Breach-of-Contract or Fraud Damages in the Alternative - No attorneys fees when election is made for recovery on fraud theory

Pollitt v. Computer Comforts, Inc. (Tex.App. - Houston [1st Dist.] Oct. 4, 2018, no pet. h.)  

NO PICKING AND CHOOSING OF REMEDIES A LA CARTE WHEN CLAIMS IS ACTIONABLE AND SUCCESSFUL UNDER ALTERNATIVE LEGAL THEORIES 

When a plaintiff succeeds on two legal theories of recovery, such as breach of contract and fraud, he is entitled to an election in favor of the theory that affords him the highest amount of damages, but he cannot elect to recover a higher award of damages on a tort cause of action and additionally get attorney's fees  which cannot be awarded for success on the tort claim, relying instead on the breach-of-contract cause of action.

In a second appeal of the same case, which was remanded for determination of exemplary damages, the First Court of Appeals recently held that the trial court erred in awarding both attorney’s fees for breach of contract and exemplary damages on the fraud claim, and removed the fee award from the judgment. Pollitt v. Computer Comforts, Incorporated, NO. 01-17-00067-CV (Tex.App. - Houston [1st Dist.] Oct. 4, 2018, no pet. h.) (deleting $11,500 in attorney's fee awarded on breach of contract cause of action based on plaintiff's election to recover under tort theory which included exemplary damages and affirming judgment as modified).

THE GIST: When a party prevails on alternate theories, the party is entitled to elect recovery on the theory affording the greatest recovery. But the one-satisfaction rule precludes a party from mixing damage elements from different liability theories to maximize its recovery. McCullough v. Scarbrough, Medlin & Assocs., 435 S.W.3d 871, 916–17 (Tex. App.—Dallas 2014, pet. denied). Thus, a party who has suffered a single injury cannot recover exemplary damages under a fraud theory and also recover attorney’s fees for breach of contract. 

KEY WORDS: Tort vs. contract claims, one statisfaction rule, election of remedies, fraud vs. contract, contract claims vs. tort claims.

Opinion issued October 4, 2018

In The 

Court of Appeals 

For The 

First District of Texas 

———————————— 

NO. 01-17-00067-CV 

——————————— 

DAVID POLLITT, Appellant 

V. 

COMPUTER COMFORTS, INCORPORATED, Appellee 

On Appeal from the 212th District Court 

Galveston County, Texas 

Trial Court Case No. 11-CV-1203 

MEMORANDUM OPINION 

Appellant David Pollitt appeals from the final judgment rendered against him on fraud and contract claims. He argues that the judgment violated the one-satisfaction rule by awarding exemplary damages for the fraud claim and attorney’s fees for the contract claim. He also contends that postjudgment interest 2

was erroneously awarded from the date of an earlier judgment that was vacated as the result of a prior appeal.

We sustain the first issue because the amended judgment improperly awards attorney’s fees, and we overrule the remaining issue because the amended judgment properly awarded postjudgment interest from the date of the original judgment.

We modify the amended judgment to delete the award of attorney’s fees, and otherwise we affirm.

I. One-satisfaction rule

The factual background of this dispute was described in our opinion in a prior appeal in this case. See Pollitt v. Computer Comforts, Inc., No. 01-13-00785-CV, 2014 WL 7474073 (Tex. App.—Houston [1st Dist.] Dec. 30, 2014, no pet.) (mem. op.) (“Pollitt I”). We take judicial notice of the appellate record in the prior appeal. See Scott Bader, Inc. v. Sandstone Prods., Inc., 248 S.W.3d 802, 806 n.1 (Tex. App.—Houston [1st Dist.] 2008, no pet.). The result of the first appeal was a remand “for the fact-finder to determine how much in exemplary damages, if any, should be awarded against Pollitt individually.” Pollitt I, 2014 WL 7474073, at *4. On remand, the trial court (with a different judge presiding) requested briefing on the exemplary-damages issue. The trial-court brief filed by appellee Computer Comforts, Inc. included evidentiary arguments with citations to the reporter’s record from the trial on the merits, and Pollitt’s trial-court brief included a proffer of the reporter’s record and his evidentiary arguments.

The trial court awarded exemplary damages against Pollitt in the amount of $20,000. Pollitt objected to the judgment proposed by Computer Comforts, and he argued based on the one-satisfaction rule that there must be an election of remedy because the trial court could not award both attorney’s fees for breach of contract and exemplary damages on the fraud claim. The trial court signed the proposed judgment, allowing Computer Comforts to recover: actual damages from Pollitt and the other defendants, jointly and severally, in the amount of $40,000; exemplary damages from the other defendants in the amount of $40,000; exemplary damages from Pollitt in the amount of $20,000; and attorney’s fees in the amount of $11,500 from all defendants, jointly and severally. Pollitt filed a motion to modify the judgment, again relying upon the one-satisfaction rule, but the motion was overruled by operation of law.

