

Opinion issued February 14, 2012

In The
Court of
Appeals
For The
First District
of Texas
————————————
NO. 01-09-00997-CV
———————————
carlton energy group, llc, Appellant/Cross-Appellee
V.
gene e.
phillips, individually and d/b/a phillips oil interests l.l.c., eurenergy
resources corporation, syntek west, Inc. and cabeltel international corporation, Appellees/Cross-Appellants

 

 
On Appeal from the 295th District Court 
Harris County, Texas

Trial Court Case No. 2006-80212
 

 
O P I N I O N
Appellant/cross-appellee,
Carlton Energy Group, LLC (“Carlton”), challenges the trial court’s judgment,
entered after Carlton accepted the trial court’s suggested remittitur of the
jury’s actual damages award in lieu of a new trial,[1] in
Carlton’s suit against appellees/cross-appellants, Gene E. Phillips,
individually and doing business as Phillips Oil Interests L.L.C. (“Phillips”),
EurEnergy Resources Corporation, formerly known as EurEnergy Resources LLC
(“EurEnergy”), Sytnek West, Inc. (“Syntek”), and CabelTel International
Corporation (“CabelTel”) for tortious interference with contract and breach of
contract.  In three issues, Carlton
contends that the trial court erred in “suggesting a remittitur to $31.16
million in actual damages when factually-sufficient evidence supports the
jury’s finding of actual damages of $66.5 million or, alternatively at least
$38 million”; setting aside the jury’s alter ego findings against Syntek and
CabelTel; and not imposing joint and several liability on Phillips for the
exemplary damages awarded against EurEnergy “when the jury found Phillips
responsible for EurEnergy’s conduct.”
In
their cross-appeal, Phillips and EurEnergy, in their first six issues, contend
that the evidence is legally and factually insufficient to support the trial
court’s award of $31.16 million in actual damages; the jury’s finding that Phillips
and EurEnergy tortiously interfered with Carlton’s contract with CBM Energy
Limited (“CBM”); the jury’s awards of exemplary damages against Phillips and
EurEnergy; the jury’s finding that Phillips breached his contract with Carlton;
the jury’s awards of attorney’s fees to Carlton; and the jury’s finding that
EurEnergy is Phillips’s alter ego.  In
their seventh issue, Phillips and EurEnergy contend that the trial court’s “erroneous
admission of voluminous, irrelevant evidence about Phillips-related companies
was harmful and prejudicial” and requires a new trial.    
We
affirm in part and reverse and render in part.  

Background
          On October 4, 2000, CBM entered
into an agreement with the government of the country of Bulgaria (the “Bulgaria/CBM
concession”) permitting CBM to conduct exploration and prospecting for natural
gas on a large parcel of land located within that country (the “Bulgaria
Project”).  The Bulgaria/CBM concession provided
CBM with an initial term of three years to conduct the prescribed exploration
and the possibility of two extension periods of no more than two years each.  The Bulgaria/CBM concession also defined CBM’s
“minimum work obligations,” which included the drilling of one exploratory well,
which, if successful, would require the drilling of two additional wells.  
          On April 25, 2003, CBM, in
need of financing to satisfy its obligations under the Bulgaria/CBM concession,
entered into a letter agreement with Carlton (the “CBM/Carlton agreement”) under
which Carlton, in exchange for making, pursuant to a schedule, three tranches[2]
of funding totaling $8 million, would acquire, incrementally, a 48% interest in
the Bulgaria Project.  Upon “actual[]
fund[ing]” of the first tranche of $1.25 million, which was to be applied to
cover the costs for drilling the first well, as well as other incidental costs,
Carlton would acquire a 7.5% interest in the Bulgaria Project.   Additionally, upon the actual funding of the
first tranche, the “arrangement” between CBM and Carlton would become “exclusive.”
 Carlton would then have three months to
“actually fund” the second tranche of $1.5 million, which was to be applied to
cover the costs of two additional wells. Carlton would then have one year after
the date of the second tranche to “actually fund” the remainder of its $8
million financing commitment.  
            In
2004, Bulgaria, by way of an annex to the Bulgaria/CBM concession, granted CBM
a two-year extension of the Bulgaria Project. 
In turn, on April 13, 2004, CBM and Carlton amended the CBM/Carlton
agreement so that upon Carlton’s “actually fund[ing]” of a first tranche of
$900,000, Carlton would be entitled to a 5.4% interest in the Bulgaria Project
and, as with the original agreement, the “arrangement” between CBM and Carlton would
become “exclusive.”  Carlton would then have
three months to “actually fund” the second tranche of $1.85 million and one
year after the date of the second tranche to “actually fund” the remainder of its
$8 million financing commitment.  The CBM/Carlton
agreement, as amended, further provided that it would not become effective
until “actual funding” of the first tranche and “actual funding” would occur if
Carlton funded $300,000 in cash and a $600,000 letter of credit. Carlton presented
evidence that CBM subsequently agreed to an oral modification of the terms
regarding the second tranche, and the jury specifically found that CBM had “agree[d]
that the timing of the second tranche of funding ($1,850,000) would take place
within 90 days of the funding of the initial tranche or 30 days after receipt
of logs for the initial well, whichever date was later.”  Phillips and EurEnergy disputed that such an oral
amendment was ever made, or could have been made, and they asserted that
Carlton was not entitled to an additional 30-day period to review the logs from
the initial well before making the second tranche.
          On April 27, 2004,
Carlton, with funds provided by investor Robert Assil, furnished the $600,000
letter of credit, and it is undisputed that this letter of credit was
sufficient to extend the Bulgaria/CBM concession to 2005.  Subsequently, on July 20, 2004, Carlton, with
funds provided by investor Kenneth Scholz, transferred the remaining $300,000
in its attempt to satisfy the first tranche of funding prescribed in the amended
CBM/Carlton agreement.  At trial, Carlton
asserted that it had satisfied its first tranche obligation and, thus, it
earned its “vested” 5.4% interest in the Bulgaria Project and obtained its right
to fund the second tranche.  Phillips and
EurEnergy disputed this and emphasized that on July 27, 2004, after receiving
the $300,000 wire transfer, CBM sent Carlton a letter in which it noted that it
would not agree to certain restrictions placed by Scholz on the $300,000
payment.  In the letter, CBM noted that Carlton’s
funding obligations were “absolute,” the parties had not contemplated “partial
funding,” the wire transfer did “not constitute performance,” and CBM would not
agree to an extension for Carlton to make the second tranche.  Carlton presented evidence that, despite this
letter, it and CBM subsequently conducted themselves as if Carlton had satisfied
the first tranche of funding.  
          Believing that it had
satisfied the first tranche of funding, Carlton, in the course of seeking additional
resources to fund its remaining obligations, came into contact with Phillips.  In the summer of 2004, Carlton, in a proposed
letter agreement, offered Phillips the right to acquire a “10% working
interest” in the Bulgaria Project in exchange for $8.5 million.   Carlton was to use the cash infusion to
fulfill its funding obligations under the CBM/Carlton agreement, and its 48%
interest in the Bulgaria Project would be reduced to 38% with Phillips’s
acquisition from Carlton of the 10% interest. 
On August 23, 2004, Phillips signed the letter agreement (the
“Carlton/Phillips agreement”) with an “addendum” that provided that Phillips
would “have a 30 day period to review all documentation and technical
information in connection with [the Bulgaria Project]” and “[i]f for any reason”
he was “not satisfied with [his] investigation then [he would] withdraw from
this agreement.”  
          Carlton, at trial, contended
that its chairman and managing director, T.C. O’Dell, signed and accepted Phillips’s
counteroffer and, thus, it formed a contractual relationship with
Phillips.  O’Dell testified that he signed
the Carlton/Phillips agreement with Phillips’s addendum “shortly” after
receiving it from Phillips, and Carlton introduced a fully executed copy of it
into evidence.  O’Dell explained that
Carlton, pursuant to ordinary procedures, would have sent a fully executed copy
of the Carlton/Phillips agreement to Phillips, but he conceded that Carlton did
not possess a record of having sent a copy to Phillips.  
          The undisputed evidence
presented at trial demonstrates that Phillips, in September 2004, shortly after
he had signed the Carlton/Phillips agreement, met with Carlton representatives,
including O’Dell, regarding the Bulgaria Project.  Nevertheless, Phillips testified that he had never
received notice that Carlton had accepted the terms of what he described as his
“counteroffer” and, thus, he had never formed a contractual relationship with
Carlton. 
          Phillips did not provide
to Carlton any funding pursuant to the Carlton/Phillips agreement.  And Carlton presented evidence that during
the fall of 2004, when it was providing Phillips with technical information
about the Bulgaria Project, Phillips and his representatives, without
Carlton’s  knowledge, were in direct
contact with CBM about the Bulgaria Project. 
Carlton contended that this evidence demonstrates that Phillips, beginning
in the early fall of 2004, was taking steps to supplant Carlton in the Bulgaria
Project “by secretly dealing with CBM.” 
Phillips countered with evidence that he withdrew from the
Carlton/Phillips agreement for business reasons.  According to Phillips, he “quickly became
disenchanted with Carlton” and O’Dell during his “due diligence efforts” and,
by mid-November 2004, he had already informed a Carlton broker that he had no
interest in working with Carlton.  On
December 3, 2004, Phillips sent Carlton a letter in which he stated that
because of “tight time constraints,” he was “unable to make a determination to
participate in this venture,” and he declined “to go forward with any proposed
transaction.”
          On February 10, 2005,
EurEnergy, a company which was later revealed to be connected to Phillips, sent
CBM a letter outlining the details of a joint development agreement between
EurEnergy and CBM regarding the Bulgaria Project.  CBM agreed, upon EurEnergy’s funding, to
declare Carlton in default of the CBM/Carlton agreement and return Carlton’s
investment.  EurEnergy agreed to
“replace” the $600,000 letter of credit that had been posted by Carlton and indemnify
CBM in any future legal proceedings brought against it by Carlton.  EurEnergy and CBM, on February 11, 2005,
executed a joint development agreement (the “CBM/EurEnergy JDA”), in which CBM acknowledged
that it needed financing for the Bulgaria Project and EurEnergy agreed to fund
at least $6.5 million in exchange for a conditional 60% interest in the
Bulgaria Project.  
          CBM, on February 25, 2005,
in satisfaction of its agreement with EurEnergy, sent Carlton a notice stating
that Carlton’s “material breach of the critical funding terms,” including Carlton’s
failure to make the second tranche, forced it to seek reliable financing for
the Bulgaria Project.  CBM offered to
remit to Carlton the $900,000 it had funded, but only if Carlton would
acknowledge that it had no further interest in the Bulgaria Project.
          CBM and EurEnergy’s
relationship subsequently soured, and litigation between CBM and EurEnergy ensued.  In May 2006, Phillips, on behalf of
EurEnergy, signed a settlement agreement of its suit against CBM, and EurEnergy
reaffirmed its obligations and liabilities to CBM “concerning the Carlton
matter.”  Subsequently, Bulgaria
terminated the Bulgaria/CBM concession.
          In December 2006, Carlton
sued Phillips and EurEnergy, along with several other Phillips-related entities,
including CabelTel and Syntek, that Carlton alleged were involved in tortious
conduct and breach of contract.  Specifically,
Carlton alleged that Phillips had breached the Carlton/Phillips agreement,
Phillips and EurEnergy had tortiously interfered with the CBM/Carlton
agreement, and CabelTel and Syntek were alter egos of EurEnergy.  
          After a lengthy trial, the
jury, in regard to Carlton’s breach-of-contract claim, found that Carlton and
Phillips entered into the Carlton/Phillips agreement; Carlton agreed to the
terms, including those set forth in Phillips’s addendum, before receiving a December
3, 2004 letter from Phillips in which he declined participation with Carlton in
the Bulgaria Project; Phillips did not send his December 3, 2004 letter in
compliance with the terms of the addendum, i.e., the provision providing
Phillips 30 days to review documentation and technical information; Phillips
failed to comply with the Carlton/Phillips agreement; and Phillips’s failure to
comply was not excused.  In regard to
damages, the trial court instructed the jury to award damages for “[t]he fair
market value” of Carlton’s “interest in the project, if any, at the time of the
failure to comply,” and the jury found that Phillips’s failure to comply caused
Carlton $66.5 million in actual damages. 

