                                                                                                    ACCEPTED
                                                                                                03-15-00025-CV
                                                                                                        7017794
                                                                                     THIRD COURT OF APPEALS
                                                                                                AUSTIN, TEXAS
                                                                                           9/21/2015 2:41:41 PM
                                                                                              JEFFREY D. KYLE
                                                                                                         CLERK
                                   No. 03-15-00025-CV

                               Texas Court of Appeals                       FILED IN
                                                                     3rd COURT OF APPEALS
                                   Third District                        AUSTIN, TEXAS

                                  Austin, Texas                      9/21/2015 2:41:41 PM
                                                                       JEFFREY D. KYLE
                                                                             Clerk

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


               FROM THE 345TH JUDICIAL DISTRICT COURT, TRAVIS COUNTY, TEXAS
                               CAUSE NO. D-1-GN-12-000983


     LAKEWAY REGIONAL MEDICAL CENTER, LLC’S AND SURGICAL
                DEVELOPMENT PARTNERS, LLC’S
                 OPENING APPELLANTS’ BRIEF

     NORTON ROSE FULBRIGHT US LLP                   NORTON ROSE FULBRIGHT US LLP
                     Jeff Cody                                  Joy M. Soloway
             State Bar No. 04468960                         State Bar No. 18838700
       jeff.cody@nortonrosefulbright.com             joy.soloway@nortonrosefulbright.com
                  Barton W. Cox                           1301 McKinney, Suite 5100
              State Bar No. 2406508                         Houston, TX 77010-3095
       beau.cox@nortonrosefulbright.com                 Telephone:      (713) 651-5151
                James V. Leito IV                       Telecopier:     (713) 651-5246
             State Bar No. 24054950
      james.leito@nortonrosefulbright.com                 WRIGHT & CLOSE, LLP
          2200 Ross Avenue, Suite 3600                         Jessica Z. Barger
              Dallas, TX 75201-7932                         State Bar No. 24032706
         Telephone:        (214) 855-8000                  barger@wrightclose.com
         Telecopier:       (214) 855-8200                     Raffi O. Melkonian
                                                            State Bar No. 24090587
                                                         melkonian@wrightclose.com
                                                          One Riverway, Suite 2200
                                                              Houston, TX 77056
Counsel for Appellants/Cross Appellees                  Telephone:      (713) 572-4321
ORAL ARGUMENT REQUESTED                                 Telecopier:     (713) 572-4320
                        LIST OF PARTIES AND COUNSEL
           1.   Appellant/Cross Appellee is Lakeway Regional Medical Center, LLC.

           2.   Appellant/Cross-Appellee is Surgical Development Partners, LLC.

           3.   Trial counsel for Appellants/Cross-Appellees Lakeway Regional

Medical Center, LLC, and Surgical Development Partners, LLC, were Jeff Cody,

Barton W. (Beau) Cox, and James V. Leito IV, NORTON ROSE FULBRIGHT US LLP,

2200 Ross Avenue, Suite 3600, Dallas, TX 75201-7932.

           4.   Appellate counsel for Appellant/Cross-Appellee Lakeway Regional

Medical Center, LLC are Jeff Cody, Barton W. (Beau) Cox, and James V. Leito

IV, NORTON ROSE FULBRIGHT US LLP, 2200 Ross Avenue, Suite 3600, Dallas, TX

75201-7932, and Joy M. Soloway, NORTON ROSE FULBRIGHT US LLP, 1301

McKinney, Suite 5100, Houston, TX 77010-3095.

           5.   Appellate   counsel    for       Appellant/Cross-Appellee   Surgical

Development Partners, LLC are Jeff Cody, Barton W. (Beau) Cox, and James V.

Leito IV, NORTON ROSE FULBRIGHT US LLP, 2200 Ross Avenue, Suite 3600,

Dallas, TX 75201-7932, Joy M. Soloway, NORTON ROSE FULBRIGHT US LLP,

1301 McKinney, Suite 5100, Houston, TX 77010-3095, and Jessica Z. Barger and

Raffi O. Melkonian, WRIGHT & CLOSE, LLP, One Riverway, Suite 2200, Houston,

TX 77056.




53883200                                     i
           6.    Appellee/Cross-Appellant is Lake Travis Transitional LTCH, LLC

n/k/a Lake Travis Specialty Hospital, LLC.

           7.    Trial counsel for Appellee/Cross-Appellant were S. Abraham Kuczaj

III, Paige A. Amstutz and Steven J. Wingard, SCOTT, DOUGLASS & MCCONNICO,

LLP, 303 Colorado, Suite 2400, Austin, TX 78701.

           8.    Appellate counsel for Appellee/Cross-Appellant are Jane Webre,

S. Abraham Kuczaj III, Paige A. Amstutz, and Steven J. Wingard, SCOTT,

DOUGLASS & MCCONNICO, LLP, 303 Colorado Street, Suite 2400, Austin, TX

78701.

           9.    Appellees are Brennan, Manna & Diamond, LLC and Frank T. Sossi.

           10.   Trial and appellate counsel for Appellees are Robert Bragalone and

B. Ryan Fellman, GORDON & REES LLP, 2100 Ross Avenue, Suite 2800, Dallas,

TX 75201.




53883200                                   ii
                                          TABLE OF CONTENTS
                                                                                                                        Page

LIST OF PARTIES AND COUNSEL.......................................................................i

TABLE OF AUTHORITIES ...................................................................................vi
STATEMENT OF THE CASE .............................................................................. xii
STATEMENT REGARDING ORAL ARGUMENT ...........................................xiv

ISSUES PRESENTED BY APPELLANTS ...........................................................xv
RECORD REFERENCES .................................................................................. xviii

STATEMENT OF FACTS .......................................................................................1
           I.     Congressional action impacts two potential Texas hospitals. .............. 1
                  A.        Construction of Lake Travis Specialty Hospital began in
                            2008. ...........................................................................................1
                  B.        Others began planning a hospital—Lakeway Regional
                            Medical Center—in 2008. ..........................................................2
           II.    Berry, McDonald, and Lakeway Regional decide to explore the
                  feasibility of Lake Travis Specialty Hospital becoming
                  Lakeway Regional Medical Center’s initial campus. ..........................3

           III.   A Letter of Intent is signed, and Lakeway Regional considers
                  whether to acquire the Lease from LTT. ..............................................4

           IV.    Lakeway Regional decides against acquiring the Lease. .....................6

           V.     In March 2010, Lakeway Regional secures a HUD-insured loan
                  for its own project; Sossi sends his “May 10 email” two months
                  later. ......................................................................................................7

           VI.    LTT completes construction of Lake Travis Specialty Hospital,
                  but it does not open. .............................................................................8

           VII. The lawsuit, summary judgment orders, trial, and judgment. ............. 9
                  A.        LTT sues Lakeway Regional, SDP, and Attorney
                            Defendants. ................................................................................9


53883200                                                     iii
                  B.       The trial court grants partial summary judgment for
                           Lakeway Regional and SDP and complete summary
                           judgment for the Attorney Defendants. ...................................10
                  C.       The case proceeds to trial; LTT prevails on its contract
                           claim. ........................................................................................11
                  D.       The post-verdict orders and judgment. ....................................13
SUMMARY OF ARGUMENT ..............................................................................14

STANDARDS OF REVIEW ..................................................................................17

ARGUMENT ..........................................................................................................19
           I.     The Jury’s Verdict Is Not Supported by Legally or Factually
                  Sufficient Evidence. ...........................................................................19
                  A.       The evidence is insufficient to show that any alleged
                           breach of the Letter of Intent caused the damages
                           awarded to LTT. .......................................................................19
                  B.       The jury’s damage awards are not supported by legally or
                           factually sufficient evidence. ...................................................24
                           1.       There is no legally or factually sufficient evidence
                                    of damages sustained by Berry and McDonald
                                    (parties to the Letter of Intent); LTT presented
                                    evidence only of its own alleged damages. ...................25
                           2.       The jury’s $7.9 million award cannot stand. .................28
                                    a.        The jury’s lost value award has zero support
                                              in the record. ........................................................29
                                    b.        Berry’s opinion was conclusory, speculative,
                                              and lacking in reasonable certainty. ....................31
                                    c.        The range cases do not apply. .............................39
                                    d.        Any finding that the jury’s award of $7.9
                                              million was foreseeable is not supported by
                                              legally or factually sufficient evidence. ..............40
                                    e.        LTT has no valid argument to support the
                                              $7.9 million award...............................................44
                           3.       The jury’s award of $790,000 is also unsupported
                                    by legally or factually sufficient evidence.....................47


53883200                                                   iv
           II.    The Trial Court Committed Fatal Charge Error; a New Trial Is
                  Warranted. ..........................................................................................49
                  A.        Under Casteel, and the facts of this case, the trial court
                            was required to list the specific provisions of the Letter
                            of Intent that could support the jury’s “yes” finding to
                            Questions 1(a) and 1(b). ...........................................................49
                  B.        Casteel also applies to Question 6 regarding damages............55
                  C.        The trial court likewise erred in refusing to include a
                            proper instruction in Question 1—to cure the Casteel
                            problem. ...................................................................................57
           III.   For Additional and Separate Reasons, the Judgment Against
                  SDP Should Be Reversed. ..................................................................58
                  A.        SDP was not a party to the Letter of Intent, but an agent
                            of a disclosed principal. ...........................................................58
                  B.        The trial court, at the very least, should have submitted a
                            jury question asking whether SDP was a party to the
                            Letter of Intent. ........................................................................59
                  C.        The jury’s finding in answer to Question 1(b) is not
                            supported by legally or factually sufficient evidence
                            because SDP did not breach any alleged duty that caused
                            any damages. ............................................................................60
           IV.    The Fee Award Cannot Stand. ...........................................................62
PRAYER .................................................................................................................62

CERTIFICATE OF WORD COMPLIANCE.........................................................64

CERTIFICATE OF SERVICE ...............................................................................64

INDEX TO APPENDIX




53883200                                                    v
                                   TABLE OF AUTHORITIES
                                                                                                    Page(s)
Cases
A to Z Rental Ctr. v. Burris,
   714 S.W.2d 433 (Tex. App.—Austin 1986, writ ref’d n.r.e.) ............................58
Ashford Partners, Ltd. v. ECO Res., Inc.,
   401 S.W.3d 35 (Tex. 2012).................................................................................62

Barrera v. Cherer,
  No. 04-13-00612-CV, 2014 WL 1713522 (Tex. App.—San
  Antonio Apr. 30, 2014, no pet.) (mem. op.) .................................................27, 28

Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc.,
  348 S.W.3d 894 (Tex. 2011) ..............................................................................41
Benge v. Williams,
  No. 01-12-00578-CV, 2014 Tex. App. LEXIS 12445
  (Tex. App.—Houston [1st Dist.] Nov. 18, 2014, no pet.) ..................................54
Bentley v. Bunton,
  94 S.W.3d 561 (Tex. 2002).................................................................................29

Burbage v. Burbage,
  447 S.W.3d 249 (Tex. 2014) ..............................................................................23

Cain v. Bain,
  709 S.W.2d 175 (Tex. 1986) (per curiam) .............................................18, 28, 61
Canyon Vista Prop. Owners Ass’n v. Laubach,
  No. 03-11-00404-CV, 2014 Tex. App. LEXIS 1099 (Tex. App.—
  Austin Jan. 31, 2014, no pet.) (mem. op) ...............................................29, 30, 46

City of Keller v. Wilson,
   168 S.W.3d 802 (Tex. 2005) ............................................................17, 36, 38, 48

City of San Antonio v. Pollock,
   284 S.W.3d 809 (Tex. 2009) ..............................................................................35




53883200                                              vi
Clear Lake City Water Authority v. Kirby Lake Development, Ltd.,
   123 S.W.3d 735 (Tex. App.—Houston [14th Dist.] 2003, pet.
   denied).................................................................................................................53

Columbia Rio Grande Healthcare, L.P. v. Hawley,
  284 S.W.3d 851 (Tex. 2009) ............................................................18, 55, 57, 60
Crown Life Ins. Co. v. Casteel,
  22 S.W.3d 378 (Tex. 2000)..........................................................................passim

Daugherty v. So. Pac. Transp. Co.,
  772 S.W.2d 81 (Tex. 1989).................................................................................46
DeNucci v. Matthews,
  03-11-00680-cv, 2015 Tex. App. LEXIS 4041 (Tex. App.—Austin
  Apr. 23, 2015, no pet.) ........................................................................................49
Earle v. Ratliff,
  998 S.W.2d 882 (Tex. 1999) ..............................................................................33
Elbaor v. Smith,
   845 S.W.2d 240 (Tex. 1992) ..............................................................................60
Emps. Ret. Sys. of Tex. v. Putnam, LLC,
  294 S.W.3d 309 (Tex. App.—Austin 2009, no pet.) ..........................................19
Examination Mgmt. Servs., Inc. v. Kersh Risk Mgmt., Inc.,
  367 S.W.3d 835 (Tex. App.—Dallas 2012, no pet.) ..........................................46
Fiess v. State Farm Lloyds,
   202 S.W.3d 744 (Tex. 2006) ..............................................................................59
Ford Motor Co. v. Ridgway,
  135 S.W.3d 598 (Tex. 2004) ........................................................................18, 61
Great Am. Ins. Co. v. Jim Stephenson Motor Co.,
  No. 05-94-00858-CV, 1996 WL 135688 (Tex. App.—Dallas Mar.
  26, 1996, writ denied) .........................................................................................25

Gulf Ins. Co. v. Burns Motors, Inc.,
  22 S.W.3d 417 (Tex. 2000)...........................................................................25, 28




53883200                                                    vii
Haase v. Glazner,
  62 S.W.3d 795 (Tex. 2001).................................................................................44

Hancock v. Variyam,
  400 S.W.3d 59 (Tex. 2013).....................................................................22, 23, 24

Harris Cnty. v. Smith,
  96 S.W.3d 230 (Tex. 2002)...........................................................................55, 56

Haynes & Boone v. Bowser Bouldin, Ltd.,
  896 S.W.2d 179 (Tex. 1995) ........................................................................18, 19

Holland v. Lovelace,
  352 S.W.3d 777 (Tex. App.—Dallas 2011, pet. denied)..............................39, 40

Holt Atherton Indus., Inc. v. Heine,
  835 S.W.2d 80 (Tex. 1992).....................................................................31, 45, 48
Houston Mercantile Exch. Corp. v. Dailey Petroleum Corp.,
  930 S.W.2d 242 (Tex. App.—Houston [14th Dist.] 1996, no writ) ...................19
Ins. Co. of State of Pa. v. Commercial Union Ins. Co.,
   No. 05-95-00471-CV, 1996 WL 732470 (Tex. App.—Dallas Dec.
   20, 1996, no writ) ................................................................................................28

JAAV Invs., LLC v. Amcap Mortg., Ltd.,
  No. 14-12-00839-CV, 2014 WL 708492 (Tex. App.—Houston
  [14th Dist.] Feb. 20, 2014, no pet.).....................................................................41

Jelinek v. Casas,
   328 S.W.3d 526 (Tex. 2010) ..............................................................................24

John H. Carney & Assocs. v. Tex. Prop. & Cas. Ins. Guar. Ass’n,
   354 S.W.3d 843 (Tex. App.—Austin 2011, pet. denied) ...................................25

Kerr-McGee Corp. v. Helton,
  133 S.W.3d 245 (Tex. 2004) ..............................................................................49

M-I LLC v. Stelly,
  733 F. Supp. 2d 759 (S.D. Tex. 2010) ................................................................28

Marathon Corp. v. Pitzner,
  106 S.W.3d 724 (Tex. 2003) (per curiam) .......................................19, 22, 24, 61


53883200                                                  viii
Mays v. Pierce,
  203 S.W.3d 564 (Tex. App.—Houston [14th Dist.] 2006, pet.
  denied).................................................................................................................59

McFarland v. Boisseau,
  365 S.W.3d 449 (Tex. App.—Houston [1st Dist.] 2011, no pet.) ................53, 54
Natural Gas Pipeline Co. of Am. v. Justiss,
  397 S.W.3d 150 (Tex. 2012) .......................................................................passim

Osterberg v. Peca,
   12 S.W.3d 31 (Tex. 2000).............................................................................44, 46
Peterson v. Kroschel,
   No. 01-13-00554-CV, 2015 Tex. App. LEXIS 5543 (Tex. App.—
   Houston [1st Dist.] June 2, 2015, no pet.) (mem. op.) .................................44, 45
Phillips v. Carlton Energy Grp., LLC,
   No. 12-0255, 2015 Tex. LEXIS 439
   (Tex. May 8, 2015) ......................................................................................passim

Plains Exploration & Prod. Co. v. Torch Energy Advisors Inc.,
   No. 13-0597, 2015 Tex. LEXIS 558 (Tex. June 12, 2015) ................................59

Pool v. Ford Motor Co.,
  715 S.W.2d 629 (Tex. 1986) ..................................................................18, 24, 49
Ramco Oil & Gas Ltd. v. Anglo-Dutch (Tenge) L.L.C.,
  207 S.W.3d 801 (Tex. App.—Houston [14th Dist.] 2006, pet.
  denied)...............................................................................................32, 37, 39, 40

Romero v. KPH Consol., Inc.,
  166 S.W.3d 212 (Tex. 2005) ........................................................................51, 56

Saenz v. Fid. & Guar. Ins. Underwriters,
   925 S.W.2d 607 (Tex. 1996) ........................................................................29, 47

Salinas v. Rafati,
   948 S.W.2d 286 (Tex. 1997) ..................................................................29, 31, 46

Sand Point Ranch, Ltd. v. Smith,
   363 S.W.3d 268 (Tex. App.—Corpus Christi 2012, no pet.) .............................54



53883200                                                     ix
Spencer v. Eagle Star Ins. Co. of Am.,
   876 S.W.2d 154 (Tex. 1994) ..............................................................................59

Spin Doctor Golf, Inc. v. Paymentech, L.P.,
   No. 05-11-01014-CV, 2013 WL 3355199 (Tex. App.—Dallas July
   2, 2013, pet. denied) (mem. op.) .........................................................................41
Springs Window Fashions Div., Inc. v. Blind Maker, Inc.,
   184 S.W.3d 840 (Tex. App.—Austin 2006, pet. granted, judgm’t
   vacated w.r.m.) .............................................................................................passim

Stuart v. Bayless,
   964 S.W.2d 920 (Tex. 1998) (per curiam) ...................................................41, 43

Tex. Instruments, Inc. v. Teletron Energy Mgm’t, Inc.,
   877 S.W.2d 276 (Tex. 1994) ..............................................................................32
Texarkana Mem’l Hosp., Inc. v. Murdock,
   946 S.W.2d 836 (Tex. 1997) ..............................................................................29
Texas Comm'n on Human Rights v. Morrison,
   381 S.W.3d 533 (Tex. 2012) (per curiam) ...................................................52, 53
Univ. Gen. Hosp., LP v. Prexus Health Consultants, LLC,
  403 S.W.3d 547 (Tex. App.—Houston [14th Dist.] 2013, no pet.) .............32, 46
Wal-Mart Stores, Inc. v. Merrell,
  313 S.W.3d 837 (Tex. 2010) (per curiam) .........................................................38
Wheelways Ins. Co. v. Hodges,
  872 S.W.2d 776 (Tex. App.—Texarkana 1994, no writ) .............................25, 28
Wingate v. Hajdik,
  795 S.W.2d 717 (Tex. 1990) ..............................................................................27

Rules and Statutes
Tex. Bus. Orgs. Code § 101.106(b) .........................................................................28

Tex. Civ. Prac. & Rem. Code § 38.001 ...................................................................62
Tex. R. App. P. 44.1(a) ......................................................................................55, 57

Tex. R. App. P. 44.1(a)(1) .......................................................................................60

53883200                                                  x
Tex. R. App. P. 44.1(a)(2) .......................................................................................55
Tex. R. Civ. P. 277 ...................................................................................................51

Tex. R. Civ. P. 278 .............................................................................................51, 60




53883200                                                   xi
                             STATEMENT OF THE CASE
Nature of the Case:                 This case arises from a September 15, 2009 letter
                                    of intent (“Letter of Intent”). At that time, Robert
                                    Berry and Keith McDonald were principals of
                                    plaintiff Lake Travis Transitional LTCH, LLC
                                    n/k/a Lake Travis Specialty Hospital, LLC
                                    (“LTT”), a tenant under a commercial real estate
                                    lease (the “Lease”) for a yet-to-be-completed long-
                                    term acute care hospital. Berry and McDonald
                                    entered into the Letter of Intent with Lakeway
                                    Regional Medical Center LLC (“Lakeway
                                    Regional”). PX-2. The stated purpose of the
                                    Letter of Intent was to establish “ground rules” for
                                    exchanging information so that Lakeway Regional
                                    could decide whether to acquire the Lease from
                                    LTT. Id.
                                    Lakeway Regional ultimately decided not to
                                    acquire the Lease, and this lawsuit ensued. LTT,
                                    as assignee of the rights of Berry and McDonald,
                                    asserted a claim for breach of contract against
                                    Lakeway Regional and its agent, Surgical
                                    Development Partners, LLC (“SDP”). (Lakeway
                                    Regional and SDP are sometimes referred to
                                    collectively as “Appellants.”) LTT also alleged
                                    that Lakeway Regional and SDP misappropriated
                                    trade      secrets    and      made      negligent
                                    misrepresentations. CR4, 158. LTT later added
                                    Frank T. Sossi, and his law firm, Brennan, Manna
                                    & Diamond, as defendants (sometimes referred to
                                    herein as “Attorney Defendants”). CR122, 158.
Trial Court:                        345th Judicial District Court, Travis County, Texas
                                    Honorable Lora J. Livingston, presiding.1



1
  Judge Livingston presided over the trial. Other judges ruled on pretrial matters. For example,
the Honorable Stephen Yelenosky signed an order granting partial summary judgment to SDP
and Lakeway Regional. CR12267.