On appeal, Pollitt continues to argue that the trial court erred in rendering a judgment against him that includes both an award of attorney’s fees for breach of contract and exemplary damages for fraud because it violates the one-satisfaction rule. Pollitt asserts that we should vacate the award of attorney’s fees because the $20,000 exemplary-damages award affords the greater recovery. Computer Comforts did not file an appellee’s brief to respond to Pollitt’s arguments. 4

The one-satisfaction rule provides that a plaintiff is limited to only one recovery for any damages suffered because of a single injury. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 303 (Tex. 2006); Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 8 (Tex. 1991); TMRJ Holdings, Inc. v. Inhance Techs., LLC, 540 S.W.3d 202, 208 (Tex. App.—Houston [1st Dist.] 2018, no pet.); Pollitt I, 2014 WL 7474073, at *4 (citing Stewart Title, 822 S.W.2d at 7). “The rule applies when multiple defendants commit the same act as well as when defendants commit technically different acts that result in a single injury.” Pollitt I, 2014 WL 7474073, at *4 (citing Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000)).

A party may seek damages based on alternate theories of liability—as Computer Comforts did—but it is not entitled to a double recovery for a single injury. See Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 184 (Tex. 1998); Peterson Grp., Inc. v. PLTQ Lotus Grp., L.P., 417 S.W.3d 46, 63–64 (Tex. App.—Houston [1st Dist.] 2013, pet. denied). When a party pleads and prevails on alternate theories of liability, “a judgment awarding damages on each alternate theory may be upheld if the theories depend on separate and distinct injuries and if separate and distinct damages findings are made as to each theory.” Pollitt I, 2014 WL 7474073, at *4.

The one-satisfaction rule further precludes a party from mixing damage elements from different liability theories to maximize recovery of damages. See Chapa, 212 S.W.3d at 304; McCullough v. Scarbrough, Medlin & Assocs., 435 S.W.3d 871, 916–17 (Tex. App.—Dallas 2014, pet. denied). Thus, a party who has suffered a single injury cannot recover exemplary damages under a fraud theory and also recover attorney’s fees for breach of contract. See, e.g., Win Shields Prods., Inc. v. Greer, No. 05-16-00274-CV, 2017 WL 2774443, at *5–6 (Tex. App.—Dallas June 27, 2017, pet. denied) (mem. op.) (applying one-satisfaction rule to fraudulent-inducement and breach-of-contract claims); McCullough, 435 S.W.3d at 916–17 (applying one-satisfaction rule to alternate liability theories of breach of contract, fraud, and breach of fiduciary duty); see also Chapa, 212 S.W.3d at 304 (noting that plaintiff could recover attorney’s fees but not exemplary damages for breach of contract and that plaintiff could recover exemplary damages but not attorney’s fees for fraud).

When a party does prevail on alternate theories, the party is entitled to elect recovery on the theory affording the greatest recovery. Chapa, 212 S.W.3d at 304, 314; Madison v. Williamson, 241 S.W.3d 135, 158 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). If the prevailing party fails to elect between the alternate theories, the court should render judgment using the findings that afford the greatest recovery. McCullough, 435 S.W.3d at 917 (citing Birchfield v. Texarkana Mem’l Hosp., 747 S.W.2d 361, 367 (Tex. 1987)).

The origin of this dispute was an order placed by the Covington entities to buy computer furniture from Computer Comforts. After the furniture was delivered, the Covington entities did not pay. Computer Comforts asserted its breach-of-contract claim against the defendants, including Pollitt, for failure to pay for the furniture. Its fraudulent-inducement claim was that the defendants, including Pollitt, ordered the furniture with no intent to pay for it. Computer Comforts suffered a single injury—the loss associated with receiving no payment for the furniture—and there is no argument and no evidence that Computer Comforts suffered separate and distinct injuries resulting from the alternate liability theories of fraud and breach of contract. See, e.g., Win Shields, 2017 WL 2774443, at *6; McCullough, 435 S.W.3d at 916–17. Based on the facts of this case, Computer Comforts cannot recover from Pollitt an award of attorney’s fees for breach of contract in the amount of $11,500 and exemplary damages for fraud in the amount of $20,000. The trial court erroneously awarded both of those damages amounts. We therefore sustain Pollitt’s first issue. Because the $20,000 exemplary-damages award for fraud provides the greater recovery, we reverse the portion of the amended judgment that awarded attorney’s fees. 7

II. Postjudgment interest

The judgment on remand awarded postjudgment interest on “the total amount of the judgment here rendered” “at the rate of 6% from June 10, 2013 until paid.” June 10, 2013 was the date of the original judgment. Pollitt asserts in his second issue that postjudgment interest was erroneously awarded from the date of the original judgment and that it should be awarded from the date of the amended judgment.