          In regard to Carlton’s
tortious-interference claim, the jury found that Carlton had complied with the
provision in the CBM/Carlton agreement requiring Carlton to “actually fund[]”
the initial $900,000; CBM and Carlton had agreed that the timing of the second
payment of $1.85 million “would take place within 90 days of the funding of the
initial tranche or 30 days after receipt of logs for the initial well,
whichever date was later”; CBM failed to comply with the CBM/Carlton agreement;
Phillips and EurEnergy intentionally interfered with the CBM/Carlton agreement;
neither Phillips nor EurEnergy had a “good faith belief” that it had the right
to interfere with the CBM/Carlton agreement; and, by clear and convincing
evidence, the harm caused by Phillips and EurEnergy to Carlton resulted from
malice.  The jury found that Phillips and
EurEnergy’s interference caused Carlton $66.5 million in actual damages; Phillips
was “responsible for the conduct of . . . EurEnergy”; and CabelTel and Syntek were
the alter egos of EurEnergy. 
          The trial court then
conducted the exemplary-damages phase of trial, after which the jury assessed $8.5
million in exemplary damages against Phillips and $8.5 million in exemplary
damages against EurEnergy.  The parties
then tried the issue of attorney’s fees to the court, and the trial court found
that Carlton was entitled to $9,954,000 in attorney’s fees for trial, $750,000
in attorney’s fees in the event of an appeal to the court of appeals, and
$250,000 for attorney’s fees in the event of an appeal to the Texas Supreme Court.

          Carlton moved for judgment
on the jury verdict, and Phillips, EurEnergy, CabelTel, and Syntek moved for a
judgment notwithstanding the verdict. 
The trial court granted a judgment notwithstanding the verdict in favor
of Syntek and CabelTel, concluding that there is no evidence to support the
jury’s alter ego findings.  The trial
court, sua sponte, determined that the jury’s actual damages award of $66.5
million for breach of contract and tortious interference is not supported by
factually-sufficient evidence and suggested a remittitur to $31.16 million.
Carlton accepted the remittitur, but reserved its right to appeal.[3]
          In its final judgment, the
trial court awarded Carlton $31.16 million in actual damages on its tortious-interference
claim against Phillips and EurEnergy, jointly and severally, and assessed exemplary
damages against Phillips and EurEnergy in the amount of $8.5 million each,
severally.
Tortious
Interference
          In their second issue in their
cross-appeal, Phillips and EurEnergy argue that the evidence is legally and
factually insufficient to support the jury’s finding that Phillips and
EurEnergy tortiously interfered with the CBM/Carlton agreement because Carlton
had no valid contract with CBM as Carlton had forfeited any interest it held under
the CBM/Carlton agreement, CBM did not fail to comply with the CBM/Carlton
agreement, there was no valid oral modification to the CBM/Carlton agreement,
Phillips and EurEnergy did not intend to wrongfully interfere with any such
agreement, and Phillips and EurEnergy’s alleged interference was based on their
“good-faith exercise of colorable rights.”
          In order to recover damages on a claim
for tortious interference with a contract, a plaintiff must prove (1) the
existence of a contract subject to interference; (2) a willful and intentional
act of interference with the contract; (3) the interference proximately caused
the plaintiff’s injury; and (4) actual damages or loss.  Prudential
Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000).
We will sustain a legal-sufficiency or “no-evidence” challenge if the
record shows one of the following: (1) a complete absence of evidence of a
vital fact, (2) rules of law or evidence bar the court from giving weight to
the only evidence offered to prove a vital fact, (3) the evidence offered to
prove a vital fact is no more than a scintilla, or (4) the evidence establishes
conclusively the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In
conducting a legal-sufficiency review, a “court must consider evidence in the
light most favorable to the verdict, and indulge every reasonable inference
that would support it.”  Id. at 822.  The term “inference” means, 
In the law of evidence, a truth or proposition drawn from another which
is supposed or admitted to be true. A process of reasoning by which a fact or
proposition sought to be established is deduced as a logical consequence from
other facts, or a state of facts, already proved. . . .
 
Marshall Field Stores, Inc. v. Gardiner, 859 S.W.2d 391, 400 (Tex. App.—Houston [1st Dist.]
1993, writ dism’d w.o.j.) (citing Black’s
Law Dictionary 700 (5th ed. 1979)). 
For a  jury to infer a fact, “it
must be able to deduce that fact as a logical consequence from other proven facts.”  Id.  
If there is more than a scintilla of evidence to support the challenged
finding, we must uphold it.  Formosa Plastics Corp. USA v. Presidio Eng’rs
& Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998).  “‘[W]hen the evidence offered to prove a vital
fact is so weak as to do no more than create a mere surmise or suspicion of its
existence, the evidence is no more than a scintilla and, in legal effect, is no
evidence.’”  Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004) (quoting
Kindred v. Con/Chem, Inc., 650 S.W.2d
61, 63 (Tex. 1983)).  However, if the
evidence at trial would enable reasonable and fair-minded people to differ in
their conclusions, then jurors must be allowed to do so.  City of
Keller, 168 S.W.3d at 822; see also King Ranch, Inc. v. Chapman,
118 S.W.3d 742, 751 (Tex. 2003).  “A
reviewing court cannot substitute its judgment for that of the trier-of-fact,
so long as the evidence falls within this zone of reasonable
disagreement.”  City of Keller, 168
S.W.3d at 822.  
In conducting a factual-sufficiency review, we must consider, weigh, and
examine all of the evidence which supports and which is contrary to the jury’s
determination.  Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989).
 Because Carlton, not Phillips and
EurEnergy, had the burden to prove liability at trial, we may set aside the jury’s
verdict only if the evidence that supports the verdict is so weak as to make
the verdict clearly wrong and manifestly unjust.  Cain v.
Bain, 709 S.W.2d 175, 176 (Tex. 1986).
In regard to Phillips and EurEnergy’s primary argument that Carlton had
no valid contract with CBM because Carlton had failed to comply with the
funding provisions of the CBM/Carlton agreement, we note that Phillips and
EurEnergy did not challenge the trial court’s instruction to the jury.  Also, the record reveals evidence
demonstrating Carlton’s compliance, CBM’s conduct consistent with Carlton’s
compliance, and Carlton and CBM’s  modification of certain terms in the
CBM/Carlton agreement.  
The jury found that Carlton complied with the requirement in the
CBM/Carlton agreement that it “actually fund[]” the $900,000 first tranche with
a $300,000 cash payment and a $600,000 letter of credit, which then created between
CBM and Carlton an “exclusive arrangement” with which Phillips and EurEnergy
interfered.   The evidence supports the
jury’s finding.   It is undisputed that
Carlton furnished CBM a $600,000 letter of credit, which, accepted by CBM, extended
the Bulgaria/CBM concession.  Carlton
also funded the $300,000 cash portion of the tranche with the wire transfer of
an investor, Kenneth Scholz. 
It is true that Scholz included some restrictions with his $300,000
payment beyond the contemplation of the CBM/Carlton agreement.  And CBM did object to these restrictions in its
July 27, 2004 letter.  However, Carlton,
in August 2004, responded to CBM by letter, noting that the funds had been
transferred, the restrictions placed by Scholz were “substantially the same” as
those set forth in the CBM/Carlton agreement as amended by a subsequent oral
agreement, and Carlton considered the “funding requirement” to have been “fully
complied with.”  Carlton explained that CBM
had previously agreed, albeit orally, to allow Carlton a 30-day period to review
the logs from the initial well before making the second tranche.  Carlton also noted that although Scholz had requested
a 45-day period to review the logs, he had since consented to the 30-day period
to comport with Carlton and CBM’s oral agreement already in place.  
Significantly, Carlton presented evidence that it and CBM had continued
to operate under the CBM/Carlton agreement as modified.  CBM retained the entire first tranche,
including the $300,000 wire transfer, for almost one year.  Indeed, CBM used the $600,000 letter of
credit to extend the Bulgaria/CBM concession, and it did not provide Carlton
with any notice of default until February 25, 2005, after it had executed the
CBM/EurEnergy JDA.  Carlton also
presented evidence that CBM, Phillips, and EurEnergy had themselves concluded that
Carlton had “actually fund[ed]” the first tranche of $900,000 and had acquired
a 5.4% interest in the Bulgaria Project.  In fact, in the February 10, 2005 letter from
EurEnergy to CBM, EurEnergy agreed to “replace” the $600,000 letter of credit
that Carlton had posted.  From this
evidence, the jury could have reasonably found that Carlton actually funded the
first tranche and the CBM/Carlton agreement constituted a valid and enforceable
contract, which was subject to interference by Phillips and EurEnergy.  
In regard to the modifications to the CBM/Carlton agreement, the trial
court instructed the jury as follows,
The Letter Agreement between Carlton Energy Group and Phillips and the
Letter Agreements as amended between [Carlton] and CBM contain provisions which
state that the agreements cannot be orally modified or amended and that any
amendment or modification must be in writing and signed by both parties.  These provisions in a contract can be waived.
 
The Letter Agreements as amended between [Carlton] and CBM contains a
non-waiver clause (Paragraph 16g).  This
provision in a contract may be waived.
 
Waiver is an intentional surrender of a known right or intentional
conduct inconsistent with claiming the right. 
Silence or inaction, for so long a period to show an intention to yield
the known right, is also enough to prove waiver.  
 
If those provisions are waived, the parties may orally agree to other
provisions.  In deciding whether the
parties reached an agreement, you may consider what they said and did in light
of the surrounding circumstances, including any earlier course of dealing.  You may not consider the parties’ unexpressed
thoughts or intentions.
 
Phillips and
EurEnergy did not object to these instructions and do not complain about them on
appeal.  When there has been no objection
to the court’s charge, we assess the legal sufficiency of the evidence
according to the instructions given by the trial court to the jury.  Osterberg
v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). 