53883200                                      xii
Course of Proceedings:   By orders dated July 16, 2014, the trial court
                         (1) granted summary judgment for Lakeway
                         Regional and SDP on LTT’s misappropriation
                         claim; (2) granted in part and denied in part,
                         Lakeway Regional’s and SDP’s motions for
                         summary judgment on LTT’s breach of contract
                         claim; (3) granted in part and denied in part
                         Lakeway Regional’s and SDP’s motions for
                         summary judgment on LTT’s negligent
                         misrepresentation claim; and (4) granted summary
                         judgment for the Attorney Defendants. CR12251,
                         12266; 1SCR201-02.
                         In August 2014, LTT’s claims for breach of
                         contract and negligent misrepresentation asserted
                         against Lakeway Regional and SDP were tried to a
                         jury. SCR3. The jury found in LTT’s favor on its
                         breach of contract claim and awarded LTT $7.9
                         million in damages for loss in the fair market value
                         of LTT and $790,000 in damages for the loss in
                         fair market value of LTT’s confidential
                         information. CR13000, 13006. The jury found
                         against LTT on its negligent misrepresentation
                         claim. CR13003.

Disposition:             The trial court denied Lakeway Regional’s and
                         SDP’s motion to disregard certain jury findings.
                         CR13010; 1SCR287. Based on LTT’s election to
                         recover the amount awarded for the loss in its fair
                         market value (1SCR250; CR13235), the Judgment
                         awards LTT $7.9 million in damages, $2 million in
                         attorneys’ fees (the amount established pursuant to
                         a stipulation, CR13240), pre- and post-judgment
                         interest, and costs. SCR3. Lakeway Regional’s
                         and SDP’s motion for new trial (CR13320) was
                         overruled by operation of law. Lakeway Regional,
                         SDP, and LTT each appealed. CR13328; SCR6.




53883200                         xiii
                  STATEMENT REGARDING ORAL ARGUMENT
           Oral argument would assist the Court in resolving Appellants’ legal and

factual insufficiency challenges and charge error complaints.        Furthermore,

because LTT has cross-appealed, this case has complexity, providing an additional

basis for having oral argument.




53883200                                  xiv
                        ISSUES PRESENTED BY APPELLANTS
1.         Legal and factual sufficiency challenges. Should the trial court’s judgment
           against Lakeway Regional and SDP be reversed because there is not legally
           or factually sufficient evidence to support this judgment on at least one of
           the following grounds?
           (a)   LTT argued that Appellants’ communications to HUD about LTT
                 caused HUD’s decision to insure Lakeway Regional’s loan and later
                 defend that decision, thus permitting Lakeway Regional to beat LTT
                 to market. When a causation theory hinges on a third party’s decision,
                 the Texas Supreme Court requires evidence of why the decision was
                 made. No witness testified and no exhibits support why HUD decided
                 to insure the loan or defend that decision or what information HUD
                 considered when making those decisions. Was there legally or
                 factually insufficient evidence that Appellants caused, under that or
                 any other theory or basis, the damages claimed by LTT or awarded by
                 the jury in answers to Questions 6(1) and 6(3)?
           (b)   Was the evidence legally or factually insufficient to support the jury’s
                 damages awards of $790,000 and $7.9 million in answer to Questions
                 6(1) and (3), and are the awards excessive?
                 (i)    LTT is an assignee of rights under the Letter of Intent. An
                        assignee can only recover damages sustained by the assignor.
                        LTT only put on evidence of its own damages, however. No
                        witness testified about and no exhibit addresses the damages
                        sustained by the assignors. Was the evidence legally or
                        factually insufficient to support the damages awards to LTT,
                        the assignee?
                 (ii)   LTT was awarded $7.9 million for its loss in fair market value.
                        The law requires that the damages award be linked to evidence,
                        that loss in value be proven with reasonable certainty, and that
                        the evidence of the amount of the loss not be conclusory or
                        speculative. LTT’s damages evidence failed on all counts. For
                        example, no witness testified and no exhibit supports that LTT
                        sustained a loss in value of $7.9 million, however, and the only
                        evidence of its lost value was a $13.8 million loss, which was
                        not fully explained to the jury. Was the evidence legally or
                        factually insufficient to support the $7.9 million award?


53883200                                     xv
                 (iii)   To recover the loss in fair market value of LTT, that loss had to
                         be a foreseeable consequence of breaching the Letter of Intent.
                         The Letter of Intent does not describe what consequential
                         damages were foreseeable, and no witness testified that anyone
                         contemplated that the value of LTT (a non-party to the Letter of
                         Intent) would be diminished or rendered worthless by a breach.
                         Was the evidence legally or factually insufficient to establish
                         that the loss in the fair market value of LTT was foreseeable?

                 (iv)    The jury awarded LTT $790,000 in loss in fair market value of
                         its confidential information. Again, a damage award must be
                         linked to the evidence. No witness testified that the fair market
                         value of LTT’s confidential information was diminished by
                         $790,000, and no exhibit supports this figure. The only
                         evidence of this loss was $7.9 million. Was the evidence
                         legally or factually insufficient to support the jury’s $790,000
                         award?
2.     Charge error. Should this judgment be reversed and remanded for a new
trial because of one of the following errors in the charge?
           (a)   Under Casteel, a liability question cannot commingle valid with
                 invalid liability theories. Appellants obtained summary judgment on
                 LTT’s claim for breach of Section 2 of the Letter of Intent. The trial
                 court, over Appellants’ objection, submitted LTT’s breach of contract
                 claim to the jury using broad-form submission, which encompassed a
                 breach of Section 2. Did the trial court err by submitting a broad-form
                 liability question in Question 1?
           (b)   Under Casteel, a damages question cannot be predicated on a finding
                 of an invalid liability theory. The trial court, over Appellants’
                 objection, submitted the damages question without asking the jury to
                 award damages connected to breaches of specific provisions of the
                 Letter of Intent. Did the trial court err in how it submitted the
                 damages question in Question 6?
           (c)   Similarly, the trial court refused to instruct the jury that in deciding
                 liability, the jury had to find (among other things) a valid, enforceable
                 agreement between the parties. This instruction would have limited
                 the jury to the enforceable sections of Letter of Intent and not



53883200                                      xvi
                 encompassed Section 2, which was unenforceable. Did the trial court
                 err in refusing this instruction?

3.         Matter of law, legal sufficiency, and factual sufficiency challenges by SDP
           only.
           (a)   As a matter of law, an agent is not contractually liable for the acts of
                 its disclosed principal. SDP owed no duty under the Letter of Intent.
                 The Letter of Intent expressly identified SDP as the agent of Lakeway
                 Regional, but the judgment imposes liability on SDP. Should the
                 judgment against SDP be reversed because LTT’s breach of contract
                 claim against SDP fails as a matter of law, rendering the jury’s answer
                 to Question 1(b) immaterial?
           (b)   LTT argued that Appellants’ communications about LTT to HUD
                 caused LTT’s injuries. The only HUD witness testified that he
                 understood that the communications about LTT were sent on behalf of
                 Lakeway Regional.        No witness testified that SDP sent any
                 communication to HUD about LTT that caused HUD to insure
                 Lakeway Regional’s loan or later defend that decision. Was there
                 legally or factually insufficient evidence that SDP breached any
                 alleged duty that caused injury to LTT?
4.         Charge error challenges by SDP only. The parties offered conflicting
           testimony about whether SDP was a party to the Letter of Intent. The trial
           court refused to submit a question asking whether SDP was a party or to
           instruct the jury that it had to find that SDP was a party to the Letter of
           Intent before it could find that SDP breached the Letter of Intent. Did the
           trial court err in refusing this question and instruction?

5.         Attorneys’ fees. The parties stipulated, subject to their right to appeal, to the
           amount of reasonable attorneys’ fees to award against Appellants, which the
           trial court awarded. Because the jury’s liability and damages findings are
           not supported by legally or factually sufficient evidence, should the award of
           attorneys’ fees be vacated?




53883200                                      xvii
                               RECORD REFERENCES
           The Clerk’s Record filed June 16, 2015 is cited as “CR.” The Supplemental

Clerk’s Record filed June 18, 2015 is cited as “SCR.” The Supplemental Clerk’s

Record filed July 17, 2015 is cited as “1SCR.” The Reporter’s Record is cited by

volume and page number, i.e., RR6:105. The video depositions played to the jury

are cited as “CE_” followed by the hour, minute and second.




53883200                                  xviii
                              STATEMENT OF FACTS
I.         Congressional action impacts two potential Texas hospitals.

           A.   Construction of Lake Travis Specialty Hospital began in 2008.
           In 2004, Robert Berry and Keith McDonald began planning the development

of a 57,000 square-foot, 46-bed hospital in Lakeway, Texas, which would be

known as Lake Travis Specialty Hospital. CR163; RR6:88, 93. Their plan was to

initially operate this facility as a long-term acute care hospital, a type of hospital

with which they had substantial recent experience. CR163; RR6:73-79, 82-87, 96-

97; DX-13. A long-term acute care hospital cares for patients who stay on average

more than 25 days. Conversely, a short-term acute care hospital (also referred to

as a general acute care hospital) cares for patients who stay on average under 6

days. RR6:75. Berry and McDonald contributed $6.35 million to the project

(RR8:106), but that was just a fraction of the amount they needed.

           In September 2007, Berry and McDonald obtained $21 million in

construction financing through a 20-year ground Lease with HCN Interra Lake

Travis LTACH, LLC, a joint venture between HCN Interra and Health Care REIT,

Inc. (“HCN”). RR6:122-25; PX-338. The Lease had many of the same attributes

as a loan. RR6:123. Right before the Lease was signed, Berry and McDonald

created plaintiff LTT to be the tenant. RR6:97. Construction of Lake Travis

Specialty Hospital began in 2008. RR6:88.



53883200                                   1
           LTT then hit a roadblock. Effective December 31, 2007, Congress imposed

a three-year moratorium on licensing long-term health care facilities. RR6: 127-

28; RR12:147. After learning that their project was not eligible for grandfather

status under the moratorium, Berry and McDonald changed gears and decided to

operate Lake Travis Specialty Hospital solely as a general acute care facility.

RR6:127-30.

           HCN became concerned about whether Berry and McDonald had enough

experience to operate a general acute care facility.           RR9:145-46, 156-57;

CE1:34m:05s–34m:44s; PX-359. That concern stemmed from the fact that neither

of them had worked at or operated a general acute care hospital since 1996 and had

never started one. CE1:34m:05s–34m:44s; RR6:69-73, 82; RR9:11-13.

           B.    Others began planning a hospital—Lakeway Regional Medical
                 Center—in 2008.
           Berry and McDonald were not the only ones working on a hospital project in

Lakeway. Another group was planning a hospital, although a considerably larger

one.       In 2008, Appellant Lakeway Regional was formed by three Lakeway

physicians and a local businessman to start a 244,000 square-foot, 106-bed

physician-owned general acute care facility in Lakeway, which would be known as

Lakeway Regional Medical Center.                RR10:158-59; RR11:130-31; PX-49.

Lakeway Regional retained Appellant SDP to assist with financing and opening the

proposed hospital. RR10:157-59; DX-18; PX-49; PX-167.


53883200                                    2
           However, in early 2009, Lakeway Regional began to see its own

governmental roadblock. As part of legislation that ultimately became the Patient

Protection and Affordable Care Act in March 2010, Congress was considering a

ban on physician-owned hospitals. RR11:9, 136-37. Lakeway Regional began to

develop contingencies for the passage of this ban.

II.        Berry, McDonald, and Lakeway Regional decide to explore the
           feasibility of Lake Travis Specialty Hospital becoming Lakeway
           Regional Medical Center’s initial campus.
           In March 2009, Frank Sossi, an attorney for Lakeway Regional, contacted

Scott Brinker, with Health Care REIT, with whom he had a prior business

relationship, to see if Brinker had any ideas about preserving the physician-

ownership component structure for Lakeway Regional. RR12:81-83, 143-45; see

also RR11:138-41. Sossi, already aware of LTT’s project, learned that Health

Care REIT had concerns about Berry’s and McDonald’s lack of experience in

opening and operating a general acute care hospital, and that the landlord was

looking to replace LTT as the tenant. RR12:143-49; see also RR11:141-44, 177-

79; PX-359; DX-30.

           Lakeway Regional began considering whether Lake Travis Specialty

Hospital, already under construction, could be an initial campus for its medical

center while its main campus was under construction, thereby avoiding the

potential ban on physician ownership.           RR8:186-87; RR11:7-10, 152-54;



53883200                                  3
RR12:143-46, 165.           After HCN’s introduction, SDP CEO Eddie Alexander

contacted LTT. RR6:132-33; RR11:7. On May 11, 2009, SDP and LTT entered

into a confidentiality agreement2 so that SDP could conduct initial due diligence

for Lakeway Regional. PX-4. A few months later, the parties moved to the next

step, which was to enter into a Letter of Intent.

III.       A Letter of Intent is signed, and Lakeway Regional considers whether to
           acquire the Lease from LTT.
           On September 15, 2009, a 7-page “Letter of Intent for the Acquisition of the

Lakeway Hospital Lease” was executed. Its stated purpose was to “establish the

ground rules for the ongoing exchange of information between the Parties” so that

a decision could be made on whether Lakeway Regional would acquire the Lease

from LTT. PX-2.

           As originally drafted, LTT was to be a party to the Letter of Intent, but

LTT’s counsel struck LTT as a party and inserted Berry and McDonald in its place.

RR12:174-75; PX-64; PX-69. Lakeway Regional is also a party to the Letter of

Intent. PX-2. SDP is identified “as the agent” for Lakeway Regional. Id.

           The Letter of Intent addresses a variety of topics. For example, Section 1

specifies a 45-day period for discussions and negotiations. This time period was

extended by Berry, McDonald, and Lakeway Regional. RR9:134. Section 2 sets

forth Lakeway Regional’s obligations if it decided to acquire the Lease, including

2
    LTT did not assert a claim for breach of this agreement. CR171-72; CR13000.


53883200                                        4
that it would reimburse Berry and McDonald reasonable and documented costs

advanced by them plus pay them $1.5 million. The total payments contemplated

by Section 2 are approximately $7.9 million. RR8:106; RR9:210; RR12:170-71;

RR13:104-06.3 Section 3 provides the conditions precedent and a “best efforts”

requirement to complete Section 2. Sections 6 and 9 contain good faith, standstill,

non-circumvention, and confidentiality provisions whereby the parties agreed not

to share with third parties certain information gained from the negotiations and to

use proprietary information and knowledge gained in the Project discussions only

to evaluate the feasibility of the Project.

           The Letter of Intent, however, provided several exceptions to the

confidentiality requirements. First, any information that was in the public domain

was excluded from the requirements. Second, information that was already in the

other party’s possession was also not considered proprietary. Third, information

that was lawfully received from a third party without restriction on further

disclosure was excluded as well. PX-2.

           As plainly stated in the Letter of Intent, Lakeway Regional was not required

to acquire or to assume the Lease. Instead, the Letter of Intent provided a process

by which the parties could evaluate whether Lakeway Regional would do so, and

contained terms that would protect the parties’ respective interests during and after
3
  The $7.9 million contemplated consideration under the Letter of Intent is also the same amount
the jury found as the loss in value in LTT. CR13006.


53883200                                       5
that process. As Berry’s and McDonald’s counsel for the Letter of Intent candidly

agreed, “there was a possibility that the deal wasn’t going to happen from the date

that the letter of intent was signed.” CE3:01h:09m:25s-30s; see also RR11:189.

           After signing, Lakeway Regional continued to evaluate whether it made

sense to acquire the Lease.        In addition to reviewing additional information

provided by LTT, Lakeway Regional began to identify any needed modifications

to transform LTT’s building (which was initially designed as a long-term acute

care facility) into a general acute care facility that suited Lakeway Regional’s

business model. RR6:161; RR8:148-51; RR11:181-82, 187-88, 193-94; PX-32;

PX-353-58; PX-368; DX-45; DX-70; DX-91.

IV.        Lakeway Regional decides against acquiring the Lease.
           In March 2010, after protracted discussions, Lakeway Regional decided not

to acquire the Lease. E.g., RR11:184-85. Reasons included that no plausible use

had been identified for Lake Travis Specialty Hospital after Lakeway Regional’s

main campus opened. RR11:184, 205. Also, Lakeway Regional and HCN could

not agree on financial terms. RR6:91; RR11:204-09; RR12:170-73; PX-35; DX-

94; DX-105; CE1:53m:24s–54m:20s. By March 22, 2010, Berry and McDonald

knew of the decision, and the Letter of Intent was terminated. RR6:91-92; PX-35;

PX-166; DX-98.




53883200                                   6
V.         In March 2010, Lakeway Regional secures a HUD-insured loan for its
           own project; Sossi sends his “May 10 email” two months later.
           After the Letter of Intent terminated, Lakeway Regional continued to move

forward with its project—and was able to see it through to completion. Its ability

to proceed in an extraordinarily challenging financial market following the

recession of 2008 was the result of its participation in a HUD program available to

new hospitals located in underserved communities. RR11:215-16.

