursuant to Texas Civil Practice & Remedies Code § 132.001 in

support of Plaintiff's Responses in Opposition to Defendant Lakeway Regional Medical

Center, LLC's Amended Traditional and No-Evidence Motion for Summary Judgment and

Brief in Support; Defendant Surgical Development Partners, LLC's Amended Traditional

and No-Evidence Motion for Summary Judgment and Brief in Support; and Defendant



1074813
                                                                                          7604
Brennan, Manna & Diamond, LLC, Brennan, Manna & Diamond, P.L., and Frank T. Sossi's

Amended Traditional and No Evidence Motion for Summary Judgment. In this Affidavit, I

refer to Defendants Lakeway Regional Medical Center, LLC, Surgical Development

Partners, LLC, Brennan, Manna & Diamond, LLC, Brennan, Manna & Diamond, P.L.,

and Frank T. Sossi collectively as "Defendants." I have personal knowledge of the facts

asserted herein, which are true and correct.

          2.   On or about April29, 2009, Surgical Development Partners, LLC ("SDP")

and Lakeway Regional Medical Center, LLC ("LRMC") approached LTT about

acquiring the Lake Travis Hospital facility to serve as the initial general acute care

campus for LRMC' s hospital.         At the time, L TT had a significant head start on

construction, and was reluctant to share any of its confidential information with the

developers of a competing general acute care facility. LTT was just months away from

being over 80% complete, while LRMC was still just a lot. In order to allow the parties

to discuss the possible acquisition of LTT's facility, SDP and LTT executed a

Confidentiality Agreement dated May 11, 2009.              A true and correct copy of the

Confidentiality Agreement is attached as Tab A.

          3.   In late May 2009, LTT informed LRMC and SDP that it wished to publicly

announce LTT's plans to operate as a general acute care facility. LRMC and SDP asked

LTT to not make the announcement and to give LRMC and SDP more time to complete

their due diligence related to their potential acquisition of LTT' s facility.




                                               2
1074813
                                                                                            7605
          4.   On September 15, 2009, LTT and LRMC and SDP executed a Letter of

Intent ("LOI"). The LOI obligated LRMC and SDP to keep confidential the information

received in the course of evaluating the acquisition of the LTT facility (the "Project"). A

true and correct copy of the LOI is attached as Tab B. Eddie Alexander, SDP's CEO,

directed me to provide all due diligence information relating to the Project to him. LTT

intended SDP to be a party to the LOI and to be bound by the terms of the LOI. When

negotiating the terms of the Confidentiality Agreement and LOI, Defendants represented

that they would keep all information provided in connection with the Lake Travis facility

confidential and not use it for any purpose, other than to evaluate the Project. Both LTT

and its Principals relied upon that promise to enter the agreements and provided its

confidential, proprietary and/or trade secret information to Defendants including, but not

limited to the information discussed below.

          5.   LTT's confidential, proprietary, and trade secret information was provided

to Defendants during the course of their project review. Some of the information was

provided after SDP executed the Confidentiality Agreement.           The majority of the

information was provided after the LOI was executed. Some of the information was

conveyed to Defendants verbally, through meetings, telephone calls, tours of the site, etc.

To the extent the information is contained in written documents, it has been compiled

into a "Project File" and produced to each of the defendants in this matter. The Bates

range of the Project File is LTT 007875-LTT 009907. LTT owned the confidential,

proprietary and trade secret information contained in the Project File. As the sole owners

                                              3
1074813
                                                                                              7606
of LTT, Keith McDonald and I had an ownership interest in the information as well, and

were authorized to disclose it pursuant to the LOI on behalf ofLTT.

          6.   In my role as Managing Member and CEO of LTT, I am familiar with and

have personal knowledge of LTT's confidential, proprietary, and trade secret

information, including the documents contained in the "Project File," which include: a

deal subfile;    correspondence;    contracts;   drawings   and specifications;    financial

information and business plans; and other miscellaneous information pertaining to the

Project.

