In another case transferred to the Amarillo Court of Appeals for docket equalization, this time from Travis County, the Amarillo Court of Appeals has reversed a substantial award of contract and tort damages, as well as a significant award of attorney’s fees, and sent the case back for further proceedings.
Michael Simmons; William Cayce Rivers; Mars Colony, LLC; and Meridian Hive, LLC d/b/a Meridian Hive Meadery and d/b/a Meridian Cellars Winery v. Evan Whitehead (No. 07-22-00009-CV; filed July 20, 2023) stemmed from a fall out between partners in an Austin craft meadery. Lowe, Simmons, and Whitehead formed the company in 2012, each contributing equal one-third shares. Three years later, the business faltered, and Simmons and Lowe decided that Whitehead, who was employed full-time by the meadery, wasn’t up to the challenge. Lowe fired Whitehead’s girlfriend, also a full-time employee, which didn’t help matters. Simmons and Lowe traded emails discussing how to buy Whitehead out of the business, which Whitehead got hold of. Simmons and Lowe then terminated Whitehead, but Whitehead retained his share and refused to accept any buy-out offers. The business’s members subsequently voted to remove Whitehead as a manager in late 2015. By then, the business was insolvent. In 2016 the meadery merged with Mars Colony, a new entity created to allow the meadery to restructure. The merger cancelled the original shares of the meadery, including Whitehead’s. In 2019 Whitehead sued, alleging claims for breach of contract and breach of fiduciary duty against Simmons and Lowe, fraudulent transfer against Meridian Hive, tortious interference against Rivers (who only invested in the business on the condition that Whitehead had to go), and conversion against all defendants. Following a bench trial, the trial court entered final judgment for Whitehead on all claims and awarded $666,750 in damages and $210,171.85 in attorney’s fees. Defendants appealed.
Defendants first asserted legal and factual sufficiency challenges against the amount of damages awarded by the trial court. Whitehead argued that a document showing that, at the time of the merger, Rivers invested $25,000 in the business in exchange for a one percent ownership interest established the value of the business at $2.5 million. According to the court of appeals, this constituted “some evidence” in support of the award, thus defeating defendants’ legal sufficiency challenge. With respect to the factual sufficiency issue, however, the court found in favor of the defendants. Whitehead’s testimony as to the value of the business failed to provide a factual basis for his opinion of value because his “job duties did not relate to the financial aspects of the business and, by the time of the merger, he had no knowledge of the financial transactions involving Meridian Hive.” Lowe, on the other hand, who did manage the business’s finances, testified that the alleged $25,000 transaction never occurred and that the business operated at a loss and had a negative book value of almost $200,000. Plaintiff did not dispute this evidence. The court thus sustained defendants’ factual sufficiency challenge. Because the court remanded to the trial court on the factual sufficiency issue, it did not decide defendants’ limitations issue or the propriety of the attorney’s fee award.