           Lakeway Regional had applied for HUD loan insurance in 2009. PX-55;

RR10:170-73.        After almost a year, on March 17, 2010, HUD approved the

application and issued a Commitment. PX-84; PX-430. On April 30, 2010,

Lakeway Regional submitted the final adjustments to the closing documentation,

including a reduction in the interest rate. PX-85. As of that date, no one from

Lakeway Regional or SDP had disclosed any information about LTT or its

proposed facility to anyone at HUD. RR10:11.

           On May 8, 2010, Rip Miller, CEO of Westlake Hospital, sent HUD an email

questioning HUD’s determination that the proposed site of Lakeway Regional was

in an underserved area given the proximity of then-under-construction Lake Travis

Specialty Hospital. PX-179. A HUD staff member emailed Lakeway Regional’s

lender a list of eight questions about Lake Travis Specialty Hospital. RR10:16-17;

RR12:113-14; PX-180.




53883200                                   7
           In an email dated May 10, 2010 (“May 10 email”), Sossi answered HUD’s

questions. PX-180. (This email became the focus of LTT’s claim that Appellants

breached the Letter of Intent’s non-circumvention and confidentiality provisions.

E.g., CR169; RR6:92-93.) On May 11, 2010, a HUD staffer responded to Miller’s

email. PX-179. On May 21, 2010, the HUD-insured loan closed. RR10:18-19;

PX-86; PX-115.

           Two years later, in April 2012, Lakeway Regional Medical Center began

providing health care to the residents of West Austin and surrounding areas.

RR13:147-49.

VI.        LTT completes construction of Lake Travis Specialty Hospital, but it
           does not open.
           While Lakeway Regional considered whether to acquire the Lease, Berry

and McDonald continued to solicit other possible investors for their project. These

efforts were unsuccessful. RR6:185-87; RR9:146-47; DX-75. After the Letter of

Intent was terminated, Berry and McDonald attempted to press ahead with their

project. RR6:221-22. HCN did not support their plan. According to Berry, Lake

Travis Specialty Hospital could have opened, but HCN preferred it not do so

unless Berry and McDonald partnered with an investor/operator with more general

acute care hospital experience, which Berry was unable to find. RR8:66-69, 162;

RR9:11-12, 152, 156-57; DX-98; DX-106; see also CE4:01m20s-02m:15s. In




53883200                                  8
2012, after a default by LTT, HCN terminated the Lease. CE1:01h:02m:53s–

01h:03m:53s.

VII. The lawsuit, summary judgment orders, trial, and judgment.
           A.   LTT sues Lakeway Regional, SDP, and Attorney Defendants.
           In April 2012, the same month that Lakeway Regional Medical Center

began admitting patients, LTT, as the assignee of Berry and of McDonald’s estate,4

filed this lawsuit against Lakeway Regional and SDP asserting breach of contract

and misappropriation of trade secrets.           CR4; PX-421.   LTT later added the

Attorney Defendants, claiming that they also misappropriated LTT’s trade secrets,

and it amended its petition to add a negligent misrepresentation claim. CR122.

           LTT’s live petition alleged that Lakeway Regional and SDP breached the

Letter of Intent by, among other actions: (1) failing to acquire or assume the Lease

and pay the amounts due upon assumption of the Lease as set forth in Section 2;

(2) breaching the standstill and non-circumvention provisions in Section 6; and

(3) making improper disclosures of confidential information to third parties,

including HUD, in violation of Sections 6 and 9. CR158, 171-72. LTT claimed

that use and disclosure of LTT’s confidential and proprietary information by

Lakeway Regional and SDP to HUD caused HUD to issue, amend, close, and

defend (i.e., not revoke) the loan insurance for Lakeway Regional. CR167-72; see


4
    McDonald passed away in July 2011. CR163; RR6:98.


53883200                                     9
also CR11793; 1SCR230-36; RR6:92-93. LTT further claimed that all defendants

misappropriated its trade secrets and made negligent misrepresentations. CR172-

74.

           B.    The trial court grants partial summary judgment for Lakeway
                 Regional and SDP and complete summary judgment for the
                 Attorney Defendants.
           Lakeway Regional moved for summary judgment on the grounds that:

(1) Section 2 of the Letter of Intent (concerning acquisition of the Lease) was

unenforceable; and (2) it was entitled to summary judgment as a matter of law on

LTT’s misappropriation and negligent misrepresentations claims. CR5602. SDP

moved for summary judgment on the same grounds, as well as the ground that it

was not a party to the Letter of Intent and therefore could not be liable for any

alleged breach. CR6020, 6035-38. The Attorney Defendants moved for summary

judgment on all claims asserted against them. CR5229.

           The trial court, Judge Stephen Yelenosky then presiding, granted summary

judgment in favor of all defendants on LTT’s misappropriation claims. CR12266;

1SCR201-02. He also granted summary judgment to Lakeway Regional and SDP

on LTT’s claim that they had breached Section 2 of the Letter of Intent by not

acquiring the Lease and granted, in part, defendants’ summary judgment motion on

LTT’s negligent misrepresentations claim. CR12266. He denied the motions in all




53883200                                  10
other respects.      Id.; see also CR12251     The Attorney Defendants were then

dismissed completely.

           C.   The case proceeds to trial; LTT prevails on its contract claim.
           Trial. The case was tried by Judge Lora Livingston in August 2014. SCR3.

With respect to LTT’s breach of contract claim, Berry linked only a few of Sossi’s

answers in the May 10 email to confidential or proprietary information he and

McDonald had provided to Appellants under the Letter of Intent. Those answers

(hereafter “Sossi answers at issue”) concerned the size of Lake Travis Specialty

Hospital, the expense of converting it from a long-term health care facility to a

general acute care facility, zoning, adequacy of parking, code issues, and the

general terms of the Lease. See RR6:140, 181, 214-15, 229-30; RR8:24, 30-32,

42-43, 48; RR9:59-69.

           Berry admitted that LTT did not provide Lakeway Regional with the

information that was the basis of some Sossi answers at issue, admitted that he

disagreed with the substance of other answers, and admitted that some answers

were subjective or opinion.        RR6:179, 181, 229-30; RR8:30-32, 42-43, 48;

RR9:59-69. Regardless, LTT claimed that Appellants’ use of LTT’s confidential

or proprietary information in their communications with HUD in violation of

Sections 6 and 9 enabled Lakeway Regional to open, which “doomed” LTT’s




53883200                                  11
ability to obtain investors for its project. E.g., RR8:68-69, 162; RR13:123; CR170;

1SCR252.

           LTT sought three categories of damages for the alleged breach: (1) loss in

the fair market value of LTT, (2) loss in the fair market value of LTT’s

confidential information, and (3) lost profits.          Berry testified as to all three

categories, and LTT’s expert, Dr. Tom Glass, also provided his opinion on lost

profits. RR8:82-83, 100-06, 161-62; RR13:27.

           Charge conference. At the charge conference, Appellants objected to the

use of broad form submission for LTT’s breach of contract and damages claims.

This objection was founded, in large part, on Judge Yelenosky’s prior holding that

LTT’s claim that Appellants breached Section 2 of the Letter of Intent was invalid,

thus requiring a granulated charge.               Appellants’ objections and requested

instruction were denied. RR14:30-31, 35; CR12972; see also CR12979.

           SDP separately requested that the jury be asked to determine whether SDP

was a party to the Letter of Intent, and it submitted a proposed question and

instruction. Those requests were also refused. CR12971-72; RR14:30-31.5

           Jury findings.      The jury found against LTT on its negligent

misrepresentation claim. CR13003. But it found that Lakeway Regional and SDP

each breached the Letter of Intent (although which section it found they breached,
5
  The trial court also refused every other proposed question and instruction (save statute of
limitations) tendered by Appellants. CR12960-61, 12970, 12973-76.


53883200                                     12
because of broad form submission, is unknown). CR13000. The jury awarded

LTT $7.9 million for the loss in LTT’s fair market value, $790,000 for the loss in

the fair market value of LTT’s confidential information, and $0 in lost profits.

CR13006.         The jury’s awards did not match any of the damages evidence

presented by LTT. The following table identifies the category of damages, the

amount claimed at trial, and the amount awarded:

            Category                       Claim                       Award
Loss in fair market value              $13.8 million                $7.9 million
of LTT
Loss in fair market value               $7.9 million                  $790,000
of LTT’s confidential
information
Lost profits                           $34.5 million                     $0


RR8:101-06, 161-62; RR9:165; RR13:27; CR13006. Notably, $7.9 million was

the exact amount that LTT claimed it was owed under Section 2 of the Letter of

Intent. RR8:106; RR13:104-06; CR13206.

           D.    The post-verdict orders and judgment.
           The trial court denied Appellants’ motion to disregard certain jury findings,

allowed their motion for new trial to be overruled by operation of law, and

consistent with LTT’s election, rendered judgment for LTT in the amount of $7.9

million. CR13010, 13235, 13320; SCR3; 1SCR250, 287. The trial court further




53883200                                     13
awarded LTT stipulated attorneys’ fees, interest, and costs. CR13235, 13240;

SCR3.

                            SUMMARY OF ARGUMENT
           There are many grounds on which this judgment should be reversed in

Appellants’ favor.

           No causation exists for LTT’s contract claim. LTT failed to prove that

Appellants breached some duty that caused LTT the damages the jury awarded.

Although LTT may bluster that the jury found that LTT’s “confidential” or

“proprietary” information was used, this case essentially boils down to a handful of

statements contained in a single e-mail to HUD, none of which LTT showed were

the cause of anything HUD did or did not do. Proving the cause of HUD’s actions

is the lynchpin of LTT’s case because its theory is that the communications to

HUD caused HUD to amend, close, and/or “defend” (i.e., not revoke) the loan

insurance Commitment, which then permitted Lakeway Regional to open and

competitively force LTT out of the market.

           But LTT presented no evidence addressing why HUD amended/closed/did

not revoke the Commitment, who at HUD made those decisions, or what

information that unnamed person (or persons) relied on in making those decisions.

Indeed, although a HUD witness testified at trial by deposition, his testimony did

not address—much less answer—any of these critical questions. The jury was thus



53883200                                 14
left to speculate as to why HUD took the actions it did and to impermissibly

assume that HUD did so based on the Sossi answers at issue or other

communication with Appellants about LTT.             Under Texas Supreme Court

precedent, the absence of evidence regarding whether HUD actually relied upon

the Sossi answers at issue, or any other communication with Appellants, when

making its decisions is fatal to the judgment. Simply put, there is insufficient

evidence that any breach of the Letter of Intent caused the damages awarded, under

any theory presented at trial, requiring that the judgment be reversed and rendered

in Appellants’ favor.

           Damages awards are not supported. LTT’s damages evidence was also

speculative in nature, and legally and factually insufficient to sustain the judgment.

First, LTT (a non-party to the Letter of Intent) brought this case as an assignee of

Berry and McDonald (the actual parties to the Letter of Intent). LTT was therefore

required to prove damages incurred by its assignors. LTT failed to do so because it

focused at trial solely on the damages that it purportedly sustained. LTT has no

legal right to recover those damages because it was not a party to the Letter of

Intent. The Court should reverse and render on this narrow issue alone.

           Second, the damage awards also cannot stand for numerous other reasons.

LTT elected to recover the $7.9 million award for the loss in its fair market value,




53883200                                  15
but no witness testified and no exhibit shows that the value of LTT was diminished

by $7.9 million.

           Next, the only evidence of lost value—an opinion supplied by Berry—was

$13.8 million.        But his opinion was conclusory, speculative, and lacking in

reasonable certainty. For example, the backbone of Berry’s testimony was a pro

forma that presumed a 38-bed hospital (rather than the as-built 46-bed hospital)

and contained a series of unexplained revenue and expense projections. These

projections and Berry’s testimony did not, however, place the lost value of LTT

anywhere near the $7.9 million awarded.

           To be sure, a $7.9 million figure was raised in other contexts. For example,

Berry testified that $7.9 million was the loss in value of LTT’s confidential

information, but that loss was the subject of a different damage award, for which

the jury awarded only $790,000.           (Thus the award for loss in value of the

information was also not tied to any evidence.) Most notably, though, the evidence

showed that $7.9 million was the amount that Berry and McDonald would have

received if Lakeway Regional assumed the Lease under Section 2 of the Letter of

Intent. Because Judge Yelenosky held on summary judgment that Section 2 was

an unenforceable promise, that damage model and figure should not have been

available at trial. But it was—in violation of Casteel.




53883200                                    16
           Charge errors. The trial court erred in submitting a broad form liability

question over Appellants’ objections. The question permitted the jury to find

Appellants liable under Section 2 for not assuming the Lease. Given that no

witness testified that LTT was worth $7.9 million (or anywhere close to it), it thus

appears that the jury improperly relied upon this evidence and awarded LTT the

amount of money due had Lakeway Regional elected to acquire the Lease under

Section 2. Harm is presumed here.

           And the charge errors did not stop there. The Letter of Intent expressly

states that SDP was acting as agent for Lakeway Regional, and the evidence

conflicted on whether SDP was a party to the Letter of Intent. Despite this

conflict, the trial court refused to submit a question asking whether SDP was a

party to the Letter of Intent.

           For these and others reasons explained below, the Court should reverse the

trial court’s judgment and render judgment in favor of Appellants, or in the

alternative, remand the case for a new trial.

                              STANDARDS OF REVIEW
           Legal and Factual Sufficiency of the Evidence. The standard for reviewing

the legal and factual sufficiency of the evidence is well established. The test for

legal sufficiency is whether “the evidence at trial would enable reasonable and fair-

minded people to reach the verdict under review.” City of Keller v. Wilson, 168



53883200                                   17
S.W.3d 802, 827 (Tex. 2005). “Evidence that is so slight as to make any inference

a guess is in legal effect no evidence.” Ford Motor Co. v. Ridgway, 135 S.W.3d

598, 601 (Tex. 2004). On factual sufficiency review, the Court must set aside the

verdict if it is so contrary to the overwhelming weight of the evidence as to be

clearly wrong and unjust. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.

1986); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).

           Charge Error. An appellate court will reverse a judgment for a charge error

if that error was harmful because it “probably caused the rendition of an improper

judgment or probably prevented the petitioner from properly presenting the case to

the appellate courts.” Columbia Rio Grande Healthcare, L.P. v. Hawley, 284

S.W.3d 851, 856 (Tex. 2009). “Charge error is generally considered harmful if it

relates to a contested, critical issue.” Id. But “when a trial court submits a single

broad-form liability question incorporating multiple theories of liability, the error

is harmful and a new trial is required when the appellate court cannot determine

whether the jury based its verdict on an improperly submitted invalid theory.”

Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388 (Tex. 2000). These standards

are also well established.




53883200                                    18
                                      ARGUMENT
I.         The Jury’s Verdict Is Not Supported by Legally or Factually Sufficient
           Evidence.

           A.    The evidence is insufficient to show that any alleged breach of the
                 Letter of Intent caused the damages awarded to LTT.
           To obtain a judgment on a breach of contract claim, a plaintiff must prove,

among other elements, that the defendant’s breach caused the plaintiff monetary

injury. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 181 (Tex.

1995) (plaintiff must “establish a direct causal link between the damages awarded,

the actions of the defendant and the injury suffered”). The failure to prove this

element is fatal. Emps. Ret. Sys. of Tex. v. Putnam, LLC, 294 S.W.3d 309, 318

(Tex. App.—Austin 2009, no pet.); see also Houston Mercantile Exch. Corp. v.

Dailey Petroleum Corp., 930 S.W.2d 242, 248 (Tex. App.—Houston [14th Dist.]

1996, no writ) (“in order to recover any type of damages,” plaintiff must prove “a

direct causal link between the damages awarded, the actions of the defendant and

the injury suffered”); CR13006 (Question 6 asking what “sum of money . . . would

fairly and reasonably compensate LTT for its damages, if any, that resulted from

[Lakeway Regional] and/or SDP’s failure to comply with the Letter of Intent”)

(emphasis added). The link between the defendant’s actions and the injuries

suffered cannot be established “by mere conjecture, guess, or speculation.”

Marathon Corp. v. Pitzner, 106 S.W.3d 724, 727 (Tex. 2003) (per curiam).



53883200                                    19
           LTT failed to prove the causal link with legally or factually sufficient

evidence of its two damage claims. LTT premised both damage claims on the

same theory:

           BREACH:           Appellants used LTT’s confidential information to
                             craft communications to HUD, thereby breaching
                             the Letter of Intent;

           RESULT:           HUD relied upon the information provided about
                             LTT when deciding to amend, close, or defend its
                             prior Commitment to provide loan insurance for
                             Lakeway Regional, which in turn prevented Lake
                             Travis Specialty Hospital from opening.

           Under this scenario, LTT was required to present evidence that Appellants’

communications with HUD, in breach of Sections 6 and 96 of the Letter of Intent

(including, specifically, the May 10 email), caused HUD to issue the Commitment,

agree to the amendment requested by Lakeway Regional, and close and/or defend

the loan. LTT did not establish this nexus, nor any other causal nexus.

           Commitment evidence. On March 17, 2010, HUD issued the loan insurance

Commitment. RR10:10-11; PX-84; PX-430. As of that date, neither Appellant

had ever communicated with HUD about LTT. RR10:11, 14. Thus, the Sossi

answers at issue in the subsequent May 10 email could not have impacted HUD’s

decision to issue the Commitment.

6
 Post-verdict, LTT also claimed that the evidence supported a finding that Appellants breached
Section 5, which provides that the provisions related to sharing of information gained during
negotiations survive termination (1SCR278-79), but that claim is no different than the claim that
Appellants breached Sections 6 and 9.


53883200                                       20
           Amend and close evidence. The loan was amended on May 20, 2010 and

closed on May 21, 2010. RR10:18-19; RR11:84; PX-86. The first LTT-related

communication between Lakeway Regional and HUD was the May 10 email. LTT

presented no evidence as to whether this email affected HUD’s decision-making

with respect to amending and closing. Most critically, LTT did not present any

evidence of HUD’s decision-making process, including evidence of the

information HUD actually considered in deciding to close.

           Defend evidence. LTT also claimed that Appellants’ conduct caused HUD

to defend the loan. 1SCR252. But this theory required the jury to speculate that

HUD’s decision to defend was based on communications from Sossi (e.g., PX-

136), when the record instead showed that LTT itself was communicating with

HUD. E.g., PX-181. Thus, for all we know, when HUD defended the loan post-

closing, it did so based on information LTT provided. That is, HUD was getting

information from others besides Appellants, and there is no evidence of how any of

the information influenced HUD’s decision to defend the loan.

           LTT recognized this evidentiary gap at trial by complaining that HUD

refused to answer certain written deposition questions. RR7:42-45. LTT went so

far as to insist that HUD’s preliminary statement to its answers be read to the jury,

which included a statement that HUD could not be required to provide testimony

and that it had decided not to answer questions it deemed irrelevant, burdensome,


53883200                                 21
or called for privileged information “pursuant to Deliberative Process Privilege.”

RR7:45-47; RR10:7-8. In the absence of any direct evidence on these issues, the

jury was left to speculate about the information HUD considered when making its

decisions.      Speculation, however, cannot fill the evidentiary hole.   Marathon

Corp., 106 S.W.3d at 727.

           Nor does any circumstantial evidence fill the hole. For example, that HUD

asked Sossi to answer questions about LTT after receiving Miller’s email (PX-180)

does not make it more or less likely that HUD decided to close based on Sossi’s

response, as LTT argued below (1SCR234-35).