          7.   I have reviewed each of the documents in the Project File. The Project File

contains information that LTT used in its business that provided LTT with an advantage

over competitors who did not know or use it. Much of the information in the Project File

is or reflects confidential and proprietary information that provided LTT with a

competitive advantage, and LTT considered this information a trade secret. The trade

secret information in the Project File includes, but is not limited to: architectural plans;

program design and operations; financial information; hospital organization; mission;

staff recruitment and retention; physician support; sources and uses of funds and other

"cost based" information; preliminary fmancial feasibility and other information about

projected revenues and costs for the initial operation of Lake Travis Hospital; current

state of construction; and preliminary fmancial feasibility ratios and other information

about projected key operational ratios of Lake Travis Hospital. Other information in the

Project File contains some information that may, by itself, be in the public domain;

                                             4
1074813
                                                                                               7607
however, when used in unique combination with other information in the Project File, it

provides LTT with a competitive advantage as well. In addition, the Project File contains

certain confidential modified architectural plans that were not, at the time they were

provided to defendants, on file with the City of Lakeway or with any other public entity.

The trade secrets contained in, reflected in, and comprising ·the Project File were

provided to Defendants during the course of negotiating with SDP and LRMC the

acquisition of LTT's facility as LRMC's initial general acute care campus. In addition,

LTT provided some of this information to Defendants verbally during the project review.

          8.   LTT owned the trade secrets contained in the Project File and used them in

its business. These trade secrets in the Project File were not generally known or readily

available to the public. LTT took reasonable steps to preserve the confidential and secret

nature of its trade secrets. For example, it was LTT' s practice to require parties seeking

LTT' s confidential information and trade secrets to agree to keep the information

confidential. LTT secured agreements to keep L TT' s information confidential from,

among others: its landlord, HCN Interra; the joint venturers who formed the LTT's

landlord, HealthCare REIT and Interra; the facilities' architect, MEDesign Architecture;

and the contractor who built the facility, Drymalla- Beckford Construction Co., LLC.

LTT also secured confidentiality agreements from SDP and LRMC. I was personally

involved in securing each of these agreements to keep LTT' s information confidential. It

was my understanding and belief that each of the parties would keep information

developed during SDP's and LRMC's review process confidential.               For example,

                                             5
1074813
                                                                                              7608
attached at Tab C is a true and correct copy of an email from Bill Hurd at HCN Interra to

Eddie Alexander and Ed Bivins at SDP, Bob Becktell at Drymalla - Beckford

Construction Co., LLC, and others involved in the discussions relating to the Project,

informing everyone that "This information is for the project review, please keep it

confidential along with all of the information generated during this review process." No

party to the email contested Bill Hurd's understanding that all the information generated

during the review process was to be kept confidential.

          9.    After SDP and LRMC terminated the transaction in late March 2010, LTT

continued to require interested parties to agree to keep LTT's information confidential.

I cannot recall any instance in which LTT' s trade secrets were disclosed, voluntarily or

otherwise, to a third party unless the third party had committed either orally or in writing

to keep the information confidential.

          10.   Because the trade secret comprised ofthe body of knowledge illustrated by

the Project File is reflected in its unique combination, it is not discoverable by inspection.

The same is true for the vast majority of its constituent parts. LTT took measures to limit

access to this information, both externally by requiring recipients to agree to keep the

information confidential, and internally by limiting employee access to the information.

          11.   The trade secrets contained in the Project File are valuable to LTT.

LTT spent a great deal of time, energy, and money developing the information. The

Principals of LTT personally expended more than 12,000 man hours over 6 years in the

development of LTT and more than $2,650,000 in personal funds, including over

                                              6
1074813
                                                                                                 7609
$1,031,000 in development staff salaries. The information would be extremely difficult

to duplicate, if it is possible at all.