In the first appeal, after finding error in the original judgment’s award of exemplary damages against all defendants jointly and severally, this court remanded the case for a determination of how much in exemplary damages, if any, should be awarded against Pollitt. As noted above, the trial court corrected its error in the amended judgment, awarding exemplary damages against Pollitt individually in the amount of $20,000. Postjudgment interest “accrues during the period beginning on the date the judgment is rendered and ending on the date the judgment is satisfied.” TEX. FIN. CODE § 304.005(a). In a recent series of cases, the Supreme Court of Texas formulated rules for which judgment should be used for postjudgment-interest accrual when there is more than one judgment as a result of an appellate-court remand. See Ventling v. Johnson, 466 S.W.3d 143, 149–51 (Tex. 2015); Long v. Castle Tex. Prod. Ltd. P’ship, 426 S.W.3d 73, 77–82 (Tex. 2014); 8

Phillips v. Bramlett, 407 S.W.3d 229, 238–43 (Tex. 2013); see also Whittington v. City of Austin, 456 S.W.3d 692, 707–08 (Tex. App.—Austin 2015, pet. denied).

In Ventling, the Court reiterated the rule that it had formulated in Phillips on which judgment controls for the purpose of postjudgment-interest accrual, noting that the answer “depends on whether additional evidence is required on remand.” Ventling, 466 S.W.3d at 149. “‘[W]hen an appellate court remands a case to the trial court for entry of judgment consistent with the appellate court’s opinion, and the trial court is not required to admit new or additional evidence to enter that judgment . . . the date the trial court entered the original judgment is the ‘date the judgment is rendered,’ and postjudgment interest begins to accrue . . . as of that date.’” Id. at 150 (quoting Phillips, 407 S.W.3d at 239).

The trial court did not reopen the record on remand; it did not require or allow new or additional evidence, and thus it possessed a sufficient record as of the date of the original judgment to render an accurate judgment. See Long, 426 S.W.3d at 76 (“The rationale behind the postjudgment-interest accrual rule and exception is that a claimant is entitled to postjudgment interest from the judgment date once the trial court possesses a sufficient record to render an accurate judgment.”); Whittington, 456 S.W.3d at 707–08 (concluding that postjudgment interest properly awarded from original judgment’s date because trial court disposed of condemnation compensation on remand without considering additional evidence or reopening record). Therefore the trial court did not err by awarding postjudgment interest from the date of the original judgment.

We overrule Pollitt’s second issue.

Conclusion

We modify the amended judgment to delete the $11,500 award of attorney’s fees to Computer Comforts, and we affirm the amended judgment as modified.

Michael Massengale
Justice

Panel consists of Justices Jennings, Higley, and Massengale.

The single-satisfaction rule serves to prevent double-dipping and undeserved windfalls

1-SATISFACTION PER INJURY 

The one-satisfaction rule prohibits a plaintiff from recovering more than once for a single injury. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 303 (Tex. 2006). If a plaintiff pleads alternate theories of liability, a judgment awarding damages on each alternate theory may only be upheld if the theories depend on separate and distinct injuries and if separate and distinct damages findings are made as to each theory. See Birchfield v. Texarkana Mem'l Hosp., 747 S.W.2d 361, 367 (Tex. 1987). 

WHEN ELECTION OF RECOVERY UNDER ONE THEORY OR OTHER IS REQUIRED, AND WHAT MAY HAPPEN ON APPEAL IF AN ELECTION IS NOT MADE 

However, if a party seeks recovery under two or more alternate theories of recovery for a single injury, then that party must elect under which remedy he wishes the court to enter a judgment before the judgment is rendered. Star Houston, Inc. v. Shevack, 886 S.W.2d 414, 422 (Tex. App.-Houston [1st Dist.] 1994), writ denied per curiam, 907 S.W.2d 452 (Tex. 1995). If the prevailing party fails to make that election, then the trial court should use the findings affording the greater recovery and render judgment accordingly. Birchfield, 747 S.W.2d at 367. 

If the trial court fails to do so, the appellate court must reform the trial court's judgment to effect such an election. Shevack, 886 S.W.2d at 423.   

SOURCE: TYLER COURT OF APPEALS - No. 12-15-00223-CV - 7/12/2017 
International Business Machines Corp. v. LUFKIN INDUSTRIES, INC., Tex: Court of Appeals  

INTERNATIONAL BUSINESS MACHINES CORP., Appellants/Cross-Appellees
v.
LUFKIN INDUSTRIES, INC., Appellee/Cross-Appellant,

No. 12-15-00223-CV.