The evidence supports the jury’s implied finding that CBM had waived the
no-oral-modification clause and non-waiver clause in the CBM/Carlton agreement.  Carlton presented ample evidence that CBM
accepted the first tranche, even though the $300,000 cash payment was made
subject to certain restrictions, including the restriction that Scholz be
provided an additional period of days to review well logs.  The evidence also supports the jury’s finding
that Carlton and CBM had agreed that Carlton’s second tranche of funding could
be made within 90 days of the funding of the first tranche or 30 days after
receipt of the well logs, whichever date was later.  
Carlton also presented evidence that CBM had failed to comply with the
CBM/Carlton agreement when, after accepting the first tranche and after
modifying the timing requirement for the second tranche, CBM declared Carlton
in default and sought to “replace” Carlton with EurEnergy.  And Carlton presented evidence that Phillips
and EurEnergy intentionally interfered with the CBM/Carlton agreement and
neither Phillips nor EurEnergy had a good faith belief that they had a right to
do so.  
On August 23, 2004, Phillips signed the Carlton/Phillips agreement under
which Phillips, in exchange for $8.5 million, would acquire a 10% interest in
the Bulgaria Project.  Phillips, in an
addendum that was subsequently agreed to by Carlton, requested 30 days to
review documents and “technical information” and the right to withdraw.  In September 2004, Phillips met with Carlton
representatives to review some of this information, and the jury was presented
evidence that would have entitled it to reasonably conclude that Carlton had shared
information with Phillips during the fall of 2004 pursuant to the
Carlton/Phillips agreement.  The jury was
also presented with evidence that, during this same time frame, and unbeknownst
to Carlton, Phillips had acquired from Dr. Henry Crichlow, a registered
professional engineer, two reports on the Bulgaria Project.  
In a June 28, 2004 memorandum report on the “Bulgaria Coalbed Methane
(CBM) Project,” Dr. Crichlow suggested that the Bulgaria Project was a
“valuable international prospect.”  And,
in his second report, an October 11, 2004 “interim due-diligence report on the
108,000 acre Coal Bed Methane Project in 
. . . Bulgaria for Mr. Gene Phillips et al,” Crichlow encouraged Phillips
to send Carlton a withdrawal letter and obtain “[l]egal advice . . . regarding
the supplanting of the Carlton Energy position with the Phillips Group under
the same 48% interest position” held by Carlton.  Crichlow, who had met with the principals of
Raven Ridge Resources (“RRR”), a consulting company involved in energy resource
assessment, to discuss
the “administrative, commercial, political, engineering and operational
aspects” of the Bulgaria Project, urged that,
A partnership with CBM is
highly recommended considering the quality and experience of the ownership and
management.  RRR and CBM have been
involved in this project for over six years. 
It is very unusual to have the amount of data available for a project of
this type and the extreme enthusiasm for success that was expressed by the
principals of such a highly respected industry leader such as Raven Ridge
Resources.  These factors greatly reduce
the investment risk in this type of project.
 
Crichlow
also suggested that any deal
directly between CBM and Phillips “be based on CBM declaring Carlton in default
of their original contract.”  Crichlow
cautioned that “[c]are should be taken” to avoid “potential Phillips Group
liability for ‘tortious interference’ directed at Phillips [] for the
termination of the contract between CBM and Carlton.”  From this evidence, the jury could have
reasonably concluded that Phillips willfully planned to cut Carlton out of what
all the parties believed at the time to be an extremely lucrative deal.  
Carlton also presented evidence that Phillips, in the fall of 2004, had
direct contact with CBM, and substantial documentary evidence reveals that he,
as early as October 2004, was contemplating a “possible cash settlement” with
Carlton in an effort to remove it from any involvement in the Bulgaria Project.  Notes and documents that were obtained from
CBM and introduced into evidence also reveal that Phillips, during this time
frame, had provided CBM with assurances that he would support CBM in potential
litigation involving Carlton.  CBM’s
lawyer testified at trial that he was “concerned” that the direct negotiations between
Phillips and CBM could have been interfering with the contract between Carlton
and Phillips.  In November 2004, CBM’s
lawyer specifically asked Phillips if there was a contract between Phillips and
Carlton, and, according to these documents, Phillips represented that they had
no contract.  Also, in November 2004,
CBM’s lawyer sent to a Phillips-related entity a letter in which he detailed
the competing interests in the Bulgaria Project.  In regard to the “current relationship with
Carlton,” CBM stated that it and the Phillips-related entity needed to
“establish a joint position on any position Carlton may have, and whether it’s
advantageous to approach Carlton to either return its partial funding to date
(including replacing the letter of credit) and perhaps allocating some
consideration to Carlton for its partial performance to date.”  CBM also noted that the Phillips-related
entity had advised CBM that it would “support (including financially) CBM in
any possible dispute which may arise of out of Carlton’s misinterpretation of
its position” in the Bulgaria Project. Thus, the jury was presented with
evidence that both Phillips and CBM were pursuing a course of action for which
they anticipated the possibility of legal liability to Carlton. 
On December 3, 2004, at the same time that Phillips was in direct contact
with CBM about the Bulgaria Project, Phillips sent Carlton a letter in which he
represented that he had not been aware that Carlton faced “time constraints” in
regard to the Bulgaria Project, but because of these “tight time constraints,”
he was unable to make a determination to participate in this venture and he
declined “to go forward with any proposed transaction” with Carlton.  Despite Phillips’s representations in his
withdrawal letter, Phillips and CBM continued their direct negotiations, which
included their shared “handling” of what they referred to as the Carlton “situation.”
 A Phillips representative stated in a
December 2004 e-mail to CBM that “it would not be prudent for Gene [Phillips]
to immediately get involved until they [Carlton] have been called into
default.”  From these communications and the
documentary evidence, the jury could have reasonably inferred that not only did
Phillips intentionally breach the Carlton/Phillips agreement but also that Phillips
and CBM willfully planned to remove Carlton from any involvement in the
Bulgaria Project and for Phillips, or a Phillips-related entity, to supplant
Carlton.
Finally, we note that the evidence reveals that in the beginning of 2005,
R.N. Real Estate, a Phillips-related entity, formed EurEnergy, a wholly owned
subsidiary.  Shortly thereafter, in
February 2005, EurEnergy and CBM executed a letter agreement and the CBM/EurEnergy
JDA, both of which demonstrated that CBM had agreed to declare Carlton in
default of the CBM/Carlton agreement and EurEnergy had agreed to indemnify CBM
for any legal liability to Carlton. 
In sum, Carlton presented ample evidence supporting the jury’s findings
in regard to Carlton’s tortious-interference claim.  Viewing the evidence in the light most
favorable to the jury’s findings, we conclude that the jury could have
reasonably found that Carlton complied with the provision in the CBM/Carlton
agreement requiring Carlton to actually fund the first tranche, Carlton and CBM
agreed to the modification of their agreement in regard to the timing of the
second tranche, CBM failed to comply with the CBM/Carlton agreement, Phillips
and EurEnergy intentionally interfered with the CBM/Carlton agreement, and
neither Phillips nor EurEnergy had a good-faith belief that it had the right to
interfere with the CBM/Carlton agreement. 
We further conclude that the evidence supporting these findings is not
so weak as to render the jury’s verdict clearly wrong and manifestly
unjust.  Accordingly, we hold that the
evidence is legally and factually sufficient to support the jury’s liability
findings on Carlton’s tortious-interference claim.
We overrule Phillips and EurEnergy’s second issue.[4]
Actual
Damages
          In their first issue in their
cross-appeal, Phillips and EurEnergy argue that the evidence is legally and
factually insufficient to support the trial court’s award of $31.16 million in actual
damages because determining the fair market value of Carlton’s interest in the
Bulgaria Project involved “a specialized field outside [the] jurors’ knowledge”
and the testimony of Carlton’s expert, who utilized unreliable foundational
data, amounted to “conjecture and speculation.” 
Within their legal-sufficiency challenge, Phillips and EurEnergy attack
the two valuation models used by Carlton’s expert.   Alternatively, Phillips and
EurEnergy argue that the evidence is factually insufficient to support an award
of damages any “greater than the 5.4% of the [Bulgaria Project’s] market value”
because Carlton was only able to conditionally fund $899,990 and “there is no
evidence that Carlton would have obtained” the required $8 million in “funding
from any other source.”  
          In
its first issue in its appeal, Carlton argues that the trial court erred in “suggesting
a remittitur to $31.16 million in actual damages” because “factually sufficient
evidence supports the jury’s finding of actual damages of $66.5 million or,
alternatively, at least $38 million.”  Carlton asserts that the evidence
presented supports “three possible damages awards”: (1) a review of all the
evidence supports the jury award of $66.5 million, (2) “a calculation by
Carlton’s damages expert, Pete Huddleston, using a conventional cash-flow
model, or ‘max/min’ analysis, supports a damages award of $38 million,” and (3)
“an alternative calculation by Huddleston using a ‘comparable sale’ approach
supports the award of $31.16 million.”  
          As noted above, in conducting a legal-sufficiency
review of the evidence, we must consider all of the evidence in the light most
favorable to the jury’s award and indulge every reasonable inference that would
support it; we must consider evidence favorable to the jury’s findings if a
reasonable fact-finder could consider it, and disregard evidence contrary to
the finding unless a reasonable fact-finder could not disregard it.  City of
Keller, 168 S.W.3d at 827; Brown v.
Brown, 236 S.W.3d 343, 348 (Tex. App.—Houston [1st Dist.] 2007, no pet.).  When
considering a party’s assertion that unreliable scientific evidence or expert
testimony is legally insufficient to support a verdict, we independently
consider whether the evidence at trial would enable reasonable and fair-minded
jurors to reach the verdict.  Whirlpool Corp. v. Camacho, 298 S.W.3d 631, 638 (Tex. 2009) (citing City
of Keller, 168 S.W.3d at 827).  Such
a review “encompasses the entire record, including contrary evidence tending to
show the expert opinion is incompetent or unreliable.”  Id.  Conclusory or speculative expert opinion
testimony is not relevant evidence because it does not tend to make the
existence of material facts more probable or less probable.  See Tex. R. Evid. 401; Whirlpool Corp.,
298 S.W.3d at 637.  We are to “rigorously examine the validity of
facts and assumptions” of an expert’s opinion “as well as the principles,
research, and methodology underlying the expert’s conclusions.”  Whirlpool Corp., 298 S.W.3d at 637.  
          In reviewing the trial court’s remittitur,
we must determine whether factually-sufficient evidence supports the jury’s
award.  Bentley v. Bunton, 94 S.W.3d 561, 620 (Tex. 2002); Mar. Overseas Corp. v. Ellis, 971 S.W.2d
402, 406 (Tex. 1998).  In conducting our
factual-sufficiency review, we may not pass upon the witnesses’ credibility or
substitute our judgment for that of the jury.  Mar.
Overseas Corp., 971 S.W.2d at 407. 
Because Carlton, not Phillips and EurEnergy, had the burden to prove its
damages at trial, a remittitur of the jury’s damages award should not have been
required unless the evidence supporting the award is so weak that the jury’s
award is clearly wrong and manifestly unjust. 
See id.; Cain, 709 S.W.2d at 176.  If
we sustain Carlton’s challenge that the trial court should not have required
the remittitur, we must render the judgment that the trial court should have
rendered.  See Tex. R. App. P. 46.2.
          In making its determination of what
sum of money would fairly and reasonably compensate Carlton for its damages
caused by the tortious interference with the CBM/Carlton agreement, the trial
court instructed the jury to consider the fair market value of Carlton’s
interest in the Bulgaria Project at the time of the interference, and it defined
fair market value as:
.
. . the amount that would be paid by a knowledgeable buyer who desires to buy
but is not required to buy, to a knowledgeable seller, who desires to sell but
is under no necessity of selling.[5]
 
          Carlton, in regard to its tortious-interference
claim, sought damages for the fair-market value of its 38% interest in the
Bulgaria Project, which was to be measured at the time that it was deprived of
its interest as a result of the tortious interference.  We first address Phillips and EurEnergy’s
argument that Carlton may not recover actual damages totaling more than the
fair market value of a 5.4% interest in the Bulgaria Project because Carlton
did not present evidence that it would have obtained the money necessary to fulfill
its funding obligations under the CBM/Carlton agreement.  The argument ignores the fact that Phillips,
pursuant to the Carlton/Phillips agreement, was to pay Carlton $8.5 million in
exchange for a 10% interest in the Bulgaria Project.  This would have enabled Carlton to fulfill
its funding obligations and entitled it to obtain its 38% interest in the
Bulgaria Project.  As discussed below,
the jury found that not only did Phillips and EurEnergy tortiously interfere
with the CBM/Carlton agreement, but also that Phillips failed to comply with
the Carlton/Phillips agreement.  And, as
we hold below, the jury’s finding that Phillips failed to comply with the
Carlton/Phillips agreement is supported by legally- and factually-sufficient
evidence.
          As evidence of the fair
market value of its 38% interest in the Bulgaria Project, Carlton presented the
expert testimony of Huddleston and Dr. Crichlow. Dr. Crichlow testified that he
obtained his doctorate in petroleum engineering from Stanford University and
had previously served as a professor of engineering and the head of the
Department of Petroleum Natural Gas and Geological Engineering at the
University of Oklahoma.  His company, HBC
Registered Professional Engineers, is involved in reserve evaluations of major
oil fields, and he had previously worked for the World Bank in evaluating the
reserves for the country of Bolivia in order to justify the construction of a
pipeline from Bolivia to Brazil and Argentina. 
Crichlow had also worked with the country of Kuwait “to decide which
wells should be looked at first” to ensure “minimal loss of resources” as a
result of the Kuwaiti oil-field fires in 1991. 
He had also worked for the United States Federal Deposit Insurance Corporation
to evaluate 29,000 oil and gas reserves packages that were being held by
banks.  And, Crichlow is the author of a
book titled, Modern Reservoir
Engineering—A Simulation Approach.    
 