          12.   The hospital facility was LTT's primary asset.         The transaction

contemplated by the LOI, which included reimbursement for certain development costs

and other expenses, was for all practical purposes the sale of LTT's business. It is my

understanding that LTT, LRMC, and SDP each had an economic interest in the deal

being negotiated to acquire the LTT facility.

          13.   At all relevant times, including from the beginning of 2009 up to the

present day, I have been the Chief Executive Officer of LTT as well as its Managing

Member. As an officer in a management position at LTT, I am familiar with and have

personal knowledge of the value of LTT and its assets. For the same reason, I am

familiar with and have personal knowledge of the lost net income from third parties that

LTT would have, with reasonably certainty, been able to earn but for defendants'

wrongful conduct. In reliance on the misrepresentations made by SDP and the other

defendants, LTT forewent the opportunity to earn this net income from third parties and

was, instead, induced to delay its completion and beginning of operations as the first

acute care facility in Lakeway, Texas.

          14.   In my role as a managing officer ofLTT, I compiled a detailed pro forma

that projected LTT's net income. The pro forma is based on objective, detailed facts and

data, taking into account the experience of LTT' s management, as well as the historical

performance of other hospital facilities operated and/or administered by LTT' s

                                                7
1074813
                                                                                           7610
management. Among other things, the objective facts and figures utilized Federal rates

for Medicare reimbursement, adjusted to the region's labor specific rate and utilizing case

mix index developed through the analysis of numerous physician interviews and profiles

compiled to provide an objective projection of the both the case mix index and projected

occupancy rate with reasonable certainty The pro forma utilized historic payment rates

for Medicaid, and current per diem rates negotiated by commercial carriers in the market.

With respect to outpatient revenue, the pro forma utilized projections as quoted from the

companies contracting to provide those services, which included, for example, imaging

and emergency care.      Expenses were projected based on third party surveys, vendor

quotes, contracts, and other objective data. This pro forma was created long before this

lawsuit was filed, and was used by LTT in its business. In fact, before this lawsuit was

filed, the pro forma was supplied, in confidence, to LTT' s landlord, who vetted the pro

forma as part of its own business dealings with LTT. Utilizing the objective facts and

data that went into the detailed pro forma, and based on my familiarity with and personal

knowledge of these objective facts and data and the development of LTT, as LTT's

managing officer, LTT suffered, with reasonable certainty, approximately $34.5 million

in damages relating to lost net income from business opportunities with third parties in

reliance on SDP and the other defendants' misrepresentations.

          15.   In addition, in reliance on the misrepresentations made by SDP and the

other defendants, LTT provided its valuable trade secret Proprietary Information to SDP

and the other defendants. As a managing officer of LTT, I am familiar with and have


                                             8

                                                                                              7611
1074813
personal knowledge of the trade secret information that was provided in reliance on the

misrepresentations at issue, and the fair market value of that information at the time of

the misappropriation by SDP and the other defendants is approximately $7.9 million.

To determine the market value of LTT's confidential, proprietary and trade secret

information, I considered the price that a willing buyer would pay to a willing seller for

the information, and then reduced that amount by the reduction in the value of the

information resulting from LTT's reliance on SDP and the other defendants'

misrepresentations.   Based on my personal knowledge of and familiarity with the

negotiations and discussions between LTT, on the one hand, and SDP and the other

defendants, on the other hand, which is additionally supported by my review of the

publicly filed documents in this matter, including communications from HUD to

defendants raising questions and concerns about competition in the Lakeway area and

evidence suggesting uncertainty about whether defendants could get other sources of

funding, and further based on my personal knowledge and familiarity with the value and

importance LTT placed on its trade secrets and its reluctance to disclose them to a nearby

competitor, at the time of the misappropriation, the fair market value of LTT' s

confidential, proprietary, and trade secret information would conservatively be at least

the consideration of $7.9 million contemplated by the LOI, if not more. As a result of

LTT' s reliance on the misrepresentations, taking into account, among other things, the

resulting changes· in the parties' competitive posture and the negative impact that has had

on LTT's ability to attract investors, the value of LTT's confidential, proprietary, and

                                             9
1074813
                                                                                              7612
trade secret information declined in fair market value to nearly zero, making the loss in

market value of this information at least $7.9 million. This reduction in fair market value

is conservative given that, as a result of SDP and the defendants' wrongful conduct, a

number of investors decided to not participate in LTT's project because of concerns

about LTT's competitive posture with LRMC.

