                                    COURT OF APPEALS
                                 EIGHTH DISTRICT OF TEXAS
                                      EL PASO, TEXAS
 M&A TECHNOLOGY, INC.,                            §
                                                                  No. 08-08-00022-CV
                   Appellant,                     §
                                                                     Appeal from the
 v.                                               §
                                                                   44th District Court
 IVALUE GROUP, INC., A/K/A                        §
 EXPLORE, INC. AND JULIAN ROSS,                                  of Dallas County, Texas
                                                  §
                   Appellees.                                       (TC#02-09794-B)
                                                  §

             OPINION ON MOTION FOR REHEARING AND REMITTITUR

       After this Court reversed the trial court’s judgment and remanded for a new trial, IVG filed

a motion for rehearing and voluntary remittitur, asking that we accept the remittitur and affirm the

judgment as reduced, and that we sever M&A’s claims against Ross. We reject IVG’s voluntary

remittitur and deny its motion for rehearing.

                                             Remittitur

       The Texas Rules of Appellate Procedure provide that if an appellate court reverses a

judgment because of a legal error that affected only part of the damages awarded, the affected party

may voluntarily remit the amount believed to cure the error. TEX . R. APP . P. 46.5. If the voluntary

remittitur is sufficient to cure the error, the appellate court must accept it and affirm the judgment

as reformed. Id. However, if the voluntary remittitur is not sufficient, but the court determines that

remittitur is appropriate, the court must suggest a proper remittitur. Id.

        IVG requested to voluntarily remit $800,000, believing that amount will cure the reversible

error in this case. IVG bases the $800,000 on language in this Court’s opinion that Ratliff’s

testimony supported a jury award of $2.2 million in actual damages, not $3 million. See M&A Tech.,
Inc. v. iValue Group, Inc., No. 08-08-00022-CV, — S.W.3d —, 2009 WL 2456289, at *8-9 (Tex.

App.–El Paso Aug. 12, 2009, no pet. h.) (not yet reported). This Court never held that the evidence

was legally and factually sufficient to sustain a jury award of $2.2 million. Id. Rather, we found it

unnecessary to address M&A’s argument that the cost method employed by Ratliff, which failed to

rely on economic obsolescence, was error when Ratliff’s testimony, at most, would only appear to

support a jury award of $2.2 million. Id. Because we never determined that the evidence was

actually sufficient to support an award of $2.2 million, we find IVG’s remittitur of $800,000

insufficient to cure the error.

        Nevertheless, if we determine that remittitur is appropriate, we must suggest a proper

remittitur. TEX . R. APP . P. 46.5. In this case, Ratliff’s cost-method reasoning is flawed; therefore,

the evidence is insufficient to support an award on any amount and remittitur is not appropriate. See

Merrell Dow Pharmaceuticals, Inc. v. Havner, 953 S.W.2d 706, 712-14 (Tex. 1997) (unreliable

scientific expert testimony is legally no evidence); Plunkett v. Connecticut General Life Ins. Co., 285

S.W.3d 106, 116 (Tex. App.–Dallas 2009, pet. filed) (inferences and opinions drawn either from

unreliable foundational data or flawed methodology and reasoning are unreliable and legally no

evidence).

                                  Analysis of Cost-Method Approach

        Part of the cost-method approach requires consideration of whether the earnings of the

business “are capable of providing a reasonable rate of return on all the property devoted to the

enterprise.” See Gordon V. Smith & Russell L. Parr, Valuation of Intellectual Property and

Intangible Assets 206 (3rd ed. 2000). Although Ratliff valued the e-commerce platform at $1.8

million and the hardware and software component at $.4 million, his estimation of future revenue

was purely speculative. See M&A, 2009 WL 2456289, at *8. We also note that Ratliff’s valuation
was based on estimates he collected from website costs and the costs incurred by profitable

companies with developing similar technology. But as we noted in our opinion, IVG was a small

unproven entity and did not compare to large, profitable companies. See M&A, 2009 WL 2456289,

at *9. Thus, there is no way to determine whether IVG’s future earnings were capable of providing

a reasonable return on its historical cost, i.e., the cost to rebuild the e-commerce platform and the

hardware and software component. In other words, Ratliff’s opinion was based on flawed

methodology and reasoning, and therefore, was no evidence of actual damages under the cost-

method approach. See Havner, 953 S.W.2d at 712-14; Plunkett, 285 S.W.3d at 116.

       Accordingly, without any evidence of actual damages, remittitur will not cure the reversible

error in this case. See TEX . R. APP . P. 46.5. We reject IVG’s request for voluntary remittitur.

                                             Severance

       IVG also asks that we sever M&A’s claims against Ross and only remand for a partial new

trial. IVG’s request is predicated on our acceptance of the remittitur. See TEX . R. APP . P. 46.5

(when the voluntary remittitur is sufficient to cure the error, the appellate court must accept it and

affirm the judgment as reformed). Because we hold that remittitur is inappropriate, we decline to

sever M&A’s claims against Ross and remand for a partial trial solely involving Ross’ claims.

IVG’s motion for rehearing is denied.



                                               GUADALUPE RIVERA, Justice

September 30, 2009

Before Chew, C.J., McClure, and Rivera, JJ.