          In his June 28, 2004 memorandum
report, Dr. Crichlow explained that he had reviewed the Bulgaria Project, his
recommendations were “favorable,” the Bulgaria Project had “several highly desirable
characteristics,” and the detailed characteristics made the project a “valuable
international project.”  He discussed the
Bulgaria Project’s geology, resource base, economics, gas valuation, and
regulatory requirements.  And Crichlow emphasized
the Bulgaria Project’s existing exploratory drilling, “relatively shallow
depth,” “excellent economics,” and “pipeline availability.”  In a section of his report entitled “Gas
Valuation,” Crichlow provided detailed estimates of the amount of gas in place
and the value of the gas in the ground for both a 100% and a 1% interest in the
Bulgaria Project.  In regard to the
valuation of a 100% interest, Crichlow estimated that there was 35,000 billion
cubic feet of gas in place, a 90% recoverability factor, a gas price of $1 per
MMBTU (or one million British Thermal Units), and a “gas valuation in ground”
of “$31.5 billion U.S.”  Crichlow
estimated that a 1% interest concerning 350 billion cubic feet of gas in place,
with a 90% recoverability factor and a “gas price in ground” of $1 per MMBTU, would
result in a “gas valuation in ground” of “$315 million US.”  
          In his October 11, 2004 “interim
due-diligence report” prepared “for Mr. Gene Phillips et al,” Dr. Crichlow, who
had met with the principals of RRR about the Bulgaria Project, issued his
findings, conclusions, and recommendations. 
He issued findings on various aspects of the Bulgaria Project, including “Commercial, Administrative, and
Political” as well as “Engineering and Operational.”  Crichlow also summarized CBM’s exploration
and prospecting programs.  And he
emphasized that it was “very unusual to have the amount of data available for a
project of this type,” the Bulgaria Project had a “greatly reduce[d] . . .
investment risk,” and it had a “[b]illion dollar profit potential.”  Thus, Crichlow “highly recommended” that
Phillips enter into a partnership with CBM and a Phillips-related entity supplant
Carlton’s position in the Bulgaria Project. 
He concluded that a “successful partnership with CBM that includes the
anticipated cash flow from gas production, should allow the reinvestment in
Bulgaria to compound the returns to [Phillips] many times over.”    
          Huddleston, a registered
professional engineer and the principal of Huddleston & Company, a
consulting firm of petroleum and geological engineers, testified that he was
involved in oil and gas consulting, exploration, and production.  He noted that his company has worked for over
500 companies, including “every major oil company” and most “large independents.”
 It had also been retained on a major
project for the United Nations to assess the losses to oil and gas reserves as
a result of Operation Desert Storm.  Huddleston
explained that he has been “involved in virtually every phase” of “upstream
activities,” including exploration and development of prospects; his company has
been involved in “several billion dollars of consulting on buy-sell projects”;
he has furnished reports to the United States Securities and Exchange
Commission and public companies; and he has been involved in project analysis,
including the estimation of reserves for transmission lines in the United
States.  Huddleston, who analyzes approximately
200 projects annually, taught two senior engineering courses— petroleum
management and petroleum investment analysis—at Texas A&M University from
1981 to 1998.  He had also prepared
manuals that were used by the petroleum schools at the University of Texas and
Louisiana State University.  Huddleston noted
that he has published in excess of 300 papers on oil and gas topics and made
presentations for multiple organizations, including the Society of Petroleum
Evaluation Engineers and the Texas Bar Association.
          In his testimony to the
jury regarding the fair market value of Carlton’s interest in the Bulgaria
Project at the time of Phillips and EurEnergy’s tortious interference with the
Carlton/CBM agreement, Huddleston generally explained two possible damage
models: (1) the “most likely” model and (2) the “cash flow” or “min/max” model.  In calculating a valuation using the “most
likely” damages model, Huddleston explained that he primarily considered the
value of the Carlton/Phillips agreement. 
Because Phillips himself had agreed
to pay Carlton $8.5 million for a 10% working interest in the Bulgaria Project,
Huddleston explained that the total value of the Bulgaria Project at the time
of the tortious interference could be calculated to have been approximately $85
million and, after the subtraction of well costs, the net market value of the
Bulgaria Project could be calculated to have been approximately $82 million.  Thus, using the amount that Phillips himself
had agreed to pay for a 10% working interest in the Bulgaria Project, Huddleston
opined that the approximate fair market value of a 38% interest in the Bulgaria
Project at the time of the tortious interference could be calculated to have
been at least approximately $31 million. 
Huddleston also explained that he considered the value of the February
2005 CBM/EurEnergy JDA when opining on the value of what would have been Carlton’s
remaining 38% interest in the Bulgaria Project. 
Although Huddleston agreed that the CBM/EurEnergy JDA was “more
complicated” and “confusing,” he explained that this separate agreement could serve
to at least confirm, “to some extent,” that his valuation of the
Carlton/Phillips agreement was “probably” reasonable.[6]  
           In regard to the “cash flow” or “min/max”
model, Huddleston explained that he derived an
approximate range of fair market values based upon reserve reports and other
documents prepared by Dr. Crichlow, whose services had been obtained by
Phillips.[7]  Huddleston characterized Crichlow’s reserve report
as “extremely good.”  And Crichlow, in
his deposition, which was introduced into evidence, explained that his report
was “reliable.”  Using the information contained
in Crichlow’s reports, Huddleston opined that the fair market value of the
Bulgaria Project at the time of the tortious interference could have been between
“in excess” of $100 million and a minimum of “roughly 32 million, or something
like that.”  When asked to derive “the
most likely between these two” figures, Huddleston cautioned that it was more
appropriate to provide the jury with a possible range of values rather than a
specific number, noting that the jury could consider all of the evidence in
determining the fair market value of Carlton’s 38% interest in the project at
the time of the tortious interference.    