           Highly instructive is Hancock v. Variyam, 400 S.W.3d 59 (Tex. 2013),

which held that when there are multiple possible inferences for why a particular

decision is made (here, the basis for the decision made by an unknown HUD

decision-maker(s)), a jury may not infer that any particular reason (here, Sossi’s

email) was the reason on the basis of “circumstantial evidence.” Id. at 70-71. In

Hancock, a physician claimed that the submission of a defamatory letter to an

accrediting body, which later denied the doctor’s accreditation, provided evidence

of reputation damages. Id. at 62-63, 70. The Court held that the jury could not

infer why the accrediting body denied the application because “there were multiple

possible grounds for the accrediting body denying accreditation,” but the plaintiff-

physician “offered no evidence that the inference regarding the letter was more


53883200                                   22
probable than other possible inferences.” Id. at 71. This holding rested on the

“equal inference rule, which provides that a jury may not reasonably infer an

ultimate fact from ‘meager circumstantial evidence which could give rise to any

number of inferences, none more probable than another.’” Id. at 70-71 (citation

omitted).

           The similarities of this case to Hancock are apparent. In both cases, there is

no direct evidence of why a decision on a particular application was made by a

third party. In both cases, information was provided by the defendants that the

plaintiff contended influenced the decision. In both cases, there was no evidence

that the decision-maker considered the information (or more importantly what, if

any, weight was given to the information). And in both cases, there are multiple

possibilities for why the decision was made, which (at best) were supported by

meager circumstantial evidence and none of which were more probable than any

other possibility.

           As in Hancock, this Court should hold that there is no legally sufficient

evidence to support one of those possibilities—that is, there is no legally sufficient

evidence that the Sossi answers at issue in the May 10 email or any other

communication between HUD and either Appellant caused HUD to issue, amend,

close, or defend the Commitment. See also Burbage v. Burbage, 447 S.W.3d 249,

262 (Tex. 2014) (holding jury could not reasonably infer that cancellations for a


53883200                                     23
funeral home business were caused by defamation when “any number of reasons”

could have caused the cancellations); Jelinek v. Casas, 328 S.W.3d 526, 538 (Tex.

2010) (reversing judgment; no probative evidence of causation); Marathon, 106

S.W.3d at 727-29.

           In sum, there is simply no evidence of causation here. The judgment should

therefore be reversed and a take nothing judgment should be rendered against LTT.

Hancock, 400 S.W.3d at 71-72. At a minimum, the evidence of the required causal

nexus is factually insufficient, requiring a new trial. Pool, 715 S.W.2d at 635.7

           B.    The jury’s damage awards are not supported by legally or
                 factually sufficient evidence.

           In response to separate damages questions, the jury awarded LTT (1) $7.9

million for loss in its fair market value and (2) $790,000 for loss in the fair market

value of its confidential information. Neither award is supported by legally or

factually sufficient evidence.




7
  LTT argued below that it proved damages caused by Appellants’ breach of Section 3 of the
Letter of Intent, the best efforts provision. 1SCR230, 236-37. That argument rests squarely on
an unsubstantiated series of speculative assumptions, including (1) that if HUD had known about
Lake Travis Specialty Hospital, it would not have issued the Commitment or completed the loan
or (2) that if the Letter of Intent had terminated sooner, HUD would have been aware that Lake
Travis Specialty Hospital was to be operated as a general acute care facility when it opened. Id.
But there was no evidence at trial of whether HUD would have made a different decision if it had
known Lake Travis Specialty Hospital was to operate (when it opened), as a general acute care
facility, and there is no evidence that if the Letter of Intent had terminated earlier, construction of
Lake Travis Specialty Hospital would have finished before the loan closed, as LTT also
speculated. Id.; Hancock, 400 S.W.3d at 70-71; Marathon, 106 S.W.3d at 727-29.


53883200                                         24
                 1.    There is no legally or factually sufficient evidence of
                       damages sustained by Berry and McDonald (parties to the
                       Letter of Intent); LTT presented evidence only of its own
                       alleged damages.
           An “assignee ‘stands in the shoes’ of the assignor but acquires no greater

right than the assignor possessed,” and “may assert only those rights that [the

assignor] himself could assert.” Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d

417, 420 (Tex. 2000); John H. Carney & Assocs. v. Tex. Prop. & Cas. Ins. Guar.

Ass’n, 354 S.W.3d 843, 850 (Tex. App.—Austin 2011, pet. denied) (citation

omitted).       It follows then that the assignee can “recover only those damages

potentially available to its assignor.” Great Am. Ins. Co. v. Jim Stephenson Motor

Co., No. 05-94-00858-CV, 1996 WL 135688, at *4 (Tex. App.—Dallas Mar. 26,

1996, writ denied); Wheelways Ins. Co. v. Hodges, 872 S.W.2d 776, 782 (Tex.

App.—Texarkana 1994, no writ) (assignee could recover only for her assignor’s

mental anguish).

           Although LTT was a party to the May 2009 Confidentiality Agreement with

SDP (upon which LTT chose not to sue), LTT was not a party to the Letter of

Intent and had no independent right of confidentiality arising therefrom. Before

trial, Berry and McDonald’s estate assigned their claims under the Letter of Intent

to LTT. PX-421; RR8:163-64. Their transactional counsel explained that LTT

was not made a party to the Letter of Intent because “the principals were in control




53883200                                   25
of the project and the principals, as it relates to the project, had information that

was not necessarily LTT’s.” CE3:46m:44s–46m:56s.8

           Accordingly, at trial, LTT could recover damages only for improper

disclosures or use of Berry’s and McDonald’s confidential information.

Disclosure or use of LTT’s confidential information could give rise to neither

liability nor damages. The only evidence presented during trial was related to how

LTT was allegedly injured and the amount of LTT’s alleged damages.                       For

example, LTT argued that a breach caused LTT to lose the fair market value of its

confidential information. E.g., RR8:161-62 (LTT’s counsel asking Berry if he had

“an opinion about what [was] the loss in value of LTT’s confidential information”)

(emphasis added); see also RR6:126, 162-63; RR8:104-06, 161-62; RR9:59-60.

No witness testified that Berry or McDonald sustained any injury or damage

resulting from the Sossi answers at issue. Indeed, this is the first place LTT’s

breach of contract claim comes off the tracks.

           The questions to the jury further illustrate the point. First, LTT asked the

jury to award damages for the loss in “value of LTT’s confidential information.”

CR13006 (emphasis added).




8
  As Berry and McDonald were represented by counsel in drafting the Letter of Intent (e.g.,
RR12:87-88, 175), their assignee, LTT, cannot now be heard to complain about terms not to its
liking.


53883200                                     26
           Second, LTT asked the jury to award damages for the loss in “fair market

value of LTT.” Id. (emphasis added). Again, the focus is on LTT, not Berry or

McDonald. LTT presented evidence of its own alleged loss in value. LTT did not

present evidence of the loss in value of the assignors’ investment.

           Third, LTT asked the jury to award damages for “LTT’s lost profits” that

were a consequence of the alleged breach. CR13006 (emphasis added). Although

the jury did not award lost profit damages,9 those damages were also exclusive to

LTT. E.g., RR8:82, 103; RR13:26-27.

           LTT cannot circumvent this lack of evidence by claiming that, because LTT

suffered damages, LTT’s owners implicitly suffered damages. To do so would

ignore the legal separateness between LTT, a limited liability company (CR159;

RR9:163), and its members. See, e.g., Barrera v. Cherer, No. 04-13-00612-CV,

2014 WL 1713522, at *2 (Tex. App.—San Antonio Apr. 30, 2014, no pet.) (mem.

op.) (“A limited liability company is considered a separate legal entity from its

members.”); see also Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990) (“A

corporate stockholder cannot recover damages personally for a wrong done solely

to the corporation, even though he may be injured by that wrong.”). Similarly, “a

member of a limited liability company does not have an interest in any specific

9
  The jury’s refusal to award lost profit damages is yet another irreconcilable conflict with its
award of $7.9 million in loss value. It begs the question of how a company with no potential lost
profits can have a loss in value of $7.9 million, especially when both damages models were
based upon the same projections. RR8:82-83, 89-90, 100-03; RR13:33-36; see also infra at n.11.


53883200                                       27
property of the company.” Barrera, 2014 WL 1713522, at *2 (citing Tex. Bus.

Orgs. Code § 101.106(b)). The assignment recognized the legal separateness.

           In sum, the lack of evidence of injury and damages directly sustained by

Berry and McDonald requires that the judgment be reversed and a take-nothing

judgment be rendered in Appellants’ favor. Gulf Ins. Co., 22 S.W.3d at 420;

Wheelways Ins., 872 S.W.2d at 782.10              At a minimum, factual insufficiency

requires a new trial. Cain, 709 S.W.2d at 176.

                 2.    The jury’s $7.9 million award cannot stand.
           Question 6(3) asked the jury to award LTT damages, if any, for “[t]he loss in

fair market value of LTT that was a natural, probable, and foreseeable consequence

of LRMC and/or SDP’s failure to comply with the Letter of Intent.” CR13006.

The jury awarded $7.9 million. Id.

           The record, however, tells a different story. First, not a single witness

testified and no document admitted into evidence references, mentions, or suggests

that LTT’s fair market value was $7.9 million. To the contrary, the only witness

who testified as to the diminution in value of LTT (Berry) testified that the amount

was $13.8 million. What’s worse, the $7.9 million that the jury awarded was tied

10
   See also M-I LLC v. Stelly, 733 F. Supp. 2d 759, 705-96 (S.D. Tex. 2010) (addressing breach
of a non-compete agreement brought by successor company who had been assigned rights under
the agreement and holding that, consistent with Texas law, the plaintiff/assignee would be
required to prove loss to the seller/assignor as a result of the defendant/employee’s alleged
breach); Ins. Co. of State of Pa. v. Commercial Union Ins. Co., No. 05-95-00471-CV, 1996 WL
732470 (Tex. App.—Dallas Dec. 20, 1996, no writ).


53883200                                     28
to other damage models. Indeed, Berry identified that precise amount as the value

of all of LTT’s confidential information, which was the subject of a separate

submission (Question 6(1)) and as the amount due to Berry and McDonald under

Section 2 of the Letter of Intent (a theory disposed of by summary judgment).

Second, Berry’s testimony as to the $13.8 million in lost value in LTT was

conclusory and non-probative and fails the reasonable certainty test. Third, there is

no evidence, or factually insufficient evidence, that the loss in LTT’s fair market

value was a foreseeable consequence of breach of the Letter of Intent.

                       a.    The jury’s lost value award has zero support in the
                             record.
           Texas law demands proof of a rational damages computation that links the

evidence to the amount awarded by the jury. Bentley v. Bunton, 94 S.W.3d 561,

605 (Tex. 2002) (noting that a jury does not have “carte blanche to do whatever it

will”); Saenz v. Fid. & Guar. Ins. Underwriters, 925 S.W.2d 607, 614 (Tex. 1996)

(a jury may not “simply pick a number and put it in the blank[,]” but “must find an

amount that . . . ‘would fairly and reasonably compensate’ for the loss”); see also

Salinas v. Rafati, 948 S.W.2d 286, 289 (Tex. 1997) (a “jury must have an

evidentiary basis for its findings”); Texarkana Mem’l Hosp., Inc. v. Murdock, 946

S.W.2d 836, 839-41 (Tex. 1997); Canyon Vista Prop. Owners Ass’n v. Laubach,

No. 03-11-00404-CV, 2014 Tex. App. LEXIS 1099, at *14-22 (Tex. App.—Austin




53883200                                  29
Jan. 31, 2014, no pet.) (mem. op) (a rational basis for jury’s calculation of damages

must exist). This principle alone requires that the $7.9 million award be reversed.

           LTT put its claim for its loss in fair market value in Berry’s hands. Berry

opined that the fair market value of LTT was $13.8 million. RR8:101-04. Berry

never testified that the loss in LTT’s fair market value was $7.9 million, any

amount near that figure, or any amount other than $13.8 million. Nor is there any

other evidence in the record to support the $7.9 million award for the loss in LTT’s

fair market value.

           Berry testified that all of LTT’s confidential information was worth $7.9

million—which was the subject of a separate damages claim and separate

award (for which $790,000 was awarded). RR8:104-06, 161-62; RR9:165;

CR13006. And Berry and others testified that $7.9 million was the amount of

money he and McDonald were to receive under Section 2 of the Letter of Intent if

Lakeway Regional acquired the Lease. RR8:106; RR12:170-71; RR13:104-06.

But no evidence links $7.9 million to “the loss in fair market value of LTT” and

therefore no evidence supports the amount the jury wrote in the answer blank to

Question 6(3).

           Because the jury’s $7.9 million award (1) does not correspond to any

evidence for the loss in its fair market value, (2) corresponds to evidence of an

entirely different damage model, and (3) reflects the amount that would have been


53883200                                    30
due as damages for breach of Section 2 (which claim was dismissed by summary

judgment), it must be set aside. Salinas, 948 S.W.2d at 289.

           Myriad other reasons also require vacating the $7.9 million award.

                       b.     Berry’s opinion was conclusory, speculative, and
                              lacking in reasonable certainty.
           A business owner’s testimony on the value of the business—especially the

valuation of a new business based on projected income—is not legally sufficient

evidence of damages when the testimony is conclusory, speculative, and lacking

reasonable certainty. This rule arises from several legal principles.

           First, a business owner may testify as to the value of his business, but his

testimony is subject to the same standards as expert testimony. Natural Gas

Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 155-59 (Tex. 2012) (discussing a

business owner’s valuation in the context of the Property Owner Rule). Such

testimony cannot be conclusory or speculative. Id. at 155-56.

           Second, courts are naturally skeptical of unverified and untested internal

projections as being inherently speculative and lacking in reasonable certainty. For

example, a business owner’s conclusory or speculative testimony about future

income will not support a judgment. Holt Atherton Indus., Inc. v. Heine, 835

S.W.2d 80, 84 (Tex. 1992); Springs Window Fashions Div., Inc. v. Blind Maker,

Inc., 184 S.W.3d 840, 884, 888-89 (Tex. App.—Austin 2006, pet. granted, judgm’t

vacated w.r.m.).


53883200                                    31
           Indeed, internal projections about a business’s future income are frequently

rejected as an evidentiary basis for an award. See, e.g., Univ. Gen. Hosp., LP v.

Prexus Health Consultants, LLC, 403 S.W.3d 547, 557-58 (Tex. App.—Houston

[14th Dist.] 2013, no pet.) (rejecting pro forma as a basis for awarding damages);

Ramco Oil & Gas Ltd. v. Anglo-Dutch (Tenge) L.L.C., 207 S.W.3d 801, 822-25

(Tex. App.—Houston [14th Dist.] 2006, pet. denied).11 This concern for internal

projections is heightened in new business and new enterprise cases. E.g., Tex.

Instruments, Inc. v. Teletron Energy Mgm’t, Inc., 877 S.W.2d 276, 278-81 (Tex.

1994) (profits “dependent on uncertain or changing market conditions, or on

chancy business opportunities . . . or entry into unknown or unviable

markets . . . cannot be recovered”).

           Third, and similarly, testimony concerning lost value damages requires

reasonably certain evidence of how the market valued the lost asset or

opportunity.       Phillips v. Carlton Energy Grp., LLC, No. 12-0255, 2015 Tex.

LEXIS 439, at *31 (Tex. May 8, 2015) (discussing the reasonable certainty

requirement and noting that it could “think of no reason . . . why it would make

sense to deny damages based on speculative evidence of lost profits but allow

recovery of lost value based on the same evidence”); see also id. at *34-35.


11
   University General and Ramco cannot be fairly distinguished on the basis that they concern
lost profits awards. Berry’s projections served as the basis for both LTT’s lost profits and lost
value claims. RR8:89-90, 100-04; RR13:33-36.


53883200                                       32
           Fourth, unexplained opinions or assumptions cannot support a judgment.

Justiss, 397 S.W.3d at 156; Springs, 184 S.W.3d at 888-89 (unexplained

assumptions render calculations “pure speculation”); see also Earle v. Ratliff, 998

S.W.2d 882, 890 (Tex. 1999) (“expert must explain the basis of his statements to

link his conclusions to the facts”).

           Berry’s testimony violates these principles.

           Overview. To determine the loss in LTT’s fair market value, Berry claimed

to use a three-step “net income methodology.” First, he multiplied LTT’s year one

projected Earnings Before Interest, Taxes, Depreciation, and Amortization

(“EBITDA”) by three, which he claimed came to $13.8 million. RR8:101-02.

LTT’s year one EBITDA was necessarily projected because LTT never generated a

dollar in revenue. RR9:162-63. That projected EBITDA came from a 48-month

pro forma Berry initially prepared in 2004 and 2005 to lure potential investors to

finance LTT’s intended business activities (by showing the project’s “potential”

success), as later updated by Berry and then modified by Glass, LTT’s lost profits

expert. PX-416; RR8:82-99; RR13:34-42, 45, 67, 237-38.12




12
   Glass’s modifications included carrying the projections out to 60 months, adding in
overlooked expenses (e.g., housekeeping), increasing the insurance expense, correcting
mathematical mistakes, and increasing expenses to account for inflation. RR13:34-42, 67, 91-
95; PX-416 at 13. At trial, Glass added another modification, agreeing with Appellants’ expert
that Berry’s projections understated expenses. RR14:15-16.


53883200                                     33
           Second, Berry looked to see if any value remained in the company. He

identified “some equipment” and, based on conversations that LTT’s facility

manager had with other facility managers, Berry concluded that the equipment was

worth about 60% of its historical cost. RR8:103.13 He then “took the $13.8

million and deducted the remaining value of the equipment to come up with a net

loss.” Id.

           Third, Berry told the jury that LTT was “virtually worthless” as a result of

Lakeway Regional’s and SDP’s alleged breaches.                        Id.   Thus, the difference

between LTT’s value before and after the breach, according to Berry, was $13.8

million. Id.

           Berry’s failure to explain key pieces of his pro forma shows his opinion is

unsupported. Year one of Berry’s pro forma was the anchor for his opinion of

LTT’s pre-breach value, and while Berry provided a high-level review of part of its

contents, several key components were never explained.                      For example, Berry

testified that in-patient revenues were derivative of four categories: Medicare,

Medicaid, commercial, and self-pay. RR8:90, 93. Berry claimed to have used a

“large statistical sampling” to “determine the type of number and the kinds of

admissions” (RR8:85), but never explained who was sampled or how that exercise

informed his pro forma (patient days attributable to each revenue category). Berry

13
     Berry never assigned a dollar value to the hospital equipment.


53883200                                          34
also stated that there was a “hospital specific Medicare rate” appearing in this pro

forma, only to then unhelpfully tell the jury that “there’s a bunch of factors that go

into that, that I won’t bore you with.” RR8:95. This rate was one of just three

factors (admissions x rate x multiplier assigned by Medicare) underlying all of the

revenue projections, yet Berry never said what the actual rate was or, more

importantly, how it was derived. RR8:95-96.

           Nor did Berry explain how he determined the vast majority of his projected

expenses. For instance, his pro forma includes in excess of 150 expense lines.

PX-416.14 Berry mentioned in passing that expenses for staffing, medical supplies,

pharmaceuticals, and specialized equipment was connected to reimbursement rates

(RR8:88), without providing any explanation as to why those particular expense

projections were reasonable and without identifying the objective data he used.

And for several line items (e.g., legal and accounting), Berry allocated $0 (PX-416

at 5), with no explanation as to why $0 would be reasonable. Phillips, 2015 Tex.

LEXIS 439, at *34-36 (holding that the evidence provided no basis for determining

the reliability of expert’s volume predictions or explanation for why the expert’s

projection was reasonable or supported the risk analysis); City of San Antonio v.




14
   The printed version of the Excel spreadsheet (PX-416, pages 1-12) is somewhat difficult to
follow. It is suggested that the Court follow the Year 1 Summary column that begins on page 1
and continues on pages 5 and 9.