          16.   I have reviewed the May 10, 2010 email that Frank Sossi sent to HUD

regarding LTT. The information that was the subject of Mr. Sossi's email was LTT's

confidential, proprietary, and trade secret information described above, specifically,

information regarding LTT's current state of construction, zoning, parking, code

compliance, operations, staffing, financing, and physician support. This information was

not publicly available, was provided to Defendants during the confidential project review

process, and was not available through any other source.    I did not authorize Defendants

to use or disclose the information underlying Defendants' May 10, 2010 email to HUD,

nor did I authorize Defendants to use or disclose LTT' s confidential, proprietary or trade

secret information in any of Defendants' subsequent communications with HUD. At no

time did I, Keith McDonald, or anyone acting behalf ofLTT consent to Defendants' use

or disclosure .of LTT's confidential, proprietary and trade secret information except for

the limited purpose contained in the LOI.

          17.   My understanding is that Defendants claim here that LTT' s architectural

plans were not trade secrets because they were on file with the City of Lakeway. This

claim is inaccurate because L TT' s trade secret information includes certain modified

                                            10
1074813
                                                                                              7613
architectural plans that were not, at the time they were provided to Defendants, on file

with the City of Lakeway or with any other public entity. I am aware that Defendants

contend that the old, pre-modification architectural plans, two short and general newspaper

articles, and a powerpoint presentation with general information that was partially presented

at a meeting in Lakeway were publicly available. This information does not form the basis

of LTT's claims, other than to the extent it may relate to aspects of LTT's unique

compilation trade secrets. I am not aware of any confidential, proprietary and trade secret

information that forms the basis of LTT' s claims being publicly available before the

misappropriation by SDP and the other Defendants.

          18.   I am aware of no court order to produce LTT' s proprietary information before

the misappropriation by SDP and the other Defendants took place. At no time has any

Defendant informed me or anyone with LTT that there was a court order that would require

the disclosure of LTT' s Proprietary Information.

          19.   As an officer of LTT, I have personal knowledge of and am familiar with

LTT as an entity, its value, and the loss of market value suffered by LTT as a result of

Defendants' conduct. Based on my personal knowledge of LTT, including its assets and

liabilities, the status of construction, and physician support, and taking into account the

detailed pro forma discussed above and all of the research and analysis that went into it, a

conservative valuation of LTT before Defendants' misconduct would have been

$13,794,834. I calculated this number by looking at the post-provider number period,

first year of financial performance statements as opined by Tom Glass. Based on my

personal knowledge of LTT, I agree with this number. I then took total of monthly
                                              11

                                                                                                7614
1074813
EBIDTA for that year and used a fair market multiplier of 3 to identify an initial fair

market value, Once I determined that initial fair market value, discounted the major

moveable equipment that L TT retained by 60 percent and combined the residiual value

with the initial fair market value for a total of $13,794,834. Based on my personal

knowledge and familiarity with LTT, this conservatively reflects the price a willing buyer

would pay a willing seller for L TT before Defendants' misconduct.         As a result of

Defendants' misconduct, L TT lost nearly all its fair market value. L TT seeks to recover,

as one of its damage models, the loss in $13,794,834 in fair market value caused by

Defendants.