          The jury awarded Carlton for its
actual damages $66.5 million, which exceeded the general approximate range of fair
market values suggested by Huddleston under
both his “most-likely” and “cash-flow” models for Carlton’s 38% interest in the
Bulgaria Project.  However, the jury’s
award of $66.5 million is not rendered legally or factually insufficient simply
because it exceeded the range of values suggested by Huddleston.  See
City of Fort Worth v. Zimlich, 29
S.W.3d 62, 73 (Tex. 2000) (“A jury may award more damages than requested by a
party if there is evidence supporting the higher award of damages.”). And we
are not compelled to affirm the trial court’s remittitur simply because Carlton’s
counsel, in closing argument, suggested that the jury award actual damages of $31.16
million.  Rather, our duty on appeal is
to instead determine whether the record evidence, including, but not limited solely
to Huddleston’s expert opinion testimony, is legally and factually sufficient
to support the jury’s award.  
          Again, in conducting our
legal-sufficiency review, we consider all of the evidence in the light most
favorable to the jury’s award and indulge “every reasonable inference” that
would support it, and we “must consider all evidence favorable” to the jury’s
award if a reasonable fact-finder could. 
City of Keller, 168 S.W.3d at
827.  In regard to our
factual-sufficiency review of the trial court’s remittitur, we again note that
a trial court may not substitute its judgment for that of the jury and may
require a remittitur only if the evidence suggesting the award is so weak that
the jury’s award is clearly wrong and manifestly unjust.  See
Mar. Overseas Corp.,
971 S.W.2d at 406; Cain, 709 S.W.2d at 176.
          In calculating the fair market
value of Carlton’s 38% interest in the Bulgaria Project at the time of the
tortious interference and awarding Carlton $66.5 million, the jury had before
it not only Huddleston’s expert opinions and methodologies, but also the
underlying data and information obtained by Dr. Crichlow regarding the Bulgaria
Project.  As noted above, Crichlow, in
regard to the valuation of a 100% interest, estimated that there was 35,000
billion cubic feet of gas in place, a 90% recoverability factor, and a “gas
price in ground” of $1 per MMBTU, resulting in a “gas valuation in ground” of
“$31.5 billion U.S.”   For a 1% interest, Crichlow estimated a “gas
valuation in ground” of “$315 million U.S.” 
In his testimony, Huddleston explained that the $1 per MMBTU figure used
by Crichlow was a reasonable price.  And
Huddleston supported his testimony by referring to Institutional Investor magazine, which “covers monthly all of the
oil and gas transaction activity certainly in the United States and Canada; and
they commonly report transactions that people are making, probably average a
billion a month or something, of what they paid for reserves in the ground.”  From Huddleston’s testimony on this subject,
the jury could have reasonably concluded that, based on industry practice, Crichlow’s
estimates reflected a reasonable market price for the Bulgaria Project’s gas in
the ground.  Huddleston, in discussing
general recoverability rates, explained that “[t]ypical coalbed recoveries
probably range from a low of 70% maybe to 85%.” 
From this evidence, the jury could have reasonably concluded that a
lower recoverability rate than the 90% recoverability rate used by Crichlow could
provide a more conservative guide to evaluate the fair market value of the
project.  Huddleston further testified
that Crichlow’s June 2004 report did “have economics to it,” and the jury could
have reasonably concluded that the estimates used by Crichlow in valuing the
Bulgaria Project’s gas in the ground took into account many of the market
variables that Phillips and EurEnergy identify on appeal.  Finally, when asked if “valuing gas in the
ground” is “one of the ways in which” an investor could determine whether “to
do a project,” Huddleston agreed that this could be used “as an approximate
early on.”  
          Moreover, we note that in
attacking Carlton’s expert evidence and underlying data on actual damages, Phillips
and EurEnergy, in the trial court below, did not present the jury with any
contradictory evidence that the jury could not have disregarded.  See
City of Keller, 168 S.W.3d at
827.  Nor did they present any expert
testimony of their own to suggest a lesser, alternative fair market value of
Carlton’s interest in the Bulgaria Project. 
Rather, Phillips and EurEnergy’s primary contention was that, regardless
of liability, which they vigorously challenged, Carlton was not entitled to
recover anything for its lost interest.  Nor,
in their cross-appeal in this Court, do Phillips and EurEnergy cite us to any
record evidence establishing that it would have been inherently unreasonable
for the jury to have relied upon Carlton’s expert evidence or the underlying
data in determining the fair market value of its interest in the Bulgaria
Project.  Specifically, we note that
there is nothing in the record to establish that it would have been inherently
unreasonable for the jury, in assessing the fair market value of Carlton’s
interest at the time of Phillips and EurEnergy’s tortious interference, to have
placed great weight on Dr. Crichlow’s unchallenged data regarding the value of a
mere 1% interest in the Bulgaria Project’s gas in the ground.  Huddleston, in regard to the “cash flow” or
“min/max” models, explained the importance of gas reserves, and  he further testified that an investor in this
type of project should consider and weigh certain information and data in
determining whether and how much to invest. And, rather than giving the jury a
specific fair market value of Carlton’s interest, he testified that the jury,
in making its own assessment, could consider a range of values as well as the
pertinent information and data.   Indeed,
assessing the fair market value of Carlton’s interest in the project was the
jury’s job as fact finder, and nothing precluded it from placing great weight
upon the value of the Bulgaria Project’s gas in the ground.  And Phillips and EurEnergy have not presented
us with either established facts or law that logically undermines the jury’s
finding of actual damages in this case.
          In sum, the jury could
have placed great weight on Dr. Crichlow’s evidence, including his data on the
value of the Bulgaria Project’s gas in the ground, and, from it, the jury could
have logically deduced that the fair market value of Carlton’s interest in the
Bulgaria Project significantly exceeded the range of values proposed by
Huddleston in both of his damages models. 
The jury was presented with evidence that, in determining the fair market
value of Carlton’s 38% interest in the Bulgaria Project, it could consider the valuation
of its gas reserves.  Dr. Crichlow, in
his June 28, 2004 memorandum report, which was introduced into evidence without
objection, valued a mere 1% interest in the Bulgaria Project’s gas “in ground”
at $315 million.  In this same report, Crichlow
estimated a 90% recoverability rate, although the jury also heard testimony
from Huddleston that would support applying a more conservative recoverability
rate than that applied by Crichlow.   
          Moreover, the jury could
have reasonably believed that Phillips himself had tremendous confidence in Dr.
Crichlow’s data, conclusions, and recommendations.  After agreeing on August 23, 2004 to pay
Carlton $8.5 million for a 10% interest in the Bulgaria Project, Phillips
obtained Crichlow’s October 11, 2004 interim due diligence report.  In the report, Crichlow explained, “It is
very unusual to have the amount of data available for a project of this type
and the extreme enthusiasm for success that was expressed by the principals of
such a highly respected industry leader such as Raven Ridge Resources.”  Noting that the pertinent factors “greatly
reduce[d] the investment risk in this type of project” and the Bulgaria Project
had a “[b]illion dollar proft potential,” which would “compound the returns to
[Phillips] many times over,” Crichlow “highly recommended” that Phillips enter
a “partnership” with CBM.  Thus, the jury
had before it evidence that Phillips himself so highly valued Carlton’s
interest in the Bulgaria Project that he was willing to breach the
Carlton/Phillips agreement and supplant Carlton’s interest by forming his own partnership
with CBM.
          Although there is nothing
in the record to directly set forth how the jury arrived at its damages award
of $66.5 million, we conclude that the jury’s damage award is amply supported
by Huddleston’s testimony, the detailed information contained in Dr. Crichlow’s
reports, and the other substantial testimonial and documentary evidence
introduced at trial.[8]    See State v. Harrell Ranch, Ltd., 268
S.W.3d 247, 258 (Tex. App.—Austin 2008, no pet.) (acknowledging that there was
“nothing in the record to inform” court of jury’s reasoning in awarding damages
for diminution of value, which exceeded proposed damage figures, but holding
that “[g]iven [the] possible applications of the evidence, the jury award” fell
within the “range of evidence” and was not “excessive”).  
          Phillips and EurEnergy
make additional arguments in attacking the sufficiency of the evidence to
support the jury’s award of $66.5 million, or the award of any actual damages.  In arguing that Huddleston’s expert testimony
constitutes no evidence, Phillips and EurEnergy cite Ramco Oil & Gas Ltd. v. Anglo-Dutch (Tenge) L.L.C., 207 S.W.3d
801 (Tex. App.—Houston [14th Dist.] 2006, pet. denied).  In Ramco,
the court held that there was “no evidence to prove with reasonable certainty”
the claimed lost profits because the proof of lost profits was “largely
speculative, dependent on uncertain and changing market conditions, and based
on risky business opportunities and the success of an unproven
enterprise.”  Id.  This, however, is not a
lost-profits case.  
          Carlton sought to recover
damages for the loss of its 38% interest in the Bulgaria Project, measured at
the time that Phillips and EurEnergy tortiously interfered with the CBM/Carlton
agreement.  Carlton claims, and the jury concluded,
that Phillips essentially appropriated Carlton’s interest, which was an asset
that had a market value at the time it was taken.  Texas courts have long recognized, in
circumstances that are similar to those presented here, that a plaintiff may
seek to recover the market value of a lost asset.  See
Humble Oil & Refining Co. v. Kishi,
276 S.W. 190, 191  (Tex. Comm’n App.
1925, judgm’t adopted), reh’g granted, 291 S.W. 538 (Tex. Comm’n App. 1927,
holding approved) (providing for recovery for market value of lost right to
leasehold interest).  Other courts have
also recognized that, in certain circumstances, a plaintiff may seek to recover
damages for the market value of an asset rather than lost profits.  See
Schonfeld v. Hilliard, 218 F.3d 164,
177 (2nd Cir. 2000) (stating that “market value of an income-producing asset is
inherently less speculative than lost profits because it is determined at a
single point in time” and “represents what a buyer is willing to pay for the
chance to earn the speculative profits”). 