53883200                                     35
Pollock, 284 S.W.3d 809, 816 (Tex. 2009) (baseless opinions cannot support a

judgment).

           Berry also failed to explain why relying on a factually incorrect pro forma

led to a reasonably certain value. Berry also never explained how his pro forma,

which had not been updated to account for materially changed facts, remained a

reliable basis for his valuation opinion. Two examples illustrate the point. First, a

primary driver of LTT’s income was the bed count (patients admitted). RR8:87-

93, 95-98; RR13:78-79. As built, Lake Travis Specialty Hospital had 46 beds.

RR9:40; CR163. However, the used-at-trial pro forma assumed 38 beds. PX-416.

Second, the pro forma assumed that Lake Travis would have two operating rooms;

it was not updated to reflect that LTT ended up with four operating rooms.

RR9:187-88; RR13:44, 67, 96-99; PX-25; PX-416; PX-477 at COL00000354; DX-

105. The as-built hospital thus would have had materially different expenses and

revenues than those contained in Berry’s projections.15 Berry never explained why

it was reasonable to base his fair market value opinion on such basic, erroneous

facts. Justiss, 397 S.W.3d at 159-62; City of Keller, 168 S.W.3d at 813 (“if an

expert’s opinion is based on certain assumptions about the facts, we cannot

disregard evidence showing those assumptions were unfounded”); see also

Phillips, 2015 Tex. LEXIS 439, at *36 (rejecting as some evidence a damages
15
  For example, Berry’s pro forma assumed “facility operating expenses” for a 38-bed, not a 46-
bed, hospital. PX-416.


53883200                                     36
model based on projections that were “demonstrably unrealistic”); Ramco, 207

S.W.3d at 822-23 (criticizing expert for failing to “quantify the risk of failure” and

holding that expert’s characterization of calculations as reasonably certain or

conservative did not satisfy the reasonable certainty test).

           Berry failed to explain his assumed “extraordinarily high” occupancy

rate. Berry’s pro forma assumed an occupancy rate of 81.6% (average of 31

patients/day after the first six-month ramp-up period), which if it had been

achieved, would have catapulted LTT to the top 5% of hospital occupancy rates in

Texas. PX-416 at 1; RR13:78-81, 196. Berry never explained why his projected

81.6% occupancy rate was reasonable or a supportable risk analysis. See Phillips,

2015 LEXIS 439, at *34-45 (rejecting presumed demand and recovery rate for oil

and gas reserves). LTT’s lost profits expert, Glass, acknowledged that Lake Travis

Specialty Hospital could have also been in the bottom 5% and that Berry had

earlier testified that the demand in Lakeway (in 2010 when LTT expected to open

its hospital) was not for 38 beds (as used in the pro forma) but was 22 beds.

RR13:80-85. Glass’s only explanation for the assumed “extraordinary[] success”

was that, after all, “somebody’s got to be in the top 5 percent.” RR13:80-81

(emphasis added). Berry’s testimony that the market could support only 22 beds

per day renders his forecasted 81.6% occupancy rate more than speculative (and




53883200                                  37
spectacularly optimistic)—it was flat wrong or at least “demonstrably unrealistic.”

Phillips, at *36.

           Berry failed to account for inconsistencies in his testimony. Berry never

reconciled his testimony that LTT was “virtually worthless” yet owned valuable

hospital equipment worth 60% of its historical cost. RR8:103. Wal-Mart Stores,

Inc. v. Merrell, 313 S.W.3d 837, 839 (Tex. 2010) (per curiam) (failing to account

for inconsistencies nullifies probative value of expert testimony); City of Keller, at

813, n.34.

           Berry’s testimony regarding use of a three-year multiplier was conclusory.

As noted above, Berry determined LTT’s pre-breach value by multiplying year one

projected EBITDA by three. RR8:101-02. Absent from Berry’s testimony is any

explanation of why three was the proper multiplier for a general acute care hospital

that never opened. Berry identified no comparable general acute care facility that,

before it opened, sold for three times its first-year projected EBITDA.           See

RR13:72. Instead, Berry apparently took the lower end of the multipliers that he

claimed had been used to determine value for unidentified hospitals that had been

in existence for some unidentified time period without explaining (1) whether the

facilities he referred to were long-term acute care facilities or general acute care

facilities, and (2) the competitive environment in which they operated.           His

testimony is therefore non-probative. Justiss, 397 S.W.3d at 159-62.


53883200                                   38
                       c.     The range cases do not apply.
           During the post-verdict phase, LTT argued that the jury was at liberty to

pick any amount of damages—provided that the figure was somewhere between

$13.8 million (the amount Berry claimed a willing buyer would have paid for LTT

before breach) and whatever number just above $0 Berry meant by his testimony

that LTT was “virtually worthless” (the amount Berry claimed LTT was worth

after breach). 1SCR252, 256-58. Numerous courts have rejected the argument

that a jury may assign a number provided it is lower than the amount presented.

E.g., Holland v. Lovelace, 352 S.W.3d 777, 793-95 (Tex. App.—Dallas 2011, pet.

denied) (discussing range cases and rejecting argument that a “jury may assign any

number as damages provided that number is less than the high end testified to by

the experts”); Ramco, 207 S.W.3d at 823 (rejecting plaintiff’s argument that by

reducing the damages sought by 99%, from $640 million to $64 million, the jury

“wrung out of the verdict any speculation”).

           Additionally, recall that Berry offered the jury one calculation: 3 x year-one

EBITDA = $13.8 million. RR8:101-04. LTT neither provided the jury with a

range of damages nor any means by which it could rationally select an amount

between $13.8 million and whatever unspecified, numerical amount Berry

attributed to his “virtually worthless” assessment of the company. Holland, 352

S.W.3d at 792-95. This is not a case, for example, where Berry testified that he



53883200                                     39
thought (1) LTT’s pre-breach value was between two specific numbers (and

offered a factually supported basis for both numbers), and (2) LTT’s post-breach

value was $0. Only perhaps in that situation would the “range argument” be

colorable. But here, Berry offered only one pre-breach value ($13.8 million) and

one post-breach value (“virtually worthless”). To be more specific, Berry did not

offer testimony that the pre-breach value of LTT was between the range of $7.9

million and $13.8 million, or any other range. As the Holland line of cases teach,

LTT cannot now save an arbitrary damages award merely by showing that it is less

than what was requested. This rule is particularly important where, as here, the

jury did not base its $7.9 million award on any evidence related to a range of

damages for the value of the company but, instead, appears to have based its award

on evidence tied to other damages models, one of which was disposed of by

summary judgment.

                      d.    Any finding that the jury’s award of $7.9 million was
                            foreseeable is not supported by legally or factually
                            sufficient evidence.
           The jury’s damage award for LTT’s loss in fair market value also fails

because the record lacks any evidence that these damages were foreseeable. There

is no evidence that this measure of damage was even contemplated by the parties

when they signed the Letter of Intent. At the very least, the evidence is factually

insufficient to support foreseeability.



53883200                                  40
           Consequential damages—like those awarded to LTT—are recoverable only

if they were foreseeable at the time the contract was made. Basic Capital Mgmt.,

Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894, 901-02 (Tex. 2011). Stated

differently, consequential damages “are not recoverable unless the parties

contemplated at the time they made the contract that such damages would be a

probable result of the breach.” Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex. 1998)

(per curiam) (emphasis added).          In addition, the damages must be “directly

traceable to the wrongful act and result from it.” Id. (emphasis added).

           Importantly, general knowledge of a plaintiff’s business is not sufficient to

satisfy the element of foreseeability. Id. at 902. LTT was required to present

more.        Specifically, LTT was required to present evidence that the parties

contemplated a loss in LTT’s fair market value if the Letter of Intent were

breached. See Spin Doctor Golf, Inc. v. Paymentech, L.P., No. 05-11-01014-CV,

2013 WL 3355199, at *5 (Tex. App.—Dallas July 2, 2013, pet. denied) (mem. op.)

(“[Plaintiff] presented no [summary judgment] evidence that the expenses were

contemplated by the parties at the time of the alleged contract to be a probable

result of a breach.”); see also JAAV Invs., LLC v. Amcap Mortg., Ltd., No. 14-12-

00839-CV, 2014 WL 708492, at *6 (Tex. App.—Houston [14th Dist.] Feb. 20,

2014, no pet.) (concluding, in a fraud case, that “at trial, no party adduced evidence

describing the foreseeability of damages” and holding that there was “not more


53883200                                     41
than a scintilla of probative evidence of foreseeability to support the measure of

consequential damages submitted to the jury”). Here, the record does not establish

that loss of LTT’s fair market value was a foreseeable damage for breach of the

Letter of Intent.

           As an initial matter, nothing in the Letter of Intent implicates LTT’s fair

market value. At Berry’s and McDonald’s request, LTT was not a party to the

Letter of Intent, and LTT was to be paid nothing under the Letter of Intent. PX-2;

PX-64; PX-69. Therefore, it was not foreseeable that a breach of the Letter of

Intent would result in diminution to the fair market value of non-party LTT.

           Furthermore, it was not foreseeable that a breach of the Letter of Intent

would render LTT “virtually worthless.” The Letter of Intent outlined a single

transaction for acquisition of a single asset owned by LTT—the Lease. The Lease

was not even LTT’s “primary asset.” RR8:106. The Letter of Intent also made

clear that the proposed consideration of $7.9 million for the assignment of the

Lease was payable to Berry and McDonald and reflected a return of expenses

incurred by them in the development of the Lease property plus a $1.5 million

premium. PX-2 § 2.

           The Letter of Intent also contained terms controlling the exchange and use of

information for due diligence. Id. §§ 6, 9. None of the terms surrounding the use

or confidentiality of the parties’ information mention or refer to LTT’s fair market


53883200                                     42
value. Section 10.1 specifically authorizes injunctive relief without a showing of

actual harm. PX-2 (“Based upon the subject matter of this Letter of Intent . . .

material and irreparable harm shall be presumed.”). Even though not applicable to

LTT as a non-party, Section 10.1’s inclusion demonstrates that the parties did not

know the types of injury/damage the non-breaching party may sustain. Stuart, 964

S.W.2d at 921-22 (noting that contract “makes no mention of this possibility [of

the type of injury] and certainly contains no agreement to pay damages for [the

type of injury at issue]”).

           Of course, the foreseeability inquiry is not confined to the Letter of Intent.

LTT could have elicited evidence of foreseeability through Berry, Alexander, or

the parties’ lawyers, all of whom testified at trial. RR1:11-23. Yet LTT did not

elicit any evidence (testimony or documentary) that LTT’s alleged loss in fair

market value was “foreseeable and directly traceable” to the Sossi answers at issue

in the May 10 email and resulted from them. Stuart, 964 S.W.2d at 921.

           In sum, at a minimum, LTT was required to present evidence that Appellants

understood that a breach of the Letter of Intent would negatively impact LTT’s fair

market value. LTT did not meet that threshold. There is no evidence whether any

party contemplated that loss in fair market value of LTT was a potential result of a

breach, let alone a “probable result” as required by the Texas Supreme Court. Id.

The award of $7.9 million in lost fair market value must therefore be reversed.


53883200                                     43
                      e.    LTT has no valid argument to support the $7.9
                            million award.
           In addition to the inapposite range cases LTT attempted to rely on below

after the verdict (see above), LTT offered other arguments aimed at salvaging the

$7.9 million award, which if reasserted, have no merit.

           For example, LTT erroneously argued that the testimony that Lakeway

Regional would have had to pay Berry and McDonald between $7.5 million and

$8.5 million under Section 2 of the Letter of Intent had the deal closed supported

the jury’s answer to Question 6(3). 1SCR252-54. First, allowing LTT to recover

the amount Berry and McDonald would have received under Section 2 if the

transaction had closed conflicts with Judge Yelenosky’s summary judgment order

on LTT’s Section 2 claim. CR12266; see also Haase v. Glazner, 62 S.W.3d 795,

800 (Tex. 2001) (holding that a party cannot recover benefit of the bargain

damages related to an unenforceable contract). Second, Question 6(3) did not

inquire about the amount that Berry and McDonald would have been paid if

Lakeway Regional had acquired the Lease; rather, that was the damage model LTT

proposed before trial for its defunct claim for breach of Section 2 (i.e., payment of

the promised consideration had Lakeway Regional acquired the Lease). CR171-

72, 13006, 13206; Osterberg v. Peca, 12 S.W.3d 31, 55-56 (Tex. 2000)

(sufficiency of the evidence is measured under the charge); Peterson v. Kroschel,

No. 01-13-00554-CV, 2015 Tex. App. LEXIS 5543, at *11-14 (Tex. App.—


53883200                                  44
Houston [1st Dist.] June 2, 2015, no pet.) (mem. op.); Springs, 184 S.W.3d at 883

n.41. Third, the Letter of Intent is no evidence of what a willing buyer would have

paid for the Lease (even if that had been the measure submitted in Question 6(3)),

because the evidence is undisputed that Lakeway Regional decided not to go

forward with the transaction. Accord Phillips, at *38-40 (holding that a binding

contract for the purchase of plaintiff’s interest was some evidence of value).

Fourth, Berry used an income methodology. RR8:101. LTT cannot support the

jury’s award based on an entirely different methodology—e.g., the supposed value

of the Lease as set forth in an unenforceable provision of the Letter of Intent.

Springs, 184 S.W.3d at 884-86 nn.42-43; see also Holt Atherton, 835 S.W.2d at 85

(“once a party has chosen a particular method for measuring their lost profits, they

must provide a complete calculation”).

           LTT also argued that the parties’ lost profits experts’ testimony provided

“additional evidence of assets, revenues, expenses, opening dates and other metrics

that the jury could have relied on to reduce Mr. Berry’s $13.8 million to $7.9

million.” 1SCR255. That argument erroneously presumes that LTT can mix and

match evidence probative of a different damages measure (e.g., lost profits), which

the jury rejected (CR13006), to supply an evidentiary basis for the jury’s $7.9

million award. Springs, 184 S.W.3d at 884, 886 n.43. Moreover, because the jury

was explicitly instructed to consider LTT’s damage claims separately (CR13006),


53883200                                   45
LTT’s attempt to salvage the jury’s award for lost value with evidence offered on a

separate measure cannot be credited. Osterberg, at 55-56; see also Daugherty v.

So. Pac. Transp. Co., 772 S.W.2d 81, 83 (Tex. 1989) (juries are presumed to have

followed court’s instructions); Springs, 184 S.W.3d at 886 n.43.

           LTT similarly claimed that the jury might have found that LTT’s goodwill

was a valuable asset and reduced the loss in fair market value accordingly.

1SCR255. But while Berry mentioned that goodwill was a valuable asset of LTT’s

(RR8:106), he assigned it no value, foreclosing any argument that the jury’s award

can be upheld on that basis. Salinas, 948 S.W.2d at 289; Canyon Vista, 2014 Tex.

App. LEXIS 1099, at *14-15; Examination Mgmt. Servs., Inc. v. Kersh Risk Mgmt.,

Inc., 367 S.W.3d 835, 844 (Tex. App.—Dallas 2012, no pet.). In other words, the

jury’s award cannot be upheld by assuming that the jury guessed at the value of

LTT’s goodwill and then deducted that amount from the $13.8 million loss in

value Berry claimed LTT sustained. The same is true of the equipment that Berry

testified LTT owned but to which he did not ascribe a specific value. There is

simply no evidence from which the jury could have performed some mathematical

equation in the jury room to reduce LTT’s damage model ($13.8 million) to the

amount awarded ($7.9 million) because LTT did not put on any evidence of the

variables that would be involved in that equation. Univ. Gen. Hosp., LP, 403

S.W.3d at 555. The far more likely explanation for why the jury departed from


53883200                                  46
LTT’s $13.8 million figure and awarded $7.9 million for the diminution in value is

that it either awarded LTT the amount it would have received under Section 2 of

the Letter of Intent (i.e., $7.9 million) had the deal closed or errantly understood

that blank to relate to the claimed value of the confidential information at issue

(i.e., $7.9 million).

                 3.     The jury’s award of $790,000 is also unsupported by legally
                        or factually sufficient evidence.
           The jury’s $790,000 award for the loss in fair market value of LTT’s

confidential information suffers from many of the same problems as the jury’s $7.9

million award for the loss in the fair market value of LTT.

           Once again, Berry’s testimony falls short. First, Berry testified that the

value of LTT’s confidential information was $7.9 million, not $790,000.

RR8:104-06, 161-62; RR9:165.           According to Berry, the $7.9 million was a

combination of historical costs incurred between 2004 and the date of the breach

(cash outlays and borrowed sums) plus the amount a willing buyer would pay a

willing seller.       RR8:104-06, 161-62.    Berry testified that following Lakeway

Regional’s breach, the confidential information was “[v]irtually worthless.”

RR8:162. That is the entirety of the evidence on this claim. As with the jury’s

award for loss in fair market value of LTT, the jury’s award for loss in fair market

value of LTT’s confidential information does not match any evidence but is an

arbitrary amount plucked from thin air. Saenz, 925 S.W.2d at 614.


53883200                                    47
           Second, Berry’s brief testimony on the fair market value of LTT’s

confidential information was conclusory, speculative, vague, non-probative, and

lacking reasonable certainty. Phillips, 2015 Tex. LEXIS 439, at *32; Justiss, 397

S.W.3d at 158. And given Berry’s testimony that the two primary assets of LTT

were its confidential information and its goodwill (RR8:106), it makes even less

sense that a reasonable and fair minded jury could have found that breach of the

Letter of Intent diminished LTT’s value by $13.8 million, but that the loss in value

of one of LTT’s two primary assets was $790,000. City of Keller, 168 S.W.3d at

827.

           Below, LTT tried to salvage the jury’s $790,000 award with many of the

same arguments used in its attempt to salvage the jury’s $7.9 million award.

1SCR256-58. Those efforts are futile for all the reasons stated above.

           As an additional argument, LTT argued that the jury might have determined

that interest savings achieved by Lakeway Regional by participating in the HUD

program evidenced the value of the confidential information to Lakeway Regional

and SDP. 1SCR242, 257. However, that was not the methodology LTT presented

to the jury. RR8:104-06, 161-62. LTT cannot now defend an arbitrary award by

mining the record for dollars and adding them together.         Holt Atherton, 835

S.W.2d at 85; Springs, 184 S.W.3d at 884, 885-86 nn.42-43. Moreover, LTT




53883200                                   48
represented it was not seeking damages based on Lakeway Regional’s purported

interest savings. RR5:41-43.

           In sum, because neither damage award is supported by legally sufficient

evidence, reversal and rendition of a judgment that LTT take nothing is the

appropriate remedy. Kerr-McGee Corp. v. Helton, 133 S.W.3d 245, 254, 259-60

(Tex. 2004) (declining to remand and provide plaintiff “‘an opportunity for another

bite at the apple’”). Alternatively, because the evidence is factually insufficient to

support either damage award and both awards are excessive, the Court should

remand for a new trial. Pool, at 635; DeNucci v. Matthews, 03-11-00680-cv, 2015

Tex. App. LEXIS 4041, *27-33 (Tex. App.—Austin Apr. 23, 2015, no pet.).

II.        The Trial Court Committed Fatal Charge Error; a New Trial Is
           Warranted.

           A.    Under Casteel, and the facts of this case, the trial court was
                 required to list the specific provisions of the Letter of Intent that
                 could support the jury’s “yes” finding to Questions 1(a) and 1(b).