          20.   In the course of discovery after this case was filed, LTT learned that

Defendants made numerous misrepresentations to L TT in the course of the transactions at

issue that L TT relied on and that caused L TT harm. Those misrepresentations included,

among other things, that Defendants were moving forward with closing on the Lake

Travis facility; that they was seeking the necessary HUD approvals for the acquisition of

the Lake Travis facility; that they would acquire the Lake Travis facility even in the

absence of the HUD guaranty; that they were making best efforts to satisfy the conditions

under the LOI; that they were negotiating, in good faith, with Health Care REIT for an

assignment of the Lease. These misrepresentations all caused LTT, in reliance on the

misrepresentations, to forego publicly announcing its plan to open the Lake Travis

facility as a general acute care hospital. L TT also relied on the misrepresentations about

Defendants provide its confidential, proprietary information and trade secrets, to allow


                                            12

                                                                                              7615
1074813
construction to be delayed during the due diligence process and to later extend the due

diligence period. As a result, after Defendants terminated the LOI shortly after securing

the HUD guaranty, LTT's construction had been on hold for approximately six months.

          21.   Once Defendants terminated the LOI in late March 2010, LTT specifically

requested that Defendants return all of the "Proprietary Information" provided to it

pursuant to the LOI.     Despite LTT' s demands, Defendants refused to do so.       LTT

ultimately filed a lawsuit in Oklahoma to secure return of the Proprietary Information.

On May 10, 2010 Defendants represented that they had returned or destroyed all of

LTT' s Proprietary Information. In reliance on Defendants representations, the lawsuit

was voluntarily dismissed without prejudice.

          22.   In late May 2010, when HUD closed on the guaranty in favor of LRMC

and to the exclusion of LTT, questions first arose about what may have happened during

the HUD application process. In late May, a CEO of another hospital forwarded an email

to me in which HUD expressed opinions about L TT' s operations, zoning, licensing, and

viability. Prior to that email, no one from HUD had ever communicated with LTT. The

statements in HUD's email appeared to be conclusions that were incorrectly drawn from

specific information that had been confidentially provided to Defendants during the

project review. At that point, LTT's counsel sent a request to HUD under the Freedom of

Information Act ("FOIA") to determine what information HUD had considered when

evaluating whether Lakeway was underserved for the purpose of LRMC's loan

application. By December 2010, HUD continued to refuse to provide any documents in

                                            13
1074813
                                                                                            7616
response· to the request. At that point. L1T was forced to file a federal lawsuit to seek

compliance with FOIA. After lengthy litigation, Judge Sam Sparks ordered HUD to

produce the responsive documents.

          Further Declarant sayeth not.''

          My name is Robert Berry, my date of birth is     ~r:;J lt:f.../<J!j and my
addresais,j~l}_~c-(,~l ~~~-1.,§7¥61/
I declare under penalty of perjury that the foregoing is true and correct.

Executed in Williamson County, State orTexas, on the 21st day or May, 2014       •


                                                  0~     /
                                            _1(./ ····-~
                                            ROBERT BERRY




                                                                                 t




                                             14
1074113

                                                                                            7617
APP. 8
                         Surgical Development Partners, LLC

                                                AND

                        Lake Travis Transitional LTCH, LLC

                        CONFIDENTIALITY AGREEMENT




        THIS CONF1DENTTALITY AGREEMENT ("Agreement") is made this 11th day of
May, 2009, to be effective May 11, 2009 by and between Surgical Development Partners, LLC
an Ohio limited liability company ("SDP") and Lake Travis Transitional LTCH, LLC, a Texas
limited liability company ("LIT").


                                             WITNESSETH


       WHEREAS, SDP has an interest in a potential development and/or management
agreement opportunity as presented by LTT and will have access to, certain Confidential
Information regarding these opportunities; and

       WHEREAS, LTT is interested in making the above indicated opportunities available to
SDP and will allow SDP to have access to, certain Confidential Information regarding LTT's
business; and

        WHEREAS, SDP and LTT desire to memorialize their understandings regarding SDP's
disclosure and use of Confidential Information.