          Of course, any investment
of capital made to obtain an interest in a speculative venture involves risk,
especially if the decision to make the investment can be made on nothing more
than estimates.  However, this simple
fact of business life does not mean that such an interest has no market
value.  Nor does it preclude a
fact-finder, utilizing pertinent data and factors, from determining the fair
market value of the interest.  Such
determinations, often involving millions and sometimes billions of dollars, are
made every day by businesses in a free market economy.  As explained by Huddleston, it is “very common” for interests in
ventures such as the Bulgaria Project to be bought and sold before there is any
production from the venture.  He also
noted that he considered the Bulgaria Project to be “viable” and that his
company “would [have] definitely consider[ed]” investing in it.
          Here, Carlton introduced
evidence to support the jury’s findings that Phillips and EurEnergy tortiously
interfered with its rights under the CBM/Carlton agreement and Carlton was
deprived of its 38% interest in the Bulgaria Project as a result of the tortious
interference.  Under Texas law, Carlton
was entitled to seek and recover, as a proper measure of its damages, the fair market
value of its interest at the time of the tortious interference.  See
Humble Oil & Refining Co., 276 S.W. at 191.  Carlton presented both expert testimony and
documentary evidence, containing pertinent data and information, to support a
broad range of values for the jury to consider in determining the fair market value
of Carlton’s interest.  Thus, Carlton was
not required to prove any ultimate “lost profits” to recover actual damages
caused by Phillips and EurEnergy’s tortious interference.[9]
          Phillips and EurEnergy
also assert that Huddleston’s damage models are too speculative to provide any
evidence of damages, citing City of
Harlingen v. Estate of Sharboneau, 48 S.W.3d 177 (Tex. 2001).  In Sharboneau,
the Texas Supreme Court determined that an expert’s testimony on the fair market
value of a piece of undeveloped real property was not competent.  Id.
at 185.  The court noted that the
expert’s methodology required “more than a dozen analytical steps, most involving
assumptions and estimates” and “fail[ed] to account for basic marketplace
realities,” including marketplace characteristics, “unexpected competition,”
political forces, “economic stagnation,” and “other risks.”   Id. at 184–85.  
          Although Huddleston’s
testimony could be viewed as somewhat conflicting, he did provide the jury with
two damage models to consider and an explanation of Dr. Crichlow’s data and estimates
of the value of the Bulgaria Project’s gas in the ground.  Again, Phillips himself, on August 23, 2004,
had offered to pay Carlton $8.5 million for a 10% interest in the Bulgaria
Project.  And, again, Crichlow, after consulting
with the principals of RRR and performing a detailed due diligence study of the
Bulgaria Project for Phillips, not only concluded that it was a “viable
international project” with a “[b]illion dollar profit potential,” but even
encouraged Phillips to obtain “[l]egal advice . . . regarding the supplanting
of the [Carlton] position with the Phillips Group under the same 48% interest
position [that would have been held by Carlton] in the CBM Project.”  He noted the Bulgaria Project’s geology,
resource base, economics, and regulatory requirements, which “greatly reduce[d] the investment risk
for this type of project.” And, he
based his calculation on the Bulgaria Project’s exploratory drilling,
“relatively shallow depth,” “excellent economics,” and “pipeline
availability.”  Huddleston also explained
that the $1 per MMBTU used by Crichlow was a reasonable price supported by his
reference to Institutional Investor
magazine.
          The bottom line is that it
was the jury’s job, as fact finder, after considering Huddleston’s testimony,
Crichlow’s report, and the other documentary evidence, to determine the fair
market value of Carlton’s interest in the Bulgaria Project at the time of Phillips
and EurEnergy’s tortious interference with the Carlton/CBM agreement.  In doing so, it, based upon Huddleston’s
testimony and Dr. Crichlow’s reports, could have reasonably concluded that one
way an investor in the marketplace could conservatively place a fair market value
on Carlton’s interest in the Bulgaria Project would be to seriously consider the
project’s estimated gas reserves in the ground and the recovery rate and value
of those gas reserves.  It was free to
place great weight upon Crichlow’s estimates and then discount them based on a
more conservative recoverability rate and other pertinent factors.  And the jury could have reasonably concluded,
based upon Huddleston’s testimony, Crichlow’s testimony, and the data and information
in Crichlow’s reports, as well as the documentary evidence, that economic and
marketplace factors were used in determining the approximate values of the
estimated gas reserves.   
          Viewing the evidence in
the light most favorable to the jury’s award, we conclude that the jury could
have reasonably found that the fair market value of Carlton’s interest in the
Bulgaria Project at the time that Phillips and EurEnergy tortiously interfered
with the CBM/Carlton agreement was at least $66.5 million.  We further conclude that the evidence that
supports the award is not so weak as to render the jury’s award clearly wrong
and manifestly unjust.  Accordingly, we
hold that the evidence is legally and factually sufficient to support the
actual damages awarded by the jury and the trial court erred in requiring a
remittitur of Carlton’s actual damages from $66.5 million to $31.16 million.  
          We sustain Carlton’s first
issue in its appeal, and we overrule Phillips
and EurEnergy’s first issue in their cross-appeal.
Breach of Contract
          Normally, having overruled Phillips
and EurEnergy’s second issue, we would not consider their fourth issue, in
which they argue that the evidence is legally and factually insufficient to
support the jury’s finding that Phillips breached the Carlton/Phillips
agreement because Carlton never accepted Phillips’s “counteroffer.”  Here, however, as noted above, Phillips and
EurEnergy have argued that Carlton may not recover actual damages totaling more
than a fair market value of a 5.4% interest in the Bulgaria Project because
Carlton did not present evidence that it could have fulfilled its funding
obligations to obtain a 38% interest in the project.  Thus, Phillip and EurEnergy’s actual-damages
issue is linked to its fourth issue, and we, therefore, address it.  Within their fourth issue, Phillips and
EurEnergy also assert that the trial court did not instruct the jury on the
proper elements of a breach-of-contract claim, and they also attack the jury’s
finding that Phillips’s failure to comply was not excused.
          Phillips agrees that he signed the
Carlton/Phillips agreement on August 23, 2004 with an addendum providing that
he be given a 30-day period to review technical information.  O’Dell testified that he, on behalf of
Carlton, signed the agreement with this addendum shortly thereafter.  It is undisputed that Phillips and Carlton
representatives met on September 7, 2004, and Carlton presented evidence that
at this meeting, and thereafter, Carlton shared technical and other information
with Phillips regarding the Bulgaria Project. 
Thus, sufficient evidence supports the jury’s findings that Carlton and
Philips formed an agreement and Carlton agreed to the terms of the Carlton/Phillips
agreement, including the addendum, before Carlton received Phillips’s December
3, 2004 letter attempting to withdraw from the Carlton/Phillips agreement.  
          Although Phillips and EurEnergy
complain that Carlton never returned to Phillips a fully executed copy of the
Carlton/Philips agreement, O’Dell testified that he did execute the agreement
shortly after receiving it from Phillips and, pursuant to ordinary procedures,
Carlton would have sent a return copy to Phillips.  Additionally, the jury’s implied finding that
the parties had engaged in conduct in furtherance of the Carlton/Phillips
agreement is supported by the evidence. 
Under these circumstances, there is no requirement for Carlton to have
returned a copy of the agreement in order for the jury to have found it to be
valid and enforceable.  See DeClaire v. G & B Mcintosh Family
Ltd. P’ship, 260 S.W.3d 34, 44 (Tex. App.—Houston [1st Dist.] 2008, no
pet.) (stating that “if one party signs, the other may accept by his acts,
conduct, or acquiescence in the terms of the contract”).  This evidence also supports the jury’s finding
that Phillips did not send his December 3, 2004 letter attempting to withdraw
from the Carlton/Phillips agreement in compliance with the addendum.  Again, as noted above, the jury was presented
with evidence that Carlton had furnished Phillips with technical information as
early as September and that Phillips, who was at the time otherwise occupied
pursuing a business deal directly with CBM, did not attempt to withdraw from
the Carlton/Phillips agreement until several months later.  
          In regard to the jury’s finding that
Phillips failed to comply with the agreement, Carlton, as noted above,
presented evidence that it, in satisfaction of the terms of the addendum,
furnished Phillips, and had arranged to be further furnished to Phillips,
technical and other information for his due diligence.  The addendum provided that Phillips would use
this information to investigate participation in the Bulgaria Project and, if
Phillips was not satisfied, he could withdraw from the Carlton/Phillips
agreement.  Carlton presented evidence
that, contrary to the contractual term allowing Phillips to use this
information for reviewing the Carlton/Phillips agreement, Phillips used this
information as part of his plan to form a separate entity, supplant Carlton in
the Bulgaria Project, and contract directly with CBM, all unbeknownst to
Carlton.   Simply put, the jury could
have reasonably disbelieved Phillips’s December 3, 2004 stated reasons for not
going “forward” with the Carlton/Phillips agreement.  And, it is undisputed that Phillips never
paid Carlton the $8.5 million required by the Carlton/Phillips agreement.[10]  Viewing the evidence in the light most
favorable to the jury’s finding, we conclude that the jury could have
reasonably found that Phillips failed to comply with the Carlton/Phillips
agreement.  We further conclude that the
evidence supporting the finding is not so weak as to render the jury’s finding
clearly wrong and manifestly unjust.
          In regard to their charge complaint,
Phillips and EurEnergy assert that the trial court should have instructed the
jury that “(1) there is no agreement unless the party to whom an offer or
counteroffer is made accepts it before knowing the offer or counteroffer has
been withdrawn; and (2) a binding contract is formed when the contract is
delivered to the appropriate party, which occurs when the delivering party
parts with possession or custody of an instrument with the intent that it
become operative.”  Phillips and
EurEnergy argue that the jury could not have been fully apprised of the
significance of Carlton’s failure to produce evidence that an executed copy of
the Carlton/Phillips agreement was ever delivered to Phillips.  We review a trial court’s decision to refuse
an instruction in its charge for an abuse of discretion.  Dew v.
Crown Derrick Erectors, Inc., 208 S.W.3d 448, 456 (Tex. 2006).  Although Phillips and EurEnergy argue that their
proposed instruction would have been “necessary” because the issue was “hotly
contested,” they have not cited any authority requiring such an instruction.  Even if such an instruction were proper,
Phillips and EurEnergy disregard the ample evidence that the parties conducted
themselves in accordance with the Carlton/Phillips agreement after Phillips
executed it and O’Dell, on behalf of Carlton, executed it shortly after
Phillips did so in August 2004.  Accordingly,
we hold that the trial court did not abuse its discretion in not instructing
the jury as requested by Phillips and EurEnergy.  
Finally, Phillips and
EurEnergy challenge the jury’s finding that Phillips’s failure to comply with
the Carlton/Phillips agreement was not excused, asserting that Carlton first
failed to comply with a material obligation, Carlton waived compliance, and
Carlton fraudulently induced Phillips’s non-compliance.  Phillips and EurEnergy’s material-obligation
challenge arises from their contention that Carlton promised Phillips a 10%
“working interest” in the Bulgaria Project, despite the fact that “Carlton did
not own, and never could own, a working interest” because the Bulgaria/CBM
concession provided that Bulgaria retained ownership of minerals.  However, as Carlton notes, this term was not
defined in the Carlton/Phillips agreement. 
O’Dell also testified that this term was “not used in a legal sense but
in a nondefined generic sense,” and he explained that Phillips never raised
this objection, even in his December 3, 2004 withdrawal letter.   Thus, this evidence contradicts Phillips and
EurEnergy’s argument that Phillips was fraudulently induced into entering the
Carlton/Phillips agreement because he did not understand the term “working
interest,” as it was used in the governing documents.    Similarly,
Carlton also presented evidence that it did not commit a material breach by not
setting up a joint venture, as required in the Carlton/Phillips agreement, and not
closing within 30 days.  Phillips did not
express any concern about these matters in his December 3, 2004 letter, and
Carlton presented evidence that it was waiting on action by Phillips before it
could accomplish these tasks.  And, of
course, the jury heard evidence that during this period, between August and
December 2004, Phillips was actively working to set up his own deal directly
with CBM.  From this evidence, the jury could
have reasonably found that Phillips’s breach was not excused.
Accordingly, we hold
that the evidence is legally and factually sufficient to support the jury’s
breach-of contract findings and the trial court did not abuse its discretion in
not instructing the jury as requested by Phillips and EurEnergy.
We overrule Phillips
and EurEnergy’s fourth issue.
Exemplary
Damages
          In their third issue, Phillips and
EurEnergy argue that the evidence is legally and factually insufficient to
support the jury’s awards of exemplary damages because there is no evidence to
support the actual damages award nor any evidence that Phillips and EurEnergy
acted “with intent to harm Carlton or that Carlton suffered economic harm.”  Phillips and EurEnergy also assert that the
jury’s exemplary damages awards are excessive and violate the Due Process
Clause of the Fourteenth Amendment.[11]  Phillips and EurEnergy further argue that the
exemplary damages awards are excessive because the trial court refused to
reduce or remit the awards “after remitting more than half the actual damages”
and, “even under the most generous view,” the evidence supports only actual
damages of $4,428,000.[12]
          As detailed above, Carlton presented
substantial evidence that Phillips and EurEnergy knew that Carlton had an
“exclusive” agreement with CBM, had acquired an interest in the Bulgaria
Project, and had a contractual right to fund the second tranche under the
CBM/Carlton agreement.  Phillips had also
entered into the Carlton/Phillips agreement to provide Carlton with $8.5
million for it to fulfill its funding obligation under the CBM/Carlton
agreement.  Carlton also presented
substantial evidence that Phillips and EurEnergy acted with malice, i.e., a
specific intent to cause substantial injury or harm to Carlton, by seeking to,
without Carlton’s knowledge, “supplant” Carlton’s position in the Bulgaria
Project.   Although Phillips and
EurEnergy presented conflicting evidence that Phillips did not believe that he
had an enforceable contact with Carlton as well as evidence that he sought a
new deal with CBM for business reasons rather than any specific intent to cause
Carlton harm, the jury was free to disbelieve Phillips’s testimony and other
contradictory evidence.  Accordingly, we
hold that the exemplary damage awards against Phillips and EurEnergy are
supported by clear and convincing evidence. 
See Qwest Int’l Commc’ns, Inc. v. AT
& T Corp., 167 S.W.3d 324, 326 (Tex. 2005) (“As
clear and convincing evidence was required, we review all the evidence in the light
most favorable to the jury’s finding, taking into account contrary undisputed
facts, to determine whether reasonable jurors could have formed a firm belief
or conviction regarding malice.”); see
also In re J.F.C., 96 S.W.3d 256, 264, 266–67 (Tex. 2002).
          In regard to the due process
challenge, an assessment of grossly excessive exemplary damages violates a
party’s substantive due process rights because it “furthers no legitimate
purpose and constitutes an arbitrary deprivation of property.”   Bennett
v. Reynolds, 315 S.W.3d 867, 873 (Tex. 2010); see also U.S. Const.
amend. XIV, § 1 (“nor shall any State deprive any person of life, liberty, or
property, without due process of law”). 
In reviewing whether the exemplary damages award is unconstitutionally
excessive, we consider three guideposts adopted by the United States Supreme
Court: (1) the degree of reprehensibility of the defendant’s misconduct; (2)
the disparity between actual and exemplary damages; and (3) a comparison of the
exemplary damages awarded and other civil or criminal penalties that could be
imposed for similar misconduct.  BMW of N. Am., Inc. v. Gore, 517 U.S.
559, 574–75, 116 S. Ct. 1589 (1996); Tony
Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 308 (Tex. 2006).  
          The first guidepost, the degree of
reprehensibility of the defendant’s misconduct, is the most important.  Gore,
517 U.S. at 575, 116 S. Ct. 1599.  In
determining the degree of reprehensibility, we should consider whether the harm
was physical as opposed to economic; whether the conduct constituted an
indifference to or a reckless disregard of the health or safety of others;
whether the target of the conduct was financially vulnerable; whether the
conduct involved repeated actions or was an isolated incident; and whether the
harm was the result of intentional malice, trickery, deceit, or mere
accident.  State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419, 123
S. Ct. 1513, 1521 (2003); Gore, 517
U.S. at 576, 116 S. Ct. at 1599.  The
presence of any one of these factors may still not be enough to support an
award of exemplary damages, and the absence of all of these factors renders the
award suspect.  Campbell, 538 U.S. at 419, 123 S. Ct. at 1521 (citing Gore, 517 U.S. at 576–77, 116 S. Ct. at
1599)).
          Here, in regard to the third
guidepost, there is nothing in the record regarding other civil or criminal
penalties that could have been imposed against either Phillips or EurEnergy for
similar misconduct.  In regard to
reprehensibility, the harm to Carlton was economic, the conduct did not involve
an indifference to or a reckless disregard for the health or safety of others,
Carlton was not a financially vulnerable plaintiff, and there is no evidence of
repeated actions.  However, the evidence amply
supports the jury’s finding that the economic harm to Carlton was the result of
intentional malice and deceit.  Again, as
detailed above, the jury was presented with substantial evidence that would have
permitted it to reasonably find, by clear and convincing evidence, that
Phillips had engaged in a high level of deceit with his purported business
partner, Carlton, in an effort to usurp Carlton’s opportunities associated with
the Bulgaria Project.  See Pitts & Collard, L.L.P. v. Schechter,
No. 01-08-00969-CV, 2011 WL 6938515, at *24 (Tex. App.—Houston [1st Dist.] Dec.
29, 2011, no pet. h.) (holding that evidence was legally and factually
sufficient to support award of exemplary damages). This evidence demonstrated
that Phillips and CBM even anticipated litigation resulting from their
conduct.  In fact, CBM’s lawyer expressly
raised the prospect that the parties were actually tortiously interfering with
the CBM/Carlton agreement.  And the
evidence supports the conclusion that Phillips intentionally engaged in a
secret plan to deprive Carlton of its contractual interest in hopes of
benefitting himself and other Phillips-related entities. 
          In regard to the second guidepost, the
separate exemplary damages awards of $8.5 million against Phillips and $8.5
million against EurEnergy constitute approximately one-eighth of the $66.5
million of actual damages awarded to Carlton by the jury.  See
Huynh v. Phung, No. 01-04-00267-CV, 2007 WL 495023, at *13 (Tex.
App.—Houston [1st Dist.] Feb. 16, 2007, no pet.) (mem. op.) (stating that
“[b]ecause exemplary damages are awarded on an individual basis and require
separate jury findings as to each defendant, the proper method for reviewing
the constitutionality of exemplary damages is to compare the exemplary damages
awarded against each individual with the compensatory damages awarded against
that individual”).   The gist of Phillips and EurEnergy’s argument
is that “[w]hile the disparity between the actual and punitive damages awards
may not be unreasonable on its face, the fact that Carlton actually suffered no
harm—given the failure of the project—suggests the award is excessive.”  However, it does not matter that the project
ultimately did not succeed.  The fact remains
that Carlton had a significant interest in the Bulgaria Project at the time that
Phillips and EurEnergy tortiously interfered with the CBM/Carlton agreement,
and Carlton’s interest had a market value. 
Thus, comparing the amount of exemplary damages awarded against Phillips
and EurEnergy separately to the amount of actual damages awarded against them
jointly and severally, the ratio of actual to exemplary damages, although not
controlling, suggests that the damages are not excessive.  See
Campbell, 538 U.S. at 425, 123 S. Ct. at 1524 (indicating that “few awards
exceeding a single-digit ratio between punitive and compensatory damages” will
satisfy due process).  
          After considering the pertinent guideposts,
we hold that the exemplary damage awards against Phillips and EurEnergy are not
constitutionally excessive and do not violate substantive due process rights.  See U.S. Const.
amend. XIV.  Finally, having held
that the trial court erred in ordering a remittitur of Carlton’s damages, we
conclude that Phillips and EurEnergy’s complaint that the trial court erred in not
reducing or remitting the exemplary damages “after remitting more than half the
actual damages” is without merit.  
          We overrule Phillips and EurEnergy’s third
issue.        
Alter Ego Finding Against EurEnergy
          In
their sixth issue, Phillips and EurEnergy argue that the evidence is legally
and factually insufficient to support the jury’s finding that EurEnergy is
Phillips’s alter ego because the “sum total of evidence shows no more than that
Phillips is an indirect minority shareholder of EurEnergy” in that he “owns
100% of Syntek West, Inc, which in turn owns Envicon, which in turn owns 20% of
EurEnergy.”  Within this issue, Phillips
and EurEnergy assert that the trial court improperly submitted the matter to
the jury and, under Nevada law, which they contend applies, the matter should
have been decided by the trial court.
          First, even if Nevada substantive law
applied to this issue, matters of remedy and procedure are nonetheless governed
by the law of the forum state.  In re Wells
Fargo
Bank Minn. NA., 115 S.W.3d 600, 605 n.7 (Tex.
App.—Houston [14th Dist.] 2003, orig. proceeding [mand. denied]).  “In particular, whether a party is entitled
to a jury trial on a particular claim is typically a procedural issue governed
by the law of the forum.”  Id. (citing Restatement (Second) of Conflict of Laws § 129 (1969)).  Accordingly, we hold that the trial court did
not err in submitting the issue to the jury.
          Second, setting aside the parties’
disputes about which substantive law applies, we assess legal sufficiency of the evidence according to the trial
court’s charge.  Osterberg, 12 S.W.3d at 55.  
The trial court asked the jury to determine whether Phillips was “responsible
for the conduct of EurEnergy,” instructing the jury that Phillips was
responsible if EurEnergy “was organized as a mere tool or business conduit” of
Phillips and “there was such unity between” EurEnergy and Phillips that “the
separateness” of EurEnergy “ceased and holding only [EurEnergy] responsible
would result in injustice.”  The trial
court further instructed the jury that it should consider the degree to which
EurEnergy’s property had been kept separate from Phillips, the amount of
financial interest, ownership, and control Phillips maintained over EurEnergy,
and whether EurEnergy had been used for the personal purposes of Phillips.
          Finally, the alter ego
arguments made in the trial court were substantial, as was the evidence
presented by Carlton in its effort to obtain an affirmative finding on this
question.  Yet, Phillips and EurEnergy’s
appellate challenge to this finding is simply that the “sum
total of evidence” did not support the jury’s affirmative finding.  In this sufficiency challenge, Phillips and
EurEnergy provide one citation to the record, which refers to five pages from
one volume of the reporter’s record in a record that contains over forty
volumes, 2000 pages of live testimony, and hundreds of exhibits.  Accordingly, we conclude that Phillips and
EurEnergy have waived this challenge for our review.  See
Tex. R. App. P. 38.1(h).
          We overrule Phillips and EurEnergy’s
sixth issue.
Admission
of Evidence Regarding Philips-Related Entities
          In
their seventh issue, Phillips and EurEnergy argue that because the trial court
erred in admitting “voluminous,” “irrelevant,” and “harmful and prejudicial”
evidence about Phillips-related companies, we must remand this case for a new
trial.  Phillips and EurEnergy note that the
trial court granted directed verdicts or a judgment notwithstanding the verdict
in favor of seven Phillips-related entities. 
They assert that, after the admission of the evidence, “it was too late
to remove the taint caused by the jury’s exposure to the irrelevant evidence”
pertaining to these seven companies.  
          However, Phillips and EurEnergy never
sought a limiting instruction regarding the evidence.  Having failed to do that, Phillips and
EurEnergy cannot complain on appeal about any harm allegedly caused by the
introduction of evidence related to these seven entities.  See
Tex. R. Evid. 105(a).  Additionally, we have reviewed the entire
record, and although we cannot say that the evidence pertaining to these
Phillips-related entities was trivial, we also cannot say that it was a
substantial part of Carlton’s case.  When
compared to the remaining portions of this substantial record, we cannot say
that this evidence influenced the jury to the extent that it probably caused
the rendition of an improper judgment.  See Tex.
R. App.  P. 44.1(a).
          We overrule Phillips and EurEnergy’s
seventh issue.
Alter Ego Findings Against Syntek and CabelTel
          In its second issue, Carlton argues
that the trial court erred in setting aside the jury’s alter ego findings
against Syntek and CabelTel because legally-sufficient evidence established
that Syntek and CabelTel were alter egos of EurEnergy.
          Consistent with our holding above, we
conclude that the trial court did not err in submitting this matter to the
jury.  See In re Wells Fargo Bank
Minn. NA., 115 S.W.3d at 605 n.7. 
Moreover, neither party objected to the pertinent jury question, which
required the jury to make findings of alter ego in accord with Nevada law.  We, therefore, evaluate the legal sufficiency of the evidence according
to the trial court’s charge.  Osterberg, 12 S.W.3d at 55.
          In accord with Nevada law,
and without objection, the trial court instructed the jury that CabelTel and
Syntek could be found to be the alter egos of EurEnergy if EurEnergy was
“influenced and governed by” CabelTel and Syntek, there was “such unity of
interest and ownership that” EurEnergy was “inseparable” from and CabelTel and
Syntek, and “[a]dherence to the corporate fiction” of CabelTel and Syntek “would
sanction fraud or promote a manifest injustice.”  The jury found that both CabelTel and Syntek
were the alter egos of EurEnergy, but the trial court granted a judgment
notwithstanding the verdict on these findings. 
Accordingly, in its final judgment, the trial court did not grant
Carlton any relief against CabelTel and Sytnek.
CabelTel
          In support of its argument
that EurEnergy was governed and influenced by CabelTel, Carlton cites the
testimony of Dave Morgan, a consultant for CabelTel, who was appointed as EurEnergy’s
managing director.  Morgan testified that
he was employed by CabelTel when he, Phillips, and other Phillips
representatives met with Carlton representatives to discuss the Bulgaria
Project.  Morgan explained that he was
told that “we’re going to do this deal through EurEnergy” and he was “going to
be a part of that company.”  He “was
asked to sit in on” the deal “because [he] was the only one . . . that
understood oil and gas” in the Phillips group. 
Morgan’s “consulting fees” were paid by CabelTel, or a Phillips-associated
payroll company, and he stated that he never received a paycheck from
EurEnergy.  He believed that there was
“no distinction” to be made when he was preparing memos and using CabelTel or
EurEnergy letterhead.  When asked about
the identity of a president of EurEnergy, Morgan, who was its managing
director, stated that he did not know “the corporate organization” of EurEnergy.  And, during the fall of 2004, he worked in
the CabelTel offices.  Morgan noted that
EurEnergy had four or five employees, and it used the address next door to
CabelTel for its offices.  Morgan also noted
that EurEnergy retained its files at CabelTel pursuant to a contract with
EurEnergy and CabelTel “does the management of all the records and payment of
all the bills” for EurEnergy.  Morgan
explained that Gene Bertcher at CabelTel, who was located “across the hall,” wrote
the checks for EurEnergy.  
          In support of its argument
that CabelTel and EurEnergy were inseparable and there was a unity of interest
and ownership between the two, Carlton again notes the evidence indicating that
both companies shared an address and Morgan, EurEnergy’s managing director, was
paid as a CabelTel employee.  Carlton
also emphasizes Phillips’s testimony, which indicates that he did not observe
corporate formalities in the companies in which he was involved.  
          Finally, in support of its
argument that adherence to the corporate fiction of CabelTel and EurEnergy as
separate entities would sanction fraud or promote manifest injustice, Carlton
cites the evidence that, when preparing to supplant it in the CBM/Carlton
agreement, Phillips elected to use a dormant real estate investment company and
changed its name to EurEnergy.  Carlton
notes that the initial president of EurEnergy admitted that he had no knowledge
about EurEnergy’s business activities or financial positions.  Additionally, EurEnergy was formed without
any offices, was capitalized for only $1,000, and needed “help from someone
else” to engage in the multi-million dollar transaction with CBM.  Moreover, EurEnergy provided CBM with
indemnity obligations in regard to the potential dispute with Carlton, and the
jury was presented with evidence that EurEnergy was not adequately capitalized
to meet those obligations.  
          Viewing the evidence in
the light most favorable to the jury’s finding, we conclude that that the jury
could have reasonably found that CabelTel was an alter ego of EurEnergy.  Accordingly, we hold that the evidence is
legally sufficient to support the jury’s alter ego findings against CabelTel
and the trial court erred in granting a judgment notwithstanding the verdict in
favor of CabelTel.  
Syntek  
          In support of its argument
that EurEnergy was governed and influenced by Syntek, Carlton notes that the
evidence reveals that Phillips owned 100% of Syntek and served as its
president, chief executive officer, and chairman of the board.  As the sole owner, Phillips agreed that he
had the power to control the officers and directors of Syntek.  When Phillips met with Thomas O’Dell of
Carlton Energy regarding the Bulgaria Project, Phillips provided him with a
Syntek business card.  Documents
pertaining to the deal between the Phillips Group and CBM were signed and
approved by Ken Joines, the general manager of Syntek, but Joines actually
signed it on behalf of EurEnergy, not Syntek. 
Joines also provided a Syntek e-mail address in correspondence regarding
the CBM/EurEnergy JDA.  When litigation
ensued between EurEnergy and CBM, Phillips was appointed by Syntek to represent
EurEnergy at mediation.  Carlton also presented
evidence that Phillips, the sole owner, president, chief executive officer, and
chairman of the board of Syntek, was the primary decision maker in EurEnergy.  
          In support of its argument
that Syntek and EurEnergy became inseparable and there was a unity of interest
and ownership between the two, Carlton cites evidence that Syntek and EurEnergy
shared offices and Syntek’s general manager, Neil Crouch, was also the sole
officer and director of EurEnergy. Additionally, Carlton presented evidence
that Syntek employees referred to Syntek and EurEnergy interchangeably.  For example, Joines approved the CBM/EurEnergy
JDA on behalf of EurEnergy.  But, in
doing so, Joines used a Syntek e-mail address. 
The CBM/EurEnergy JDA also provided that, if a notice was to be sent to
EurEnergy, it should be sent to Sytnek, rather than EurEnergy.  Additionally, the contract that EurEnergy
entered into for drilling the first well in Bulgaria pursuant to the
CBM/EurEnergy JDA identified the operator of the well as Syntek, not
EurEnergy.  Morgan claimed that this was
an error, but he agreed that this “error” had never been corrected.  John Hughett, EurEnergy’s operations manager
in Bulgaria, signed a Master Service Agreement as operations manager on behalf
of Syntek, not EurEnergy, and he stated that he was authorized to do so by
Joines.  In an e-mail to a Bulgarian company
associated with the CBM/EurEnergy JDA, Hughett stated that “EurEnergy/Syntek[]”
would assume any costs and rental rates incurred as a result of actions taken
by Bulgarian Customs.
          Finally, in support of its
argument that adherence to the corporate fiction of Syntek and EurEnergy as
separate entities would sanction fraud or promote manifest injustice, Carlton again
emphasizes that EurEnergy was formed with no separate offices or employees, nominal
capital, and a nominal president.  
Moreover, Carlton notes that Syntek’s general manager signed the CBM/EurEnergy
JDA on behalf of EurEnergy; EurEnergy’s president, secretary/treasurer, and
sole director is the general manager of Syntek; Syntek’s sole owner, president,
and CEO is the ultimate decision-maker at EurEnergy; and  the name of Syntek and EurEnergy have been
used interchangeably in contracts and communications with  multiple parties. 
          Viewing the evidence in
the light most favorable to the jury’s findings, we hold that the jury could
have reasonably found that Syntek was an alter ego of EurEnergy.  Accordingly, we hold that the evidence is legally
sufficient to support the jury’s alter ego findings against Syntek and the trial
court erred in granting a judgment notwithstanding the verdict in favor of
Syntek.
          We sustain Carlton’s
second issue.
 