           Appellants objected to Question 1 on the basis of Casteel and submitted an

instruction (a separate point below) that would accompany the question of whether

Appellants failed to comply with specifically listed sections of the Letter of Intent

because LTT’s live pleading broadly alleged that Lakeway Regional and SDP

breached the contract. CR171-72. But Section 2 was not viable at the time this

case went to the jury; the trial court had granted summary judgment in favor of

Lakeway Regional and SDP on LTT’s Section 2 claim. CR12266.


53883200                                    49
           Over Appellants’ objections, the trial court erred in submitting Question 1 to

the jury as a single, broad form question on liability that included consideration of

Section 2—asking: “Did SDP and/or LRMC fail to comply with the Letter of

Intent?” CR13000; RR14:30.16

           “[W]hen a trial court submits a single broad-form liability question

incorporating multiple theories of liability, the error is harmful and a new trial is

required when the appellate court cannot determine whether the jury based its

verdict on an improperly submitted invalid theory.” Casteel, 22 S.W.3d at 388.

“[W]hen a jury bases a finding of liability on a single broad-form question that

commingles invalid theories of liability with valid theories, the appellate court is

often unable to determine the effect of this error.” Id. “It is essential that the

theories submitted be authorized and supported by the law governing the case. If

they are not, the appellate court must, at a minimum, be able to determine whether

properly submitted theories constituted the basis of the jury’s verdict.” Id. at 389

(emphasis added).

           A trial court errs when it submits theories of liability that are not legally


16
     The objection was as follows:
           [W]e object to Question No. 1 on the grounds that we believe it submits legally
           invalid theories of liability. In particular, the broad form fails to recognize that
           Judge Yelenosky previously granted summary judgment on the Section 2 claim,
           and the Section 2 claim can be considered by the jury under this broad form
           submission.
RR14:30.


53883200                                           50
viable, e.g., liability theories that (a) have not been pleaded, (b) are not supported

by legally sufficient evidence, or (c) are not supported by operative law. See Tex.

R. Civ. P. 277 (requiring that the trial court submit issues that are raised by the

pleadings and the evidence); Casteel, 22 S.W.3d at 390 (stating that Rule 277

implicitly mandates that the jury be able to base its verdict on legally valid

questions and instructions); see also Romero v. KPH Consol., Inc., 166 S.W.3d

212, 215 (Tex. 2005) (“[B]road-form submission cannot be used to put before the

jury issues that have no basis in the law or the evidence.”) (emphasis added); Tex.

R. Civ. P. 278.

           While not every breach of contract case will require a separate inquiry into

the terms breached, here it was required. Because broad form was used, it is

impossible to know from the jury’s answer to Question 1 whether the jury

answered “yes” on the basis that Lakeway Regional failed to acquire the Lease or

reimburse Berry and McDonald certain expenses, which are obligations only under

Section 2 of the Letter of Intent, or on the basis of some other provision of the

Letter of Intent.

           In its post-verdict briefing, LTT—when arguing that the jury could consider

breach of any provision of the Letter of Intent (except Section 2) (1SCR279)—

highlighted the fundamental problem with submitting a broad form liability

question when one aspect of the contract has already been held unenforceable: this


53883200                                    51
Court will never know if the jury’s affirmative finding to Question 1 was based on

a finding that Lakeway Regional or SDP breached Section 2 or some other aspect

of the contract.

           This case is much like Texas Commission on Human Rights v. Morrison,

381 S.W.3d 533, 536-38 (Tex. 2012) (per curiam), involving a former employee’s

retaliation action. In that case, the jury was asked:

           Did the Texas Commission on Human Rights (TCHR) take adverse
           personnel actions against Marilou Morrison because of her opposition
           to an unlawful discriminatory practice?
Id. at 535. Like Question 1 here—which fails to identify the provisions of the

Letter of Intent that could be the basis of a breach finding—the charge in that case

did not define “adverse personnel actions.” Id. There, TCHR argued that the

charge lumped its alleged wrongful actions together, that the case was “‘really,

about retaliation and termination’” and “that it would not be possible to determine

what adverse acts would form the basis of the jury’s verdict.”            Id. at 536

(emphasis added). The Texas Supreme Court held that it was reversible error to

ask in a broad-form question whether the employer took “adverse personnel

actions” against the employee because the charge failed to define that phrase and it

was impossible to determine what adverse “acts” formed the basis of the jury’s

verdict:

           This is the problem we identified in Casteel—commingling valid and
           invalid theories of liability in a broad-form question. This is


53883200                                   52
           especially true given that, from the outset of the underlying
           proceeding, the scope of what adverse personnel actions could form
           the basis of the suit was a contentious issue.
Id. (emphasis added). On the issue of harm, the Supreme Court held that “when a

broad-form question allows a finding of liability based on an invalid theory, an

appealing party does not have to prove that the jury actually relied on the invalid

theory.” Id. at 537.

           Two other cases are illustrative and support a reversal: Clear Lake City

Water Authority v. Kirby Lake Development, Ltd., 123 S.W.3d 735 (Tex. App.—

Houston [14th Dist.] 2003, pet. denied), and McFarland v. Boisseau, 365 S.W.3d

449 (Tex. App.—Houston [1st Dist.] 2011, no pet.).

           In Clear Lake, the Water Authority argued that there was Casteel error in the

broad-form submission of the breach of contract liability question involving

several contracts because it could not be determined whether the jury relied on an

invalid theory to find a breach. 123 S.W.3d at 752. The Fourteenth Court of

Appeals held that two of the three breach of contract theories were invalid and

should not have been considered by the jury as a basis for breach of contract:

           Because we cannot determine from the jury’s answers the basis for
           their finding that the Authority failed to comply with its contracts, we
           find that the error is harmful, and we reverse and remand University’s
           claims for trial.

Id.




53883200                                     53
           Likewise, in McFarland, the First Court of Appeals held it was reversible

error to submit a single broad-form damages question that did not separately list

each allegedly defamatory statement. 365 S.W.3d at 453-54; see also Benge v.

Williams, No. 01-12-00578-CV, 2014 Tex. App. LEXIS 12445, at *45 (Tex.

App.—Houston [1st Dist.] Nov. 18, 2014, no pet.) (rejecting argument that Casteel

error did not apply in analogous context); Sand Point Ranch, Ltd. v. Smith, 363

S.W.3d 268, 274-75 (Tex. App.—Corpus Christi 2012, no pet.) (finding reversible

error in submitting a broad-form question to the jury that included invalid bases for

liability).17

           Under these well-established principles, Question 1 was fatally flawed

because it comingled valid and invalid liability theories. Further, without a proper

instruction describing the provisions of the Letter of Intent on which the jury could

find a breach (see Section II.C. below), this Court is unable to ascertain whether

the jury based its answer upon a finding that either Appellant breached Section 2—

though that result seems most probable given that the damages awarded for the


17
   Undoubtedly, the issue of whether Appellants complied with Section 2 was before the jury.
Witnesses were asked questions about Section 2 directly and indirectly and, of course, the
provision was part of the evidence presented to the jury. E.g., RR6:90-91, 147-48; RR8:106,
168; RR9:141-42, 179, 210; RR12:17-19, 23; RR13:103-05; PX-2. See Benge, 2014 Tex. App.
LEXIS 12445, at *30 (“If one of the plaintiff’s legal theories does not support liability as a
matter of law and the plaintiff presented evidence to the jury on that theory that may have led the
jury to answer affirmatively the broad-form liability question incorporating the invalid theory,
there is a Casteel-type charge error.”). Importantly, the jury was never informed that a breach
finding could not be based on either Appellant’s failure to comply with Section 2. See infra at
Section II.C.


53883200                                        54
breach matched the amount that would have been due under Section 2 had the

transaction been consummated. CR13006; RR13:104-06. Because it is impossible

to determine whether the jury’s answer to Question 1 was based on Section 2 (an

unenforceable provision) or some other provision, harm is presumed. Tex. R. App.

P. 44.1(a)(2).18

           B.     Casteel also applies to Question 6 regarding damages.

           Casteel applies to damages submissions as well. Harris Cnty. v. Smith, 96

S.W.3d 230, 233-34 (Tex. 2002).                 Over Appellants’ objection, the trial court

allowed the jury to award damages predicated on a legally unenforceable section of

the Letter of Intent.19

           Because LTT alleged multiple breaches, the failure to provide the jury with a

question that asked it to award damages connected to a specific breach also


18
   Alternatively, if the presumed harm Casteel analysis is found inapplicable, harm exists. The
manner in which the breach claim was submitted allowed the jury to award damages that were
recoverable under Section 2, which it appears the jury did (i.e., the $7.9 million is the same
amount owed had Lakeway Regional acquired the Lease). RR8:106; RR9:210; RR12:170-71;
RR13:104-06. Therefore, considering the entire record, the use of broad form submission
probably resulted in an improper judgment. Tex. R. App. P. 44.1(a); Hawley, 284 S.W.3d at
856.
19
     Lakeway Regional and SDP objected to Question No. 6 as follows:
           We also object to Question No. 6 in that we believe that it also submits damage
           theories that are -- have been rejected by the prior -- prior Court’s ruling in the
           summary judgments in the form of damages that may arise out of the contract
           itself. And the -- by this question, the jury will be answering the question and the
           Court of Appeals will not be able to tell the basis upon which the jury has
           rendered its decision.

RR14:35.


53883200                                           55
violates Casteel. Id. For example, in answering Question 6(3), which asked the

jury to award damages for loss in fair market value of LTT because of “[Lakeway

Regional] and/or SDP’s failure to comply with the Letter of Intent,” the jury could

well have awarded LTT damages that resulted from the failure to comply with

Section 2, even though LTT’s claim for its breach and damages that were a

“natural, probable, and foreseeable consequence” of that breach (CR13006) failed

as a matter of law. CR12266.

           Because of the broad-form question and predicate, this Court cannot

determine whether a breach of Section 2 is what informed the jury’s award. But (if

harm were not presumed) it is probable given that the evidence presented at trial

showed that had Lakeway Regional acquired the Lease, Section 2 required

Lakeway Regional to pay Berry and McDonald approximately $7.9 million

(comprised of reimbursements for incurred costs plus a $1.5 million lump sum).

RR8:106; RR9:210; RR12:170-71; RR13:104-06; PX-2. That figure is, as noted

above, the exact amount that the jury awarded. CR130056. Romero, 166 S.W.3d

at 226 (even if the jury could have reached the same result with a proper

instruction, “the error in the question is nevertheless reversible because it

effectively prevents [the appellant] from complaining on appeal that they would

not have done so”).




53883200                                56
           C.    The trial court likewise erred in refusing to include a proper
                 instruction in Question 1—to cure the Casteel problem.
           Separate from, but consistent with, their Casteel objection, Appellants asked

the trial court to instruct the jury that in deciding whether there was a failure to

comply with the Letter of Intent, as to each specifically-listed section of the Letter

of Intent, the jury had to find a valid, enforceable agreement between the parties,

that the defendant breached the contract, and that the defendant caused the plaintiff

injury. CR12972;20 RR14:31. Had this instruction been given, then the jury would

have been limited to the sections of the Letter of Intent that were legally

enforceable, and would not have had the option to find in LTT’s favor based on

breach of unenforceable Section 2. And because the damages awarded by the jury

($7.9 million) is the same amount that would have been due upon acquisition of the

Lease (e.g., RR13:104-06), the harm resulting from the failure to provide this

instruction is plain. Tex. R. App. P. 44.1(a).

           The Texas Supreme Court made clear in Hawley that trial courts must give

instructions to the jury to limit the jury’s consideration to the act or omission that

can create liability. Hawley, 284 S.W.3d at 863. The trial court did not do so here.




20
   The proposed instruction would have informed the jury that it had to find, as to specifically
listed sections of the Letter of Intent, that there was a valid, enforceable contract, LTT was a
proper party to the contract, LTT performed or was excused from performing, the defendant
breached, and that breach caused LTT injury. CR12972.


53883200                                      57
           Charge error infected the trial of the case. If the Court does not reverse and

render on the grounds set forth in Section I, supra, a new trial is required.

III.       For Additional and Separate Reasons, the Judgment Against SDP
           Should Be Reversed.
           LTT was not entitled to a judgment against SDP for at least three reasons:

(1) as a matter of law, SDP cannot be liable for breach because it was not a party to

the Letter of Intent and therefore had no obligations thereunder; (2) alternatively,

whether SDP was a party to the Letter of Intent should have been submitted to the

jury; and (3) there is legally and factually insufficient evidence that SDP breached

the Letter of Intent.

           A.    SDP was not a party to the Letter of Intent, but an agent of a
                 disclosed principal.
           “Unless the parties have agreed otherwise, a person making or purporting to

make a contract with another as agent for a disclosed principal does not become a

party to the contract.” A to Z Rental Ctr. v. Burris, 714 S.W.2d 433, 435 (Tex.

App.—Austin 1986, writ ref’d n.r.e.) (emphasis added). Here, SDP executed the

Letter of Intent as the agent of its disclosed principal, Lakeway Regional. Indeed,

the first paragraph identifies SDP as the agent for Lakeway Regional:

           Surgical Development Partners, LLC (“SDP”) is pleased to submit
           this Letter of Intent, as agent for LRMC, to each of you (collectively,
           the “Principals”) (each a “Party” and collectively the “Parties”) for the
           Parties to work in good faith . . . .




53883200                                      58
PX-2 (emphasis added). Because the only reasonable construction of the Letter of

Intent is that SDP was not a party and was only acting as Lakeway Regional’s

agent, LTT’s breach claim against it was not cognizable as a matter of law. Fiess

v. State Farm Lloyds, 202 S.W.3d 744, 746 (Tex. 2006) (contract is not ambiguous

if there is only one reasonable construction); see, e.g., Mays v. Pierce, 203 S.W.3d

564, 575 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). SDP, as a matter of

law, had no duty to LTT, breached no agreement with LTT, nor caused any

damages to LTT. Accordingly, the jury’s answer to Question 1(b) is immaterial

and should have been disregarded. Spencer v. Eagle Star Ins. Co. of Am., 876

S.W.2d 154, 157 (Tex. 1994). The judgment against SDP should be reversed and a

judgment rendered in its favor for this reason alone.

           B.   The trial court, at the very least, should have submitted a jury
                question asking whether SDP was a party to the Letter of Intent.
           Where a contract is ambiguous, a jury is to decide its meaning. Plains

Exploration & Prod. Co. v. Torch Energy Advisors Inc., No. 13-0597, 2015 Tex.

LEXIS 558, at *22 (Tex. June 12, 2015).

           Assuming arguendo that the Letter of Intent is ambiguous, the judgment

must be reversed because SDP was prevented from having a jury decide the

disputed issue of whether it was a party to the Letter of Intent. Undoubtedly, the

evidence conflicted on this issue. Alexander testified that he signed the Letter of

Intent in his capacity as CEO of SDP as the agent of Lakeway Regional and that


53883200                                 59
SDP’s confidentiality obligations were under the earlier confidentiality agreement.

RR11:179-80, 190-93; RR12:10-14. Conversely, Berry testified that SDP was a

party to the Letter of Intent. RR6:149; RR8:202; RR9:172-74.

           In light of the conflicting evidence, SDP asked the Court to either submit a

question asking “Was SDP a party to the Letter of Intent dated September 15, 2009

in its individual capacity?” (CR12971) or to include an instruction to the breach of

contract question that would have informed the jury that it had to find that “there is

a valid, enforceable contract between the parties” (CR12972). Its requests were

overruled. CR12971-72; RR14:30-31. The trial court abused its discretion in

refusing to allow the jury to decide this threshold issue of whether SDP was a party

to the Letter of Intent. Tex. R. Civ. P. 278; Elbaor v. Smith, 845 S.W.2d 240, 243

(Tex. 1992); see also CR11799 (LTT’s acknowledgement in responding to SDP’s

summary judgment motion that at “a minimum, there is a question of fact as to

whether the parties intended SDP to be bound” to the Letter of Intent). The failure

to submit the instruction or question probably caused the rendition of an improper

judgment. Tex. R. App. P. 44.1(a)(1); Hawley, 284 S.W.3d at 856.

           C.    The jury’s finding in answer to Question 1(b) is not supported by
                 legally or factually sufficient evidence because SDP did not breach
                 any alleged duty that caused any damages.

           The only evidence of the capacity in which Sossi was acting when he sent

the May 10 email (or any other communications to HUD about LTT) came from



53883200                                    60
HUD witness Robert Deen. Deen unequivocally testified that he understood that

Sossi was acting on behalf of Lakeway Regional at the time he sent the May 10

email:

                 Question No. 332: “On whose behalf did HUD understand that
                 Frank Sossi sent the May 10, 2010 response contained in
                 Defendants’ Exhibit 1?”

                 Answer: “Mr. Sossi was responding for Lakeway Regional
                 Medical Center.”
RR10:20.

           The record contains no evidence that contradicts Deen’s testimony, nor does

it contain any evidence that Sossi sent the May 10 email (or any other

communication) on behalf of SDP. Because there is no evidence that Sossi was

acting for SDP when he communicated with HUD about LTT, and no other

evidence to support a finding of duty, breach, or causation as to SDP, the judgment

against SDP should be reversed. Ridgway, 135 S.W.3d at 601. At a minimum, the

evidence is factually insufficient to support the jury’s finding that SDP breached

the Letter of Intent, warranting a new trial. Cain, 709 S.W.2d at 176.21




21
  LTT argued below that the jury could infer that SDP breached the Letter of Intent based on
SDP’s admission that it had communicated with HUD about LTT with respect to LTT’s
January 18, 2011 FOIA request (PX-186) and after June 11, 2011. 1SCR272. But there is no
evidence of the contents of that communication and nothing to connect that communication with
any earlier communication. Marathon Corp., 106 S.W.3d at 727-29.


53883200                                     61
IV.        The Fee Award Cannot Stand.
           Because the jury’s findings in answers to Questions 1(b), 6(1), and 6(3) are

not supported by legally or factually sufficient evidence, the fee award (CR13240;

SCR3) must be reversed.22           There is no question that LTT cannot recover

attorneys’ fees in the absence of a valid claim or in the absence of recoverable

damages. Tex. Civ. Prac. & Rem. Code § 38.001; Ashford Partners, Ltd. v. ECO

Res., Inc., 401 S.W.3d 35, 40-41 (Tex. 2012).

                                        PRAYER
           Appellants Surgical Development Partners, LLC and Lakeway Regional

Medical Center LLC request that the trial court’s judgment be reversed and that the

Court render a judgment that Lake Travis Transitional LTCH, LLC take nothing on

its claims. Alternatively, they request a new trial on all issues. They further ask

for all other relief to which they may be justly entitled.




22
  The fee stipulation was subject to Appellants’ right to challenge any subsequent judgment.
CR13241.


53883200                                    62
           Respectfully submitted,

           NORTON ROSE FULBRIGHT US LLP

           By:          /s/ Jeff Cody
                 Jeff Cody
                 State Bar No. 04468960
                 jeff.cody@nortonrosefulbright.com
                 Barton W. Cox
                 State Bar No. 2406508
                 beau.cox@nortonrosefulbright.com
                 James V. Leito IV
                 State Bar No. 24054950
                 james.leito@nortonrosefulbright.com
           2200 Ross Avenue, Suite 3600
           Dallas, TX 75201-7932
           Telephone: (214) 855-8000
           Telecopier: (214) 855-8200

           and

           NORTON ROSE FULBRIGHT US LLP
               Joy M. Soloway
               State Bar No. 18838700
                 joy.soloway@nortonrosefulbright.com
           1301 McKinney, Suite 5100
           Houston, Texas 77010
           Telephone: (713) 651-5151
           Telecopier: (713) 651-5246

           Counsel for Appellant/Cross-Appellee,
           Lakeway Regional Medical Center, LLC

           and




53883200    63
                                      WRIGHT & CLOSE, LLP
                                            Jessica Z. Barger
                                            barger@wrightclose.com
                                            State Bar No. 24032706
                                            Raffi O. Melkonian
                                            melkonian@wrightclose.com
                                            State Bar No. 24090587
                                      One Riverway, Suite 2200
                                      Houston, TX 77056
                                      Telephone: (713) 572-4321
                                      Telecopier: (713) 572-4320
                                      Counsel for Appellant/Cross-Appellee
                                      Surgical Development Partners, LLC

                 CERTIFICATE OF WORD COMPLIANCE
       Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), the undersigned
counsel – in reliance upon the word count of the computer program used to prepare
this document – certifies that this brief contains 14,898 words, excluding the words
that need not be counted under Texas Rule of Appellate Procedure 9.4(i)(1).