    NOW, THEREFORE, In consideration of the foregoing premises in this Agreement, the
parties agree as follows:

    I. Confidential Information. LTT may furnish SDP with certain confidential, non-public
       and/or proprietary information concerning a certain Project in Texas (the "Project"). SDP
       may furnish LIT with proprietary information concerning its business. All infonnation
       concerning the Project shaH be held by" SDP in confidence in accordance \Vith this
       agreement. All business infonnation concerning LTT's business shall be held by SDP in

                              ····------------------------
Surgical Development Parrners, LLC and LIT
Co!1_/identiality Agreement- Mt1y /I. 2009


                                                                                         Exhibit
                                                                                            4
                                                                                          Berry
                                                                                          8/8/13


                                                                                                   7619
                                                                           (




         <XJnfidencc in accordance with this Agreement. All information concerning the Project
         and LIT's business shall hereafter be referred to as the "Confidential Information".

     2. Use of Confidential Information. The parties hereto agree to use Conftdentiallnfonnation
        only for infonnational purposes to evaluate participation in the Project. Both parties
        agree not to disclose Confidential Information to any other person or entity except upon
         the written consent of the other party. Both parties agree that, as set forth above, neither
         it nor its employees, agents, or business or professional associates will disclose or use any
         Confidential Information in any matter whatsoever.

     3. Return of Confidential Infonnation. All Confidential Information is to remain the sole
        property of each respective party. All Confidential Information furnished in documentary
        form and any copies thereof shall be returned to each respective party immediately upon
        its request.

     4. Entire Agreement: Invalidity. This agreement contains the full and complete
        understanding of the parties with respect to the subject matter hereof. It supercedes all
        prior representations and understandings whether oral or written. In the event that any
        provision herein is tound invalid or unenforceable pursuant to judicial decree or
        discussion, any such provision or obligation shall be deemed and construed to extend
        only to the maximum permitted by law and the remainder of this agreement shall remain
        valid and enforceable according to its terms.

    5. Equitable Relief. Because of the unique and proprietary nature of the Confidential
       Information, it is understood and agreed that remedies at law for breach by a party of its
       obligations under this agreement will be inadequate and either party shall, in the event of
       such a breach, be entitled to equitabk: relief, (including without limitation, injunctive
       relief and specific perfom1ance) without any requirements to post bond as a condition for
       such relief~ in addHion to all remedies under this agreement or available at law.

    6. Legal Fees. The prevailing party and any action or proceeding brought to enforce the
       provisions of this agreement shall be entitled to recover its reasonable legal costs and
       expenses incurred in such action or proceeding, including but not limited to, any legal
       costs and expenses incurred to enforce any judgments rendered on this agreement. The
       provision regarding recovery of legal costs shall not be merged into any judgment on this
       agreement.

    7. No Rights. Nothing in this agreement shall give either party any right, title, license, or
       interest, whatever in or to the Confidential Information (which shall remain at all times
       the property of each respective party) or in or to any existing patents, know how,
       inventions or other intellectual property of each respective party.

    8. Non-Assignability. The rights and obligations of the parties under this agreement may not
       be assigned.



Surgical Development Partners, /,LC and LIT
Coiifidentiality Agreement- May 11, 2009
                                               . 2




                                                                                                         7620
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     9. Amendment and Governing Law. This agreement can only be amended by subsequent
        written agreement between the parties. This agreement will be governed by the laws of
        the state of Ohio and the parties agree that the exclusive jurisdiction for any
        disagreement, dispute, claim, or matter arising hereunder shall be in the courts of the
        State of Ohio, or the United States located in Summit County, Ohio.


IN WITNESS WHEREOF, the parties have executed this agreement as of the date above written.


                                       Surgical Development Partners, LLC




                                       G. Edward Alexander, its President




                                       LTT




Surgical Development Farmers. LLC and LIT
Confidenriality Agreement-- May 1I, 2009
                                                 3




                                                                                                  7621