 
Joint and Several Liability for Exemplary Damages
          In its third issue, Carlton argues
that the trial court erred in not rendering judgment that Phillips is jointly
and severally liable for the exemplary damages awarded against EurEnergy
because the jury found Phillips responsible for the conduct of EurEnergy.
          “In any action in which there are two
or more defendants, an award of exemplary damages must be specific as to a
defendant, and each defendant is liable only for that amount of the award made
against that defendant.”   Tex. Civ. Prac. & Rem. Code Ann. §
41.006 (Vernon Supp. 2010).  Although
Carlton argues that this section does not “categorically ban joint and several
liability for exemplary damages,” it cites to no authority suggesting that an
alter ego finding can trump the plain language of section 41.006.  However, even if such a finding might in some
circumstances permit joint and several liability for exemplary damages, section
41.003 provides that “[e]xemplary damages may be awarded only if the jury was
unanimous in regard to finding liability for and the amount of exemplary
damages.”  Id. § 41.003(d); see also
Tex. R. Civ. P. 292(b) (“A
verdict may be rendered awarding exemplary damages only if the jury was
unanimous in finding liability for and the amount of exemplary damages.”).  Here, under the structure of the charge, the
jury was permitted to make a non-unanimous alter-ego finding.  Accordingly, we hold that the trial court did
not err in not rendering a judgment making Phillips jointly and severally
liable for the exemplary damages awarded against EurEnergy. 
          We overrule Carlton’s third issue.[13]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conclusion
          We reverse the portion of the trial
court’s judgment ordering that Carlton recover only $31,160,000 in actual
damages from Phillips and EurEnergy, jointly and severally, and we render
judgment that Carlton recover $66,500,000 in actual damages from Phillips and
EurEnergy, jointly and severally.  We
reverse the trial court’s take-nothing judgment entered in favor of Syntek and
CabelTel, and we render judgment that Syntek and CabelTel are jointly and
severally liable for the $66,500,000 in actual damages awarded to Carlton from
EurEnergy.  We affirm the remaining
portions of the trial court’s judgment.
 