                                         /s/ Joy M. Soloway
                                      JOY M. SOLOWAY




53883200                                64
                            CERTIFICATE OF SERVICE
      I hereby certify that on the 21st day of September 2015, Appellants/Cross-
Appellees served a copy of this Brief by electronic service (via FileTime) and
email upon the following counsel of record:

           Ms. Jane Webre (jwebre@scottdoug.com)
           Mr. S. Abraham Kuczaj III (akuczaj@scottdoug.com)
           Ms. Paige A. Amstutz (pamstutz@scottdoug.com)
           Mr. Steven J. Wingard (swingard@scottdoug.com)
           SCOTT, DOUGLASS & MCCONNICO, L.L.P.
           One American Center
           303 Colorado Street, Suite 2400
           Austin, TX 78701
           Counsel for Appellee/Cross-Appellant,
           Lake Travis Transitional LTCH, LLC
           n/k/a Lake Travis Specialty Hospital, LLC

           Mr. Robert Bragalone (bbragalone@gordonrees.com)
           Mr. B. Ryan Fellman (rfellman@gordonrees.com)
           GORDON & REES LLP
           2100 Ross Avenue, Suite 2800
           Dallas, TX 75201
           Counsel for Appellees Brennan, Manna &
           Diamond, LLC and Frank T. Sossi

                                           /s/ Joy M. Soloway
                                        JOY M. SOLOWAY




53883200                                  65
                                            INDEX TO APPENDIX

Description                                                                                                               Tab
Judgment ....................................................................................................................1
Verdict ........................................................................................................................2

Letter of Intent ...........................................................................................................3




53883200
TAB 1
                                       DC       BK14294 PG476
                                                                              Filed in The District Court
                                                                               of Travis County, Texas

                                                                                    OCT 17 2014 RT
                                                                             At         1:?Jc; 4 M.
                               CAUSE NO. D-1-GN-12-000983                     Amalia Rodriguez-Mendoza, Cieri<.

 LAKE TRAVIS TRANSITIONAL LTCH,                 §               IN THE DISTRICT COURT OF
 LLC n/k/a LAKE TRAVIS SPECIALTY                §
 HOSPITAL, LLC,                                 §
                                                §
 v.                                             §                   TRAVIS COUNTY, TEXAS
                                                §
 LAKEWAY REGIONAL MEDICAL                       §
 CENTER, LLC, SURGICAL                          §
 DEVELOPMENT PARTNERS, LLC,                     §
 BRENNAN, MANNA & DIAMOND, LLC,                 §
 AND FRANK T. SOSSI,                            §                   345th JUDICIAL DISTRICT


                                        JUDGMENT

          On August I I. 2014. this cause came on to be heard.           Plaintiff Lake Travis

Transitional LTCH, LLC n/k/a Lake Travis Specialty Hospital, LLC ("Plaintiff' or "LTT"),

appeared in person and by attorney of record and announced ready for trial. Defendant

Lakeway Regional Medical Center, LLC ("LRMC") and Defendant Surgical Development

Partners, LLC ("SDP") (collectively, "Defendants" and each a "Defendant"), appeared in

person and by their attorney of record and announced ready for trial. A jury having been

previously demanded, a jury was duly empanelled and the case proceeded to trial.

          The jury heard the witnesses and the presentation of evidence. At the conclusion

of the evidence, the Court submitted the questions of fact in the case to the jury. The

charge of the court and the verdict of the jury are incorporated by reference herein for all

purposes.     On August 28. 2014, the jury returned a verdict to the Court.         Because it

appears to the Court that the verdict of the jury was for Plaintiff LTT and against




1138876




                                                                3
                                     DC          BK14294 PG477




Defendants SDP and LRMC, judgment should be rendered on the verdict in favor of the

Plaintiff LTT and against the Defendants SDP and LRMC.

          IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that Plaintiff

L TT, in respect to its breach of contract claim, have and recover actual, past damages

from Defendants SOP and LRMC. jointly and severally, in the amount of $7,900,000.00,

as well as prejudgment interest on that amount at an annual rate of five percent (5.0% ).

As of October 13. 2014. prejudgment interest on that amount, calculated as simple

interest based on the date this case was filed on April 3, 2012, totals $998,863.01, which

amount shall increase by $1,082. 19 per day until the date this judgment is signed.

          The Court finds that the parties have stipulated that the amount of reasonable

attorney fees incurred by Plaintiff LTT in the prosecution of its breach of contract claim

against Defendants SOP and LRMC is $2,000,000.00. IT IS THEREFORE ORDERED,

ADJUDGED, AND DECREED that Plaintiff L TT have and recover from Defendants

SDP and LRMC, jointly and severally, reasonable attorneys' fees incurred in the

prosecution of LTT' s breach of contract claim in the sum of $2,000,000.00 pursuant to

Chapter 38 of the Texas Civil Practice and Remedies Code.

          IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all costs of

court incurred by Plaintiff LTT in this matter are adjudged against and shall be recovered,

jointly and severally, from Defendants SDP and LRMC.

          IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Plaintiff LTT

have judgment against Defendants SDP and LRMC, and that the total amount of



                                             2
1138876




                                                                 4
                                         DC           BK14294 PG478


•




    judgment for Plaintiff LTT against Defendants SOP and LRMC, jointly and severally,

    shall be as follows:    actual damages in the sum of $7,900,000.00; plus prejudgment

    interest on that sum as set forth above; plus attorneys' fees in the stipulated amount of

    $2,000,000.00; plus costs of court; plus post-judgment interest on the sum total of each of

    the foregoing, at an annual rate of five percent (5.0% ), compounded annually, from the

    date this judgment is rendered until paid.

           IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all writs and

    processes for the enforcement and collection of this judgment or the costs of court shall

    tssue as necessary.

           IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED by the Court

    that the relief specified above is hereby granted and, as to all parties and issues in this

    case, all relief not specifically granted herein is expressly denied. This judgment is final,

    disposes of all claims and parties. and is appealable.



           SIGNED on October _    _il ~-.-
                                                                      '
                                                       ,:~~-/                 -   .
                                                                                  '




                                                 HONORABLE'LdRA .--                   INGSTON
                                                           '
                                                 PRESIDINGJUDGE




                                                  3



                                                                          5
TAB 2
                                                   DC     BK14259 PG396




                                                                                          ORIGINAL
..




                                             CAUSE NO. D-1-GN-12-000983


     LAKE TRAVIS TRANSITIONAL LTCH,                           §           IN THE DISTRICT COURT OF
     LLC n/k/a LAKE TRAVIS SPECIALTY                          §
     HOSPITAL, LLC,                                           §
                                                              §
     v.                                                       §           TRAVIS COUNTY, T EXA S
                                                              §
     LAKEWAY REGIONAL MEDICAL                                 §
     CENTER, LLC AND SURGICAL                                 §
     DEVELOPMENT PARTNERS, LLC                                §           345™ JUDICIAL DISTRICT


                                              CHARGE OF THE COURT


     LADIES AND GENTLEMEN OF THE JURY:


               After the closing arguments, you will go to the jury room to decide the case, answer the
     questions that are attached, and reach a verdict. You may discuss the case with other jurors only
     when you are all together in the jury room.


               Remember my previous instructions: Do not discuss the case with anyone else, either in
     person or by any other means. Do not do any independent investigation about the case or conduct
     any research. Do not look up any words in dictionaries or on the Internet. Do not post information
     about the case on the Internet. Do not share any special knowledge or experiences with the other
     jurors. Do not use your cell phone or any other electronic device during your deliberations for any
     reason.


               Any notes you have taken are for your own personal use. You may take your notes back into
     the jury room and consult them during deliberations, but do not show or read your notes to your
     fellow jurors during your deliberations. Your notes are not evidence. Each of you should rely on
     your independent recollection of the evidence and not be influenced by the fact that another juror has
     or has not taken notes.


               You must leave your notes with the bailiff when you are not deliberating. The bailiff will
     make sure your notes are kept in a safe, secure location and not disclosed to anyone. After you
     complete your deliberations, the bailiff will collect your notes. When you are released from jury
     duty, the bailiff will promptly destroy your notes so that nobody can read what you wrote.


               Here are the instructions for answering the questions:


               1.     Do not let bias, prejudice or sympathy play any part in your decision.


     Charge of the Court
     Page 1 Filed in The District Court                                               Filed in The District Court
             of Travis County, Texas                                                   of Travis County, Texas

                    AUG   2 7 2014 RT                                                       AUGJ _8 2014 �T
          At        /: )Q e             M.                                           At        \Z- 1o t: M.
           Amalia Rodriguez-Mendoza, Clerk                                            Amalia Rodriguez-Mendoza, Clerk
                                                                           12997
                                               DC        BK14259 PG397




'




            2.       Base your answers only on what was presented in court and on the law that is in these
    instructions and questions. Do not consider or discuss any evidence that was not presented in the
    courtroom.


            3.       You are to make up your own minds about the facts. You are the sole judges of the
    credibility of the witnesses and the weight to give their testimony. But on matters of law, you must
    follow all of my instructions.


            4.      If my instructions use a word in a way that is different from its ordinary meaning, use
    the meaning I give you, which will be a proper legal definition.


            5.      All the questions and answers are important. No one should say that any question or
    answer is not important.


            6.      Answer "Yes" or "No" to all questions unless you are told otherwise. A "Yes"
    answer must be based on a preponderance of the evidence unless you are told otherwise. Whenever
    a question requires an answer other than "Yes" or "No," your answer must be based on a
    preponderance of the evidence unless you are told otherwise.


            The term "preponderance of the evidence" means the greater weight of credible evidence
    presented in this case. If you do not find that a preponderance of the evidence supports a "Yes"
    answer, then answer "No." A preponderance of the evidence is not measured by the number of
    witnesses or by the number of documents admitted in evidence.                For a fact to be proved by a
    preponderance of the evidence, you must find that the fact is more likely true than not true.


            7.       Do not decide who you think should win before you answer the questions and then
    just answer the questions to match your decision.           Answer each question carefully without
    considering who will win. Do not discuss or consider the effect your answers will have.


            8.       Do not answer questions by drawing straws or by any method of chance.


            9.       Some questions might ask you for a dollar amount. Do not agree in advance to decide
    on a dollar amount by adding up each juror's amount and then figuring the average.


            10.      Do not trade your answers. For example, do not say, "I will answer this question your
    way if you answer another question my way."


            11.      Unless otherwise instructed, the answers to the questions must be based on the
    decision of at least 10 of the 12 jurors. The same 10 jurors must agree on every answer. Do not
    agree to be bound by a vote of anything less than 10 jurors, even if it would be a majority.




    Charge of the Coutt
    Page2




                                                                         12998
                                           DC        BK14259 PG398




        As I have said before, if you do not follow these instructions, you will be guilty of juror
misconduct, and I might have to order a new trial and start this process over again. This would waste
your time and the parties' money, and would require the taxpayers of this county to pay for another
trial. If a juror breaks any of these rules, tell that person to stop and report it to me immediately.


        In answering questions about damages, answer each question separately. Do not increase or
reduce the amount in one answer because of your answer to any other question about damages. Do
not speculate about what any party's ultimate recovery may or may not be. Any recovery will be
determined by the court when it applies the law to your answers at the time of judgment.


Definitions


        "LTT'' means Lake Travis Transitional LTCH, LLC nlk/a Lake Travis Specialty Hospital,
LLC.


        "LRMC" means Lakeway Regional Medical Center, LLC.


        "SDP'' means Surgical Development Partners, LLC.


        "Letter oflntent" means the letter agreement between SDP and LTT dated September 15,
2009.




Charge ofthe Court
Page 3




                                                                     12999
                                        DC        BK14259 PG399




QUESTION �0. 1:

        Did SDP and/or LRMC fail to comply with the Letter of lntent?

        Answer "Yes" or " No" for each of the following:

        a.      LRMC

        b.       SDP




Charge of the Court
Page4




                                                                  13000
                                             DC       BK14259 PG400




        If you answered "Yes" to any subpart of Question No. 1 then answer the corresponding
subpart of the following question. Otherwise, do not answer the following question.

QUESTION NO. 2:

        Was LRMC's and SDP's failure to comply excused?

        Failure to comply by LRMC and/or SDP is excused by LTT' s previous failure to comply with
a material obligation of the Letter of Intent.

                 A failure to comply must be material. The circumstances to consider in determining
        whether a failure to comply is material include:

                 1.     the extent to which the injured party will be deprived of the benefit which it
                        reasonably expected;

                 2.     the extent to which the injured party can be adequately compensated for the
                        part of that benefit of which it will be deprived;

                 3.     the extent to which the party failing to perform or to offer to perform will
                        suffer forfeiture;

                 4.     the likelihood that the party failing to perform or to offer to perform will cure
                        his failure, taking into account the circumstances including any reasonable
                        assurances;

                 5.     the extent to which the behavior of the party failing to perform or to offer to
                        perform comports with standards of good faith and fair dealing.

        Failure to comply by LRMC and/or SDP is excused if the following circumstances occurred:

                 1.     LTT

                        a.      by words or conduct made a false representation or concealed
                                material facts, and

                        b.      with knowledge of the facts or with knowledge or information that
                                would lead a reasonable person to discover the facts, and

                        c.      with the intention that LRMC and/or SDP would rely on the false
                                representation or concealment in acting or deciding not to act; and




Charge of the Coutt
PageS




                                                                      13001
                                       DC        BK14259 PG401




                2.     LRMC and/or SDP

                       a.   did not know and had no means of knowing the real facts; and

                       b.   relied to its detriment on the false representation or concealment of
                            material facts.

       Answer "Yes" or " No" for each of the following:

       a.       LRMC

       b.       SDP




Charge ofthe Court
Page6




                                                                 13002
                                           DC         BK14259 PG402




QUESTION NO. 3:

          Did LRMC and/or SDP make a negligent misrepresentation on which LIT justifiably
relied?

          Negligent misrepresentation occurs when-


          1.     a party makes a representation in the course of his business or in a transaction
                 in which he has a pecuniary interest, and

          2.     the representation supplies false information for the guidance of others in
                 their business, and

          3.     the party making the representation did not exercise reasonable care or
                 competence in obtaining or communicating the information.

          Answer "Yes" or " No" for each of the following:


          a.     LRMC

          b.     SDP




Charge of the Court
Page 7




                                                                      13003
                                       DC        BK14259 PG403




       If you answered "Yes" to any subpart of Question No. 3 then answer the corresponding
subpart of the following question. Otherwise, do not answer the following question.


QUESTION NO. 4:

       By what date should LTT, in the exercise of reasonable diligence, have discovered the
negligent misrepresentation of LRMC and/or SDP?

       Answer with a date in the blank below for each of the following:

       a.       LRMC

       b.       SDP




Charge of the Court
Page 8




                                                                 13004
                                               DC    BK14259 PG404




        If you answered "Yes" to both subparts of Question No. 3 then answer the following
question. Otherwise, do not answer the following question.


        Assign percentages of responsibility only to those you found cause or contributed to cause
LIT's dan1ages.       The percentages you find must total 100 percent.       The percentages must be
expressed in whole numbers.         The percentage of responsibility attributable to any one is not
necessarily measure by the number of acts or omissions found.


QUESTION NO.5:

        For each party you found caused or contributed to cause the damages to LTT, find the
percentage of responsibility attributable to each:

        a.       LRMC     -----
                                          %

        b.       SDP      -----
                                          %

                 Total    ----'1�0�0:..___ %




Charge of the Court
Page9




                                                                     13005
                                                  DC   BK14259 PG405

•




            If you answered "Yes" to any subpart of Question No. 1 , and " No" to the corresponding
    subpart of Question No. 2, then answer the following question.             Otherwise, do not answer the
    following question.


    QUESTION NO. 6:

            What sum of money, if any, if paid now in cash, would fairly and reasonably compensate
    LTT for its damages, if any, that resulted from LRMC and/or SOP's failure to comply with the Letter
    of Intent?


            Consider the following elements of damages, if any, and none other. You shall not award any
    sum of money on any element if you have otherwise, under some other element, awarded a sum of
    money for the same loss. That is, do not compensate twice for the same loss, if any.


            Do not add any amount for interest on damages, if any.


            Do not include in your answer any amount that you find LTT could have avoided by the
    exercise of reasonable care.


            Answer separately in dollars and cents for damages, if any.


           1.       The loss in fair market value of LTT's confidential information that was a natural,
                    probable, and foreseeable consequence of LRMC and/or SOP's failure to comply
                     with the Letter of Intent.


                    Answer:

           2.       LTT's lost profits that were a natural, probable, and foreseeable consequence of
                    LRMC and/or SOP's failure to comply with the Letter of lntent.


                     Answer:      .r/t:
            3.       The loss in fair market value of LTT that was a natural, probable, and foreseeable
                     consequence of LRMC and/or SOP's failure to comply with the Letter of lntent.


                     Answer:    £� CJO({ (}()0



    Charge of the Court
    Page 10




                                                                       13006
                                              DC        BK14259 PG406

•




            If you answered "Yes" to any subpart of Question No.3, then answer the following question.
    Otherwise, do not answer the following question.


    QUESTION NO. 7:

            What sum of money, if any, if paid now in cash, would fairly and reasonably compensate
    LTT for its damages, if any, that were proximately caused by the negligent misrepresentation?

            " Proximate cause" means a cause that was a substantial factor in bringing about an event, and
    without which cause such event would not have occurred. In order to be a proximate cause, the act
    or omission complained of must be such that a person using the degree of care required of him would
    have foreseen that the event, or some similar event, might reasonably result therefrom. There may be
    more than one proximate cause of an event.

            Consider the following elements of damages, if any, and none other. You shall not award any
    sum of money on any element if you have otherwise, under some other element, awarded a sum of
    money for the same loss. That is, do not compensate twice for the same loss, if any. Do not add any
    amount for interest on past damages, if any.

            Do not include in your answer any amount that you find LTT could have avoided by the
    exercise of reasonable care.

    Answer separately in dollars and cents for damages, if any.


           1.       The difference, if any, between the value of what LTT received in the transaction and
                    the value given.


                    Answer:

           2.       The economic loss, if any, LTT otherwise suffered in the past as a consequence of
                    LTT' s reliance on the misrepresentation.


                    Answer:




    Charge of the Court
    Page 11




                                                                        13007
                                                 DC         BK14259 PG407

•




    Presiding Juror:

            1.        When you go into the jury room to answer these questions, the first thing you will
    need to do is choose a presiding juror.


           2.         The presiding juror has these duties:


            a.   Hav� the complete charge read aloud if it will be helpful to your deliberations.


            b. Preside over your deliberations. This means the presiding juror will manage the
                 discussions and see that you follow these instructions.


            c. Give written questions or comments to the bailiff who will give them to the judge.


            d.   Write down the answers you agree on.


            e.     Get the signatures for the verdict certificate.


            f.   Notify the bailiff that you have reached a verdict.