Court of Appeals of Texas, Twelfth District, Tyler.

Opinion delivered August 16, 2017.

Paul A. Robbins, Reagan Simpson, R. Paul Yetter, Nicolas Thompson, Marc S. Tabolsky, for International Business Machines Corp., Appellant.

James Robert Wetwiska, Murry B. Cohen, Scott C. Skelton, Patrick Gregory O'Brien, Holli Pryor-Baze, for Lufkin Industries, Inc., Appellee.

Appeal from the 159th Judicial District Court Angelina County, Texas, (Tr.Ct.No. CV-02073-13-02).

Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

SUPPLEMENTAL MEMORANDUM OPINION

JAMES T. WORTHEN, Chief Justice.

In our opinion issued on July 12, 2017, this Court reversed the portion of the trial court's judgment awarding Lufkin Industries, Inc. (Lufkin), $11,000,000.00 in mitigation expenses and suggested a remittitur in the amount of $3,455,455.00, resulting in $7,544,545.00 in mitigation expenses, thereby reducing total actual damages to $17,544,545.00.

In our opinion and order, we stated that if Lufkin filed the remittitur with the trial court clerk within fifteen days of our opinion and notified this Court of such, we would modify the judgment and affirm the damages award in accordance with the remittitur, thereby obviating the need for a new trial. See TEX. R. APP. P. 46.3, 46.5.

On July 27, 2017, the trial court clerk filed a supplemental clerk's record in this Court containing Lufkin's remittitur, which showed that it had timely filed the remittitur with the clerk. Accordingly, we modify the trial court's judgment to reflect that the amount of the judgment for mitigation damages awarded to Lufkin is reduced to the sum of $7,544,545.00, resulting in a reduction of total actual damages to $17,544,545.00. SeeTEX. R. APP. P. 46.3, 46.5.

The judgment of the trial court awarding an alternative judgment of $6,000,000.00 to Lufkin on its fraud claim is reversed and rendered that Lufkin take nothing on that claim.

As part of its remittitur, Lufkin requests that we recalculate the trial court's prejudgment interest award. This court has the power to modify the judgment of the court below to make the record speak the truth when we have the necessary information to do so. SeeTEX. R. APP. P. 43.2(b); Shamoun v. Shough, 377 S.W.3d 63, 78 (Tex. App.-Dallas 2012, pet. denied). Lufkin's total actual damages are $17,544,545.00, and it is entitled to prejudgment interest at the rate of 5% per year from January 18, 2013 to September 10, 2015. Therefore, Lufkin is entitled to prejudgment interest in the amount of $2,319,244.65 (965 days multiplied by $2,403.36 per day), for a total award of $19,863,789.60. IBM agrees with this calculation.

We affirm the trial court's judgment in all other respects. This Court's opinion of July 12, 2017, otherwise remains in effect.(PUBLISH)

JUDGMENT

THIS CAUSE came to be heard on the appellate record and the briefs filed herein, and the same being considered, it is the opinion of this court that there was error in the judgment of the court below insofar as the trial court's judgment awarded $6,000,000.00 in damages to Appellee on its fraud claim, and $11,000,000.00 in mitigation expenses on its fraudulent inducement claim.

It is therefore ORDERED, ADJUDGED, and DECREED that the portion of the trial court's judgment awarding $6,000,000.00 to Appellee on its fraud claim be reversed and rendered that Appellee take nothing on that claim.

It is further ORDERED, ADJUDGED and DECREED that the portion of the trial court's judgment awarding $11,000,000.00 in mitigation expenses be modified to reflect an award of $7,544,545.00 in mitigation expenses, thereby reducing total actual damages to $17,544,545.00.

It is further ORDERED, ADJUDGED and DECREED that the portion of the trial court's judgment awarding $2,776,025.10 in prejudgment interest be modified to reflect an award to Lufkin in the amount of $2,319,244.65.

It is further ORDERED, ADJUDGED and DECREED that, in all other respects, the trial court's judgment is affirmed; all costs of this appeal be assessed one-half against the Appellant, INTERNATIONAL BUSINESS MACHINES CORP., and one-half against the Appellee, LUFKIN INDUSTRIES, INC., for which execution may issue; and that this decision be certified to the court below for observance.

INTERNATIONAL BUSINESS MACHINES CORP., Appellant/Cross-Appellee,
v.
LUFKIN INDUSTRIES, INC., Appellee/Cross-Appellant,

No. 12-15-00223-CV.

Court of Appeals of Texas, Twelfth District, Tyler.

Opinion delivered July 12, 2017. Appeal from the 159th Judicial District Court Angelina County, Texas.

Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

OPINION

JAMES T. WORTHEN, Chief Justice.

International Business Machines Corporation (IBM) appeals the trial court's judgment in favor of Lufkin Industries, Inc. (Lufkin). IBM raises five issues on appeal, and Lufkin raises a conditional cross-issue in its response brief and a separate cross-appeal. We affirm in part, reverse and render in part, and suggest a remittitur of a portion of the damages awarded in the trial court's judgment incorporating the jury verdict.

BACKGROUND

Lufkin is a NASDAQ traded company that is an industry leader in manufacturing "engineered-to-order" power transmission gear boxes and "manufactured-to-order" oil field pumping units.^[1] Its sales of both dropped in the Great Recession of 2007-2008. However, it expected a strong market recovery for both of these products, particularly due to the "fracking" and horizontal drilling revolution throughout Texas, North Dakota, and other states.

To position itself for growth, Lufkin's leadership realized it needed to replace its highly configured but increasingly outdated Enterprise Resources Planning (ERP) System. An ERP system is a computer software business operating system that integrates all departments and functions across the company. Because of the high demand expected for Lufkin's two signature products, as the economy improved, time was of the essence to install a new ERP operating system. Lufkin's executive team had experienced the installation of new business operating systems, both at Lufkin and at other companies, that had taken more time than expected. These delays negatively impacted company earnings.

IBM, through its hardware division, learned of Lufkin's concerns about a lengthy and delay-riddled implementation of a new ERP operating system. David Bisker, an IBM salesman, contacted Lufkin executives, and at his behest, representatives of the two companies began discussions about IBM's Express Solution.^[2] IBM designed its Express Solution in 2006 and 2007 with a team of engineers under the direction of Juan Gonzalez, an IBM employee who implements SAP operating systems for small companies.

On September 30, 2009, Gonzalez, on behalf of IBM but with the assistance of SAP, demonstrated software that IBM represented showed the functionality of IBM's Express Solution. Furthermore, IBM represented that its Express Solution was preconfigured in a way to manage both of Lufkin's vastly different product lines — its engineered-to-order transmission gear boxes and manufactured-to-order oil field pumping units. Additionally, IBM represented that its Express Solution would generate financial results for all of Lufkin's required reports, both for U.S. and international plants. After IBM represented that these vital functions required by Lufkin were already preconfigured in the Express Solution, Lufkin agreed to execute a contract, formally called the "Statement of Work" (SOW), with IBM on March 25, 2010.

The SOW projected the implementation would be completed by March 1, 2011, when Lufkin would be able to "Go-Live" with its fully implemented IBM Express Solution. However, the first test of the system in November 2010 was a complete failure. The second test in February 2011 also failed. IBM requested a Project Change Request (PCR) extending the "Go-Live" date to June 1, 2011, along with an increase of its implementation fees by 2.6 million dollars. Lufkin's President, Jay Glick, became concerned "that the project was off the rails." IBM even fired its project manager, William Berry, in early 2011. Nevertheless, IBM continued to insist that it could complete the project if only given more time and money. IBM failed to inform Lufkin that it stopped marketing the Express Solution in the U.S. at the end of 2010.

The June 1, 2011 "Go-Live" date passed without an operational system. Later in June, IBM requested another PCR which added over four million dollars to its fees. IBM assured Lufkin that this would allow it to properly complete the implementation for a January 1, 2012 "Go-Live" date. In September 2011, IBM's third test failed with many of the same problems from the previous two tests continuing to recur. A fourth test in November 2011 also went poorly. By the end of 2011, Lufkin had executed nine PCRs and paid $12,983,736 for IBM's Express Solution. As the January 1, 2012 "Go-Live" date approached, Lufkin sought assurances from IBM that the Express Solution would properly function. IBM promised Glick that although it would be a "Go-Live Ugly and that things might be a little rockier in a few places than a normal startup," IBM had thoroughly tested the payroll system and that it would correctly function. Glick decided to deactivate Lufkin's operating system and to initiate IBM's Express Solution on January 1, 2012.

The "Go-Live Ugly" was likewise unsuccessful. Lufkin was forced to manually calculate payroll amounts because the Express Solution did not function properly. Lufkin's employees were upset and company morale sank. Moreover, the vendor payment system failed, requiring Lufkin to manually make payments to vendors. Likewise, project materials were not delivered to the appropriate machine on a timely basis, and Lufkin's products were not able to be shipped as scheduled and promised. The company had to mostly operate manually during most of the first half of 2012.