 
 
                                                                   Terry
Jennings
                                                                   Justice

 
Panel
consists of Justices Jennings, Higley, and Sharp.
 




[1]           Carlton
accepted the trial court’s suggested remittitur subject to its right to
appeal.  See Tex. R. App. P.
46.2 (providing that party who remits judgment at trial court’s suggestion may
complain about remittitur on appeal if party benefiting from remittitur appeals
and remitting party independently perfects appeal).  


[2]           Tranche
is defined as “a portion of something, esp. money: they released the first tranche
of the loan.”  David Bach, 1001 Financial Words You Need to Know
202 (Oxford University Press 2003).  


[3]              See
Tex. R. App. P. 46.2.
 


[4]           Having
held that the evidence is legally and factually sufficient
to support the jury’s findings on Carlton’s tortious-interference claim, we
need not consider Phillips and EurEnergy’s fifth issue, in which they contend
that the evidence is legally and factually insufficient to support the trial
court’s finding that Carlton would have been entitled to attorney’s fees on its
breach-of-contract claim.  Although the
trial court made such a finding, it did not award Carlton its attorney’s fees
because it entered judgment on Carlton’s tortious-interference claim and
awarded Carlton actual and exemplary damages on that claim.
 


[5]              See, e.g.,
Dupont Emps. Recreation Ass’n v. A.V.A. Servs., Inc., No. 01-04-00053-CV, 2005 WL 1118043, at *4 (Tex.
App.—Houston [1st Dist.] May 12, 2005, no pet.). On
appeal, neither party complains about the damages question or associated
instructions and definitions.     


[6]           Phillips
and EurEnergy argue that Huddleston, and the jury, were not entitled to
consider the value expressed in the Carlton/Phillips
agreement because the agreement was ultimately never consummated. However, the
fact that a contract is unconsummated does not necessarily deprive that
contract of evidentiary value when determining the fair market value of the
interest at issue. See Nelson v. Najm,
127 S.W.3d 170, 177 (Tex. App.—Houston [1st Dist.] 2003, pet. denied); Moore v. Bank Midwest, N.A., 39 S.W.3d
395, 400 (Tex. App.—Houston [1st Dist.] 2001, pet. denied); State v. Clevenger, 384 S.W.2d 207,
209–10 (Tex. Civ. App.—1964, writ ref’d n.r.e.); Robards v. State, 285 S.W.2d 247, 249 (Tex. Civ. App.—Austin 1955,
writ ref’d n.r.e.).  Moreover, the jury
found that Phillips failed to comply with the Carlton/Phillips agreement. 
 
Phillips and EurEnergy also argue that the
Carlton/Phillips agreement should not have been used by Huddleston because,
when Phillips signed the letter agreement with Carlton, he “did not have
knowledge of all the facts,” including the technical information that he
referenced in his addendum.  However, the
evidence supports an implied finding that Phillips contracted with Carlton and
did not timely withdraw after he had obtained more information on the Bulgaria
Project.  Indeed, as outlined above,
Carlton presented evidence that Phillips, during this time frame, had obtained
the services of Dr. Crichlow, had been in direct contact with CBM, and was
working to reach an agreement with CBM and exclude Carlton from the Bulgaria
Project.
 


[7]           Phillips
and EurEnergy cite conflicting evidence as to whether Dr. Crichlow actually worked
for Phillips at any time throughout the parties’ dealings, but the jury was
free to resolve any conflicts and conclude that he, at some point, was acting
for Phillips.  Indeed, Crichlow, in his
October 11, 2004 “interim due diligence report” prepared “for Mr. Gene Phillips
et al,” recommended to Phillips that a Phillips entity “supplant” Carlton in
the Bulgaria Project. 
 
Phillips and EurEnergy also assert that Dr. Crichlow’s
initial June 2004 report was nothing more than a “sales pitch” prepared for
D.W. Mitchell and not Phillips.  To the
extent there is evidence to suggest that Crichlow prepared his first report for
the purpose of meeting with other possible investors, this fact could have been
considered by the jury in weighing the evidence.  Moreover, we note that Crichlow consistently
testified that he knew that potential investors would be relying upon the
information he prepared, in his capacity as a professional engineer, for
decision-making purposes.
  


[8]              Carlton asserts that the jury, using Dr. Crichlow’s
value of a 1% interest, not a 100% interest, in the Bulgaria Coalbed Methane
Project’s gas in the ground, may have based its fair market valuation of Carlton’s
38% interest on the following formula: 
 
Dr. Crichlow put the amount of gas at 350 billion
cubic feet (BCF).  He put its
recoverability at 90%.  The jury
conservatively discounted Dr. Crichlow’s 90% to 50%.  This cut the 350 BCF of gas in half, to 175
BCF in recoverable gas.  Carlton’s 38%
share of that 175 BCF is 66.5 BCF.  That
calculation provides a damages finding of $66.5 million, using the standard
conversion factor of 1 million MMBTU (million British Thermal Units) per BCF
and a price of $1 per MMBTU.  Thus, the
jury’s finding flows directly from the reports by Phillips’s hand picked
engineering professor and “world renowned expert [Dr. Crichlow].”  And under his evidence, the jury award
actually could have been much higher.


[9]           Phillips
and EurEnergy also argue that Carlton could not seek to recover the market
value of its interest because the Bulgaria Project was ultimately a
failure.  However, this is precisely why
Carlton sought to recover damages measured by the fair market value of its interest
at the time that Carlton was deprived of it rather than on any future lost
profits. 
 
Phillips and EurEnergy also complain that Carlton
failed to present evidence of any other willing buyers in the market.  This complaint ignores the fact that Phillips
himself was such a willing buyer.  The
necessary implication of Huddleston’s testimony is that Carlton’s interest in
the Bulgaria Project had a market value that was subject to calculation based
upon various factors, which he left to the jury to weigh and ultimately
determine.          


[10]            Phillips and EurEnergy emphasize conflicting
correspondence from Carlton indicating that Carlton was unsure of whether
Phillips intended to participate in the Bulgaria Project pursuant to the
Carlton/Phillips agreement as well as Phillips’s December 3, 2004 withdrawal
letter, to which Carlton did not object until much later.  The jury was presented with this evidence,
and, to the extent that it is conflicting, the jury was free to resolve those
conflicts against Phillips. 
Additionally, the jury’s findings are supported by the evidence that
Carlton, pursuant to the Carlton/Phillips agreement, provided Phillips with
technical and other information and Phillips breached the Carlton/Phillips
agreement by using this information beyond the terms stated in the addendum.


[11]         See U.S.
Const. amend. XIV.
 


[12]         The jury
was asked to determine, by clear and convincing evidence, whether the harm to
Carlton resulted from malice.  The trial
court instructed the jury that malice “means a specific intent to cause
substantial injury or harm” to Carlton.


[13]         We note
that Carlton, in the prayer of its brief, also asks that we render a judgment providing
that CabelTel and Syntek are jointly and severally liable for the exemplary
damages imposed against EurEnergy.  For
the same reasons we articulate above, we decline Carlton’s request to impose
against CabelTel and Syntek joint and
several liability for the exemplary damages awarded against EurEnergy.