            Do you understand the duties of the presiding juror? lf you do not, please tell me now.


    Instruction for Signing the Verdict Certificate:

           1.         You may answer the questions on a vote of10 jurors. The same10 jurors must agree
    on every answer in the charge. This means you may not have one group of 10 jurors agree on one
    answer and a different group of 10 jurors agree on another.


           2.         If 10 jurors agree on every answer, those 10 jurors sign the verdict.


            If11 jurors agree on every answer, those 11 jurors sign the verdict.


            If all12 of you agree on every answer, you are unanimous and only the presiding juror signs
    the verdict.

            3.         All jurors should deliberate on every question. You may end up with all 12 of you
    agreeing on some answers, while only10 or 11 of you agree on other answers. But when you sign
    the verdict, only those 10 who agree on every answer will sign the verdict.




    Charge of the Court
    Page 12




                                                                            13008
                                        DC        BK14259 PG408




                                  VERDICT CERTIFICATE

Check one:


__     Our verdict is unanimous. All12 of us have agreed to each and every answer. The presiding
juror has signed the certificate for all 12 of us.


  fJ&
S'i
  gnature of Presiding Juror                         Printed Name of Presiding Juror


  Vo      ur verdict is not unanimous. Eleven of us have agreed to each and every answer and have
signed the certificate below.


__       Our verdict is not unanimous. Ten of us have agreed to each and every answer and have
signed the certificate below.




                                                                   E; l-€ e f\ M. c. 6-\ fl n   \ S

                                                                  ]kiotJ rd Jl         PeSek

                                                                  ��,.. b st..Ac.KAlfb-:=, t r  •


                                                                  M:ghtut-lhomson
                                                                  � -1-1- #a,., J � fruJ
                                                                       6




                                                                   � ffiW.bVlS:
                                                                   �o:tda. Ok..ut_



Charge of the Court
Page 13




                                                                   13009
TAB 3
                                                                   SURGICAl OEVEummn PARTNERS
•

    G. Edward Alexander                                John T. Prater
    Direct Telephone Number: 615-550-2600   ext   12   Direct Telephone Number: 615-550-2600   ext   !3
    Cell Phone Number: 615-289-98%                     Cell Phone Number: 615-714-1898
    Direct Telefax Number· 6i5-550-260l                Direct Te!efax Number: 615-550 -260 I
    E-Mail:                                            E-Mail:
    ealexander@surgicaldevelopmentparlners.co          jprater@surgicaldevelopmentpartners.com
    m




                                    VIA E-MAIL- September 15,2009

    Mr. Robert F. Berry
    Mr. R Keith McDonald
    I3706 Research Blvd., Ste      102
    Austin, TX 78750
    rfberryok@yahoo.com


    RE:     Letter of Intent   for the Acquisition of the   Lakeway Hospital Lease


    Dear Robe1t and Keith:



•           Thank you for the opportunity to re-affirm our interest in the acquisition of the lease
    (the "Lease-') for the hospital facility currently trnder construction in Lakeway, Texas (the
    "Facility") as the initial campus tor Lakeway Regional Medical Center, LLC ("LRMC") and to
    serve as a key satellite facility for LRMC a fter the main campus for LRMC is developed (the
    "Project"). S urgical Development Partners, LLC, ("SDP") is pleased to submit this Letter of
    Intent, as the agent tor LRMC, to each of you (collectively, the "Principals") {each a "Party"
    and collectively the ''Parties") for the Parties to work in good faith with each other to plan,
    form, develop, fund, acquire, open and operate the Project. The objective of this Binding Letter
    of Intent is to indicate SOP's interest in the Project and to establish the ground rules for the
    ongoing exchange of infonnation between the Parties to facilitate the development of the
    Project and the exchange of information required for such a process to succeed. To clarify this
    relationship and to best protect the interests of all of the Parties, the Parties hereto agree as
    follows:


    i.   Discussions   and   Negotiation of the Project.     Upon the execution of this    Letter of Intent
         the Parties will enter into discussions and negotiations tor a period of forty-five (45) days,
         which may be extended by the mutual agreement of both parties (the "Negotiation Period"),
         with regards to evaluating and implementing the proposed Project with one another as well




                                                                                                        LTT v LRMC/SDP
                                                                                                      No. 0-1-GN-12-000983
                             20! Seaboard Lone, Suite ]1)1), Franklin, TN 37{}67
                             Telephone: (615)550-2600 Fax.· (6!5) 550-1601
                                                                                                           PX0002            �
                                                                         Exhibit
                                                                             2

•                                                                         Berry
                                                                          8/8113
                                                                                                          LTT002154
                                                                                                     Confidential
    Lake Travis Specially Hospital
    Bimling Letter of Intent

•   September 15,
    Page 2 of7
                        2009




         as with any     third party, as agreed to by the Parties,   lor the development and implementation
         of the Project.


    2.   The Proposed Outline          of the Terms of the Project.      As we ha ve   discussed the outline of
         the terms for the Project are as follows:


         2.1. �uisiti on of the Lease. LRMC will assmne the existing Lease between L ake Travis
              Transitional LTCH, LLC (or its assignee controlled by the Principals) and HCN Interra
              Lake Travis LTACH, LLC ("'HCN") and become the tenant under the Lease. The
              Principals and each and every one of their respective affil iate s will be relieved of all
              liability related to the Lease and the Facility upon the assignment of the Lease to
              LRMC in c luding without limitation, the release of any guaranties relating to the Lease
                                   ,



              by the Principals or any of (heir respective affiliate..<>, and LRMC shall ensure that all
              such liabilities in favor of any third parties are released in connection with the
              assignment of the Lease and shall indemni fy and hold the Principals and their
              respective affiliates harmless rrom any and all such Jiabllities from and after the
              assignment of the Lease.


         2.2.      Reimbursement of De posits and Costs; Assumption of Obligations. LRMC will
                retund at closing of the assignment of the Lease all deposi ts made by the Princ ipals and
                their respective affiliates and reimburse to the Principals a11d their respec tive affiliates
                all reasonable and documented costs that have been advanced by them to develop the
                Facility, including, with out limitation, compensation and benefits paid to employees of

•               the Principals an d/or their respective affiliates responsible for the plarming and
                construction of the Facili ty all expenses incurred in connection with the planni ng and
                                              ,



                constmction of the Facility, and interest expense associated with indebtedness incurred
                in connec tion with the Facility. In addition to the foregoing, LRMC shal l assume all
                liabilities and co ntractual obligations of the Principals and their respective affiliates
                incurred wi th respect to the Facility (whether relating to its development or its ongoing
                o pe ra ti o ns loll o wi ng its commencement of operations).     In particular and without
                limiting the    foregoing,   LRMC shall       either   offer employmen t at      their current
                compensation levels to, or shall reimburse Principals and their respec tiv e affiliates, as
                applicable, for severance equal in the aggregate to six months' of such current
                compensation  for, each of the following personnel relating to the Facility: Chie f
                Operating Officer, Vice President of F acilities Management, Vice President of
                Ancillary and Support Services, Clinical Specialist (Infection Control Nurse), Vice
                Presid ent of Medical Affairs, and Director of Facilities Management.


         2.3.     Lump Sum Payment. In exchange for the           assignment of the Lease to LRMC, LRMC
                will   make a si ngle lump sum cash payment at closi ng          to the Principals, or their
                designated assignee, equal to     $1.5 million.




•                                                                                                         LTT002155
                                                                                                        Confidential
    Lake Travis Specially Hospital
    Binding      Letter ofIntellt

•   September 15,
    Page 3 of7
                       2009




    :>.   Required Approvals for the Project. The abo ve indicated terms in Section 2 wilt be
          subject to th e following conditions: (i) full and formal approval by the B oard of Managers
          of   LRMC; (ii) the approval of HCN as landlor d      under the Lease to the assignment thereof;
          (iii) a reasonable due dil i gence process related to the feasibility of the Facility to serve as a
          campus for a general acute care hospital as configured or reasonably modified; (iv) the
          ability of LRMC to obtain appropriate funding to allow for this expansion of the operational
          plans for LR!V!C; and (v) the mutual development of definitive documents that fully reflect
          the intention of the Pruties expressed in this Letter of Intent The Parties agree to use their
          re spective best efforts to satisfy each of the foregoing condition s as soon as reasonably
          practicable, subject to the other terms of this Letter of Intent.


    4.    Earnest Moncv.       In consideration of the Principals' willingness to enter into   this Letter of
          Intent and di sc lose Proprietary Information relating to the Lease and the Faci l ity to SOP a nd
          LRMC, SOP shall cause LR MC to deposit as earnest money the amount of $50,000 with an
          escrow agen t tnlllually acceptable to the Pat1ies on or before the fifth day following

          execution of this Letter of Intent . In the event t hi s Letter of Intent is tenninated by or on
          be half of LRMC for any re ason, or in the event definitive agreements for the transactions
          contemplated herein are not executed by the parti e s during the Negotiation Period (unl es s
          the failure to execute one or m ore definitive agreements lies with or is attributable to the
          unreasonable del ay of Pri n cipals or the P rinci pa ls unwillingness to agree to terms
                                                                      '



          materially consistent with this Letter of Intent), the earnest money, including all interest
          thereon, shaJl be forfeited to Principals. If Principals terminate this Letter of Intent , or if
          definitive agreements for the transactions contemplated herein are not executed by the

•         parties due to the unreasonable delay of Principals or the Principals' unwillingness to agree
          to terms materially consistent with this Letter of Intent, the earnest money, including all
          interest thereon , shall be returned lu LRMC.


    5. Term. This Letter of Intent will remain o pen for acceptance unt il Sep tember 17, 2009.
       After acceptance this Lett e r of Intent may be terminated by either Party, for any reason,
       with written notice to the other Party, subj ect to the provisions described above relating to
       the entitlement to the earnest money, and below related to the sharing of information gained
          in the negotiation and development process.


    6.    Standstill and Non-Circumvention            Provisions.      Each of the Parties recognizes and
          acknowledges that in connection        with such meetings and the e xchange of information to
          discuss the Project, all Partie s will need to act in good faith and not use any kn o wledge
          gained in the Project discussion process for their own benefit and exclusive of the rights or
          interests of the other Party. In order to accomplish that goal, the Parties agree : (i) that
          Principals will not enter into negotiations with any third party for the assignment of the
          Lease while this Letter of Intent is in force; (ii) LRMC will not enter into negotiations with
          any third party for the use of any site, other then the intended LRMC main campus site, as
          an alternative or satell ite facility while this Letter of Intent is in force; and (iii) not to share

          any information with t hird parties gained in the negotiation and de velopment process for the




•                                                                                                         LTT002156
                                                                                                       Confidential
    Lake Travis Specialty      Jlospital
    Bindbzg Letter of hrte11t

•   September 15, 2009
    Page4of7


         Project    or   to independently usc any proprietary information of the other Pru.1y in any
         discussions or negotiations regarding this Project with third parlies after the acceptance      of
         this Lett er of Intent. The parties agree that these standstill provisions shall not apply to the
         continued work by Principals on their plans for the operation of the Facility, the continued
         recruitment of potential investo rs by Principals to be equ ity holders in the Principals'
         project, or other operational ma ucrs relating to the Facility during the term of this Le tt er of
         Intent, but no such discussions shall p rec lude the Princi pals from entering into the definitive
         agreements contemplated in this Letter of Intent or from consummating the transactions
         contemplated herein.


    7.   Fees and Expenses.         Each party will bear its own expenses assoc i ated with the
         development of the overall stra tegy and the interaction of the Parties in devel oping the
         detinitive terms for the agreements contemplated by this L etter of Intent.


    8. Relationship Between the Parties. None of the provision s of this Letter of Intent are
       inte nded to create, nor sh a l l be deemed or construed to create, any relationship between t he
       Parties and any of the Parties' vendors or agent s and any of the Parties , other than that of
       independent entities contracting with each other he re under solel y for the purpose of
       provid ing the services described in tlus Letter of Intent as independent contractors, and
       otherwise maintaining and carrying out the provisions of this Letter of Intent. None of the
       Parties nor any of their respecti ve agents or employees shal l be construed to be the agent,
       employer, employee, partner, joint venturer, or the representative of the other parties hereto,
       for any purpose of any kind or nature whatsoever. Both Parties agree to hold the other

•      h arm l es s from third-party liability resulting from acts of any Party.


    9.   Confidcntialitv.       The Parties desire to assure the mutual confidential status of any
         information whic h may be disclosed      to or from any Party in the   eval uation of this Project
         and the indicated approach    to the Project:

         9. I.   Proprietary Information.          Except as provided in Subsection 9.7., below,        all
                   information disclosed by any Party or its Representatives at any time to any other
                 Party or its Representatives in connection with the Proj ect in any manner shal l be
                 deemed "Proprietary Information." The term "Representative(s)" means, in the case
                 of LR!I.1C or SDP, any director, ofticer, employee, member, shareholdet·, or agent of
                 LRMC or SDP en ga ge d in the evaluation of the Project, and in the case of
                 Principals, Robert F. Berry and R. Keith McOonald.


         9.2.      Permissible Use. Each Party t hat receives Proprietary Information (referred to as the
                 "Receiving Party") shall usc the Proprietary Information received from any other
                 Party (referred to as the "Disclosing Party") solely to evaluate the feasibility of the
                 Project or similar transactions between the Parties. No other rights are implied or
                   granted under this Letter   of Intent.




•                                                                                                     LTT002157
                                                                                                    Confidential
    Lake Travis Special(�' Ilo5pital
    Binding Letti!Y of]!ltent

•   September 15, 2009
    Page 5 of7
    --"'---"-------------- -------------------------




          9.3.          Reproduction.  Proprietary Information received shall not be reproduced in any form
                        except tor internaluse of the Receiving Party and its Representatives and only for

                        the express purpose of evaluating the Project.


          9.4.          Nondisclosure. The Receiving Party shaH use all reasonable efforts to protect the
                        Proprietary Information received with the same degre e of care used to protect its
                        own Proprietary Informati o n from unauthorized use or disclosure, except that such
                        Proprietary Information may be used or disclosed to the Receiving Party's
                        Representatives as may be reasonably required to evaluate the Project.

          9.5.          Ownership of lnfotmation. All Proprietary Information, unless otherwise specified
                        in writing, shall remain the property of the Disclosing Party and promptly upon
                        request of either Party s hall be returned to the Disclosing Party (including all whole
                        or partial copies thereof and any written notes made regarding the Proprietary

                        Inf01mation).


          9.6.          No   Lil:cnse    or   Interest.    No rights or obligations other than those expressly recited
                        herein arc to be implied. No license is granted to tl1e Receiving Party or otherwise
                        implied, by estoppel or otherwise, with respect           to any pr o perty or right of Disclosing
                        Party, presently existing or acquired in the future, or for any           use of or interest in the
                        Proprietary Information except such             use   expressly contemplated by this Letter of
                        Intent.


•         9.7.          Exclusions.
                        include
                                        It is understood that the term "Proptietary Information" does not
                                  Information which:

                 {a.)    is no\.v or herealier         in the public domain through no fault of the Receiving      Party;


                 (b.) prior       10   disclosure hercmtdcr, is properly           within the rightful possession of       the
                         Rel:eiving     Party;

                 (c.)    is lawfully     received from a      third party with no restriction   on   further disclosure;   or



                 (d.)    is ob l igated to be pr o duced under applicable law           or order of a court of competent
                        jurisdiction, unless made            the subject of   a   confidentiality agreement or protective
                         order.


    tO.   Miscellaneous.

          10.1.              Remedies. Based                             this L etter of rntent and the mutual
                                                        on the subject matter of
                 obligations           and    duties    herein material and irreparable harm shall be
                                                        indicated
                 presumed, if any Party to this Letter of Intent breaches any provision of this Letter of
                 Intent. The Parties agree, that in the case of the b re ach of any of the non-circumvention




•                                                                                                                          LTT002158
                                                                                                                      Confidential
    Lake Travis Special�v Hospital
    Binding Letter of lntellt

•   September 15, 2009
    ?�G�.f:.!![?

                or confidentiality provisions of this Letter of Intent, the non-breaching Party will have
                the right to request that any            comt of competent jurisdiction shall        immediately enjoin the
                Party in breach in addition to that Party being entitled to all other rights and remedies
                which the Party may have at law                  or   in equity.


       l 0.2.           Compelled  Disclosure. In the even t a Pa rty, any of its Representatives, or
                anyone to   whom any Party transmits the Proprietary Information, becomes legally
                compelled to di sclose any of the Proprietary Information, prior to such disclosure s uch
                Party will provide the owner of the Proprietary I nformati on with advance written notice
                and a copy of the documents and information r elevant to such legal action, so the
                owner of the Prop1ictary Information may seek a protective order or other appropriate
                re med y to protect its interestsin the Proprietaty Information, and the compelled Party
                shallfurni�h only that portion of the requested Proprietary Information that the
                compellc::d Party is advised by a written opinion of c ounsel is legally require d               .




       10.3.            Entire             Agreement.       'fhere     are   no    other   understandings,   agreements,   or
            representations, express or implied, between the Parties, not herein specified until such
            time as definitive agreements for proposals and letters of                               understanding   can be
            developed             '-i!ld   agreed to by the Parties for any individual Project. This Letter of Intent
            may not be amended except in a                       writing executed by all Parties.

       l 0.4.           .Assi�;:;nment. This          Leiter of Intent may not be assigned without the express
            written consent of al l of t he other Parties .

•      10.5.            Governing            Law.   This Letter of Intent and all        transactions contemplated by this
            Letter of Intent shall be governed by the taws of the                     State of Texas,

       l 0.6.           Counterparts. This              Letter   of Intent may be e xecuted in any number of copies and
            by the diiTerent Pa11ies hereto on separate counterparts.                            Each counterpart shall be
            deemed           an   but all counterparts together shall constitute one and the same
                                    original,
            instmmcnt. l'he persons executing this Letter of Intent personally represent and warrant
            that they have been duly auth<Hized to do so by their respective Party and that, upon full
            execution hcreo( this Letter of intent shaH be a binding obligation of said Party.


       10.7.                     Termination of this Letter of Intent shall not relieve any of the
                        fenniqa,tiqn.
                                       imposed by Section 6 and Section 9 above, with respect to
            Parties from the obligations
            Standstill, Non-Circumvention and/or Proprieta ry Information exchanged between the
            Parties, or as it rel ate s to the terms, conditions, plans or discussions regarding the
            Project.


    ll. ACCEPTANCE- If Principals are in agreement with th e objectives indicated in Section 2
        and the conditions indicated in Section 3 of this Letter of fntent and the terms and
       conditions       c   ont ai ned      herein, please   sign the RJ:,!UR:--.1 COPY of this Letter of Intent and




•                                                                                                                      LTT002159
                                                                                                                     Confidential
    Lake Travis Specialty llospital
    Binding Letter of Intent

•   September 15, 2()09
    Page 7 of7   _____        ,<,_   ··- ·   · �·--· -··"-·
                                                          ·-· -----··-···· ·-·····--····---�----··




         retum it to SDP. The terms of this Proposal are valid until 5:00 PM, Central Time,
         September l7, 2009 and may be accepted as indicated above.


    We  look forward to our future meetings and the success of the Project                               which we   can

    accomplish through our mutual efforts.

    Sincerely,

    SURGICAL DEVELOPMENT PARTNERS, LLC




                                                                                                     '
                       �/�


    Accepted this   _[:.
                       ____   day    of September, 2009 and effective September __
                                                                                 l , 2009 .




•




•                                                                                                                   LTT002160
                                                                                                                Confidential