The problems extended to financial reporting. As a publicly traded stock on the NASDAQ stock exchange, Lufkin released quarterly reports every three months. With the IBM Express Solution unable to run its business operation system, Lufkin was unable to close its books for January, February, and March of 2012. Lufkin, as a publicly-traded company, was required to report the failed IBM Express Solution implementation and the resultant problems to the public. Lufkin's stock price suffered. Glick reported that the financial situation for the second quarter of 2012 was "similarly bad." Lufkin's stock price continued to be adversely affected.

In the summer of 2012, after six months of a virtually nonfunctioning Express Solution, Lufkin invited IBM and SAP to assess what needed to be done to implement an effective operating system for Lufkin. IBM sent one person who did not have authority to take any action. SAP, on the other hand, began analyzing what could be done to reconfigure the Express Solution so that its software would become operable for Lufkin. With SAP's help, along with other third party consultants, Lufkin was eventually able to develop an operating system after a year and a half of effort. Lufkin continues using this system today. After the disastrous "Go-Live Ugly" Express Solution implementation on January 1, 2012, Lufkin paid third-party consultants an additional $7,544,545.

After implementing an effective business operating system, with the assistance of SAP and third-party contractors, Lufkin sued IBM for, among numerous causes of action, fraudulent inducement of a contract, fraud, and breach of contract. IBM filed a motion for summary judgment, claiming that Lufkin agreed to disclaim its reliance on IBM's representations made prior to signing the SOW, and consequently, Lufkin could not establish the reliance element of the fraudulent inducement and fraud claims as a matter of law.

The trial court denied IBM's motion, and the case proceeded to a jury trial. The jury first determined that IBM fraudulently induced Lufkin to execute the SOW, as modified by the PCRs. It further determined that IBM committed fraud against Lufkin and made a negligent misrepresentation on which Lufkin justifiably relied. The jury also found Lufkin had not waived or ratified IBM's fraudulent acts and it was not estopped from asserting its fraud claims. Furthermore, the jury determined that IBM breached the contract by failing to comply with the SOW, as modified by the nine PCRs.

The jury found that Lufkin had suffered ten million dollars in out-of-pocket damages, which represented the difference in the value of IBM's Express Solution and the amount Lufkin paid for it. The jury also found Lufkin incurred eleven million dollars in "reasonable and necessary expenses incurred in attempting to restore operation of Lufkin's software." On Lufkin's fraud claim, the jury awarded six million dollars. Although the jury determined IBM made negligent misrepresentations and breached the SOW, it found no damages for Lufkin on either cause of action. The jury also declined to award exemplary damages against IBM.

The trial court entered a judgment in favor of Lufkin against IBM for $23,776,025.10, which was based on twenty-one million dollars in out-of-pocket and mitigation damages for Lufkin's fraudulent inducement claim, and $2,776,025.10 in prejudgment interest.^[3]IBM timely appealed.

FRAUDULENT INDUCEMENT

In its first issue, IBM challenges the jury's finding of fraudulent inducement, and argues that a provision in the SOW disclaiming reliance on representations it made to Lufkin conclusively negates fraudulent inducement's reliance element.

The One Satisfaction Rule in Texas

THE ONE SATISFACTION RULE AND SETTLMENT CREDIT 

The one-satisfaction rule is "the longstanding proposition that a plaintiff should not be compensated twice for the same injury." Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991); Galle, Inc. v. Pool, 262 S.W.3d 564, 573 (Tex. App.-Austin 2008, pet. denied). "The rationale for this doctrine is that the plaintiff should not receive a windfall by recovering an amount in court that covers the plaintiff's entire damages, but to which a settling defendant has already partially contributed. The plaintiff would otherwise be recovering an amount greater than the trier of fact has determined would fully compensate for the injury." First Title Co. v. Garrett,860 S.W.2d 74, 78 (Tex. 1993); Galle, 262 S.W.3d at 573. The one-satisfaction rule applies both when several defendants commit the same act and when multiple defendants commit technically different acts that result in the same, single injury. Stewart Title, 822 S.W.2d at 7; Galle, 262 S.W.3d at 573. The application of the rule is not limited to tort claims, and whether the rule may be applied depends not on the cause of action asserted but rather on the injury sustained. Galle, 262 S.W.3d at 573. Thus, if the plaintiff has suffered only one injury, even if based on "overlapping and varied theories of liability," the plaintiff may recover only once. Id. The fact that more than one defendant may have caused the injury or that there may be more than one theory of liability does not modify this rule. See Stewart Title, 822 S.W.2d at 8; Galle, 262 S.W.3d at 573-74. We review the trial court's application of the one-satisfaction rule de novo. See Galle, 262 S.W.3d at 570 n.3.

The party seeking a settlement credit has the burden to prove its right to such a credit. Utts v. Short, 81 S.W.3d 822, 828 (Tex. 2002); Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 927 (Tex. 1998); see Galle, 262 S.W.3d at 570, 572. The party must prove the settlement amount by introducing into the record either the settlement agreement or some other evidence of the settlement amount. Ellender, 968 S.W.2d at 927; Galle, 262 S.W.3d at 572. If the nonsettling party meets this burden, the burden shifts to the plaintiff—the party in a better position to prove the proper allocation of the settlement—to show the extent to which the settlement amounts were allocated to separate damages caused by the settling defendants as opposed to joint or common damages. Galle, 262 S.W.3d at 572 (citing Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 391-92 (Tex. 2000); Ellender, 968 S.W.2d at 928-29). If the plaintiff fails to satisfy this burden, then the nonsettling party is entitled to a credit equaling the entire settlement amount. See Ellender, 968 S.W.2d at 928; Galle, 262 S.W.3d at 574.

SOURCE: AUSTIN COURT OF APPEALS - No. 03-14-00738-CV - 1/20/2017

THE SINGLE SATISFACTION RULE IN TEXAS

"The one satisfaction rule applies to prevent a plaintiff from obtaining more than one recovery for the same injury." Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991); see also Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000). Under this rule, a plaintiff is entitled to one recovery for damages suffered when multiple defendants commit the same act as well as when multiple defendants commit technically different acts resulting in a single injury. Casteel, 22 S.W.3d at 390. A court can grant summary judgment based on the one satisfaction rule. See El Paso Natural Gas Co. v. Berryman, 858 S.W.2d 362, 363 (Tex. 1993) (per curiam).

The one satisfaction rule is grounds for granting summary judgment when (1) the one satisfaction rule applies, (2) the credit sought by the defendant entirely sets off the maximum compensatory liability claimed by the plaintiff, and (3) punitive damages are not at issue. Cohen v. Arthur Andersen, L.L.P., 106 S.W.3d 304, 309-10 (Tex. App.-Houston [1st Dist.] 2003, no pet.).

SOURCE: FOURTEENTH COURT OF APPEALS HOUSTON - No. 14-13-00113-CV - 7/15/2014

PUNITIVE DAMAGES ARE A DIFFERENT MATTER 

"The `one satisfaction rule' is usually inapplicable to punitive damage awards because punitive damages do not concern compensation; they are, instead, intended to punish the wrongdoer and to deter future similar acts." Universal Servs. Co. v. Ung, 882 S.W.2d 460, 467 (Tex. App.-Houston [14th Dist.] 1994), rev'd on other grounds, 904 S.W.2d 638 (Tex. 1995); see Casteel, 22 S.W.3d at 391 ("A nonsettling defendant cannot receive credit for settlement amounts representing punitive damages."); Ratner v. Sioux Natural Gas Corp., 719 F.2d 801, 804 (5th Cir. 1983) ("The purpose of the [one satisfaction] rule is to ensure that a plaintiff receives no more than full compensation for his loss. A plaintiff awarded punitive damages has been given the right to receive more than `one satisfaction.'" (citations omitted)). Punitive damage calculations are based on the award of compensatory damages, not the amount actually recovered. See Tex. Civ. Prac. & Rem. Code Ann. § 41.004(a) (West 2008); Gilcrease v. Garlock, Inc., 211 S.W.3d 448, 458 (Tex. App.-El Paso 2006, no pet.). Consequently, a plaintiff would be entitled to recover punitive damages based on an award of compensatory damages even though his ability to recover compensatory damages is entirely offset by a credit based on the one satisfaction rule. See Gilcrease, 211 S.W.3d at 458-59.

Plaintiffs prevented from double-dipping on damages claims under the one-satisfaction rule

THE ONE-SATISFACTION RULE  

The one-satisfaction rule is the longstanding proposition that precludes a plaintiff from recovering twice for the same injury. Utts v. Short, 81 S.W.3d 822, 831 (Tex. 2002) (citing Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000)); Galle, 262 S.W.3d at 573. The rule applies when several defendants commit the same act and when multiple defendants commit technically different acts that result in a single injury. Crown Life, 22 S.W.3d at 390; Galle, 262 S.W.3d at 573. 
  
The one-satisfaction rule guards against a plaintiff's "receiving a windfall `by recovering an amount in court that covers the plaintiff's entire damages, but to which a settling defendant has already contributed.'" Galle, 262 S.W.3d at 573 (quoting Osborne v. Jauregui, 252 S.W.3d 70, 75 (Tex. App.-Austin 2008, pet. denied) (en banc)).

SOURCE: AUSTIN COURT OF APPEALS - 03-10-00499-CV – 8/23/2013  

Can the trial court award both injunctive relief AND damages?

   

Permanent Injunction and Damages: Does a judgment awarding both violate the prohibition against dual recovery? 

  

The supreme court has specifically recognized that only when a judgment awards “both an injunction and damages as to future effects” is there an impermissible double recovery. Schneider v. Nat’l Carriers, Inc. v. Bates, 147 S.W.3d 264, 284 (Tex. 2004). In the absence of an award of future damages, there is no double recovery. See id. As one court of appeals recognized, an award of permanent injunctive relief and past damages was not a double recovery because no future damages were awarded. F.S. New Prods., Inc. v. Strong Indus., Inc., 129 S.W.3d 606, 631-32 (Tex. App.—Houston [1st Dist.] 2004), rev’d in part on other grounds, 221 S.W.3d 550 (Tex. 2006).

  

THE ONE-SATISFACTION RULE

  
A party is entitled to bring suit and seek damages on alternative theories; however, the plaintiff may not recover on both theories because these would amount to a “double recovery.” Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 184 (Tex. 1998); Foley v. Parlier, 68 S.W.3d 870, 882 (Tex. App.—Fort Worth 2002, no pet.).

  

THE RULE AGAINST DUAL RECOVERY ("WINDFALL")

  
A double recovery exists when a plaintiff is awarded more than one recovery for the same injury. Waite Hill Servs., 959 S.W.2d at 184; Foley, 68 S.W.3d at 882-83. “Texas law does not permit double recovery.” Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex. 1995). The prohibition against double recovery is a corollary to the one satisfaction rule, Foley, 68 S.W.3d at 883, which provides that a plaintiff may recover only for the damages suffered as a result of a particular injury. Utts v. Short, 81 S.W.3d 822, 833 (Tex. 2002).
   
SOURCE: SAN ANTONIO COURT OF APPEALS - 04-10-00602-CV – 11/23/11 

Double recovery barred under the one-satisfaction rule

    
Under Texas rules of civil procedure, it is permissible to plead even inconsistent theories of recovery in the alternative, but dual recovery on different legal theories is precluded if there was only a single injury.   
   
ONE-SATISFACTION RULE - BAR ON DOUBLE RECOVERY ON MULTIPLE THEORIES OR CAUSES OF ACTION
    
Pursuant to Texas Rules of Civil Procedure, Rule 48, a party may plead "as many separate claims or defenses as he has regardless of consistency." The "one satisfaction rule" provides that a plaintiff cannot obtain more than one recovery for the same injury. Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 184–85 (Tex.1998); Borden v. Guerra, 860 S.W.2d 515, 528 (Tex. Civ. App.—Corpus Christi 1993, writ dism’d by agr.) (citing Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991)). This rule is based on the principle that, with only one injury, "there can, in justice, be but one satisfaction for that injury." Id. When a plaintiff pleads alternate theories of liability, a judgment that awards damages based upon both theories does not amount to a double recovery if the theories of liability arise from two separate and distinct injuries, and there has been a separate and distinct finding of damage on both theories of liability. Birchfield v. Texarkana Mem’l Hosp., 747 S.W.2d 361, 367 (Tex. 1987); Berry Prop. Mgmt, Inc. v. Bliskey, 850 S.W.2d 644, 664–66 (Tex. App.—Corpus Christi 1993, writ dism’d by agr.).

An impermissible double recovery occurs when there is only one injury, the theories of liability are mutually exclusive, or there are no separate damages findings based on the alternate theories of liability. See Southern Cty. Mut. v. First Bank & Trust, 750 S.W.2d 170, 173–174 (Tex. 1988); Birchfield, 747 S.W.2d at 367. When confronted with a situation of double recovery, the affirmative defense of election of remedies, under certain circumstances, bars a person from pursuing two inconsistent remedies. See generally Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 850–52 (Tex. 1980).9 The Bocanegra court articulated the following test for the election doctrine to bar relief: (1) one successfully exercises an informed choice; (2) between two or more remedies, rights, or states of facts; (3) which are so inconsistent as to; (4) constitute manifest injustice. Id.; Medina, 927 S.W.2d at 600.

SOURCE: CORPUS CHRISTI/EDINBURG COURT OF APPEALS - 13-08-00263-CV - 10/20/11

THE FEDERAL DESPOSIT INSURANCE CORPORATION AS RECEIVER FOR WASHINGTON MUTUAL BANK v. DAVID MARION WHITE--Appeal from County Court at Law No 1 of Dallas County (transferred case)
We hold that the damages awarded to White constitute two separate and distinct injuries, with separate and distinct findings of damages on different theories of liability. See Birchfield, 747 S.W.2d at 367. Further, White’s damages are not so inconsistent as to constitute a manifest injustice. See Bocanegra, 605 S.W.2d at 850. We overrule Washington Mutual’s third issue.