Playoff Corporation, Donruss Playoff, L.P., Donruss LLC, and Ann (Blake) Powell AND Lawrence Blackwell v. Lawrence Blackwell AND Playoff Corporation, Donruss Playoff, L.P., Donruss LLC, and Ann (Blake) Powell

Citation: Not availableDocket: 02-06-00249-CV

Court: Court of Appeals of Texas; October 29, 2009; Texas; State Appellate Court

Original Court Document: View Document

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The Court of Appeals for the Second District of Texas reviewed Lawrence Blackwell's motions for rehearing and en banc reconsideration, ultimately denying both and substituting a new opinion and judgment. This case centers on a breach of an oral employment contract, with the court determining that the contract is unenforceably indefinite as a matter of law. Consequently, the trial court's judgment of "take nothing" regarding Blackwell's breach of contract claim against Playoff Corp., Donruss Playoff, L.P., Donruss LLC, and Ann Powell was affirmed. Additionally, the court upheld the trial court's denial of the defendants' motion for attorney's fees under the Texas Commission on Human Rights Act (TCHRA).

The background reveals that Powell founded Playoff Corp. in 1992, hiring Blackwell as a consultant in 1997. Their relationship transitioned to a romantic one until February 2002. In December 1999, Blackwell became an employee and president of Playoff. He claimed an oral agreement with Powell encompassed eight key terms, including employment, salary adjustments, loan guarantees, and profit distributions, all of which were never formalized in writing. Powell denied any such agreement, labeling Blackwell's claims as false. Their employment relationship ended in November 2002, with disputes over the nature of Blackwell's departure. Blackwell initially sued for sexual harassment under TCHRA, alleging wrongful termination after refusing to resume their romantic involvement, later expanding his claims to include breach of contract, fraud, and breach of fiduciary duty, while nonsuiting his TCHRA claims. The defendants sought attorney’s fees related to TCHRA.

Blackwell's claims were presented to a jury, while the issue of attorney's fees under the Texas Commission on Human Rights Act (TCHRA) was submitted to the court. The trial court granted a directed verdict for Donruss on Blackwell's breach of contract claim and for all defendants on his fraud claim. The jury found that Blackwell and Powell had agreed to eight specific terms, which Playoff and Powell failed to adhere to, and determined that Blackwell neither resigned nor committed misconduct justifying his termination. For breach of contract damages, the jury was instructed to consider 25% of the fair market value of Playoff Corporation and its affiliates, reduced by $5 million, arriving at a damages verdict of $6.1 million.

Initially, the trial court ruled in favor of Blackwell for the full amount but later granted a motion for judgment notwithstanding the verdict (JNOV) from Powell and Playoff, resulting in a take-nothing judgment against Blackwell. The court deemed the oral agreement found by the jury legally unenforceable due to insufficient definiteness. The court also denied the defendants' motion for TCHRA attorney's fees. Blackwell appealed the JNOV decision, while the defendants appealed the denial of attorney's fees. 

In reviewing JNOV, the court must determine if any evidence supports the jury's findings necessary for liability or if a directed verdict was warranted. The standards require viewing evidence favorably towards the jury's verdict and only disregarding contrary evidence if reasonable jurors could not interpret it otherwise. Blackwell contends that the trial court erred in ruling the alleged employment contract as unenforceably indefinite, while defendants maintain that vague terms render it unenforceable. A contract is binding only if its terms are sufficiently definite for a court to understand the parties' obligations.

Indefiniteness of material terms in a contract prevents a party from accepting an offer to form a contract unless the terms are reasonably certain. A contract is considered sufficiently definite if a court can ascertain the legal obligations of the parties involved. Contract terms must provide a basis for determining breaches and appropriate remedies. If an agreement is too indefinite for a court to establish legal obligations, it is not enforceable. An agreement to form a future contract is enforceable only if all essential terms are specific, with no reliance on future negotiations. Agreements that leave material matters open for future adjustment do not bind the parties and are deemed mere agreements to agree.

Determining whether an agreement is indefinite is a legal question for the court. This case questions whether the term "fair market value" in the agreement is enforceably definite, specifically regarding its application to the valuation of Playoff Corporation or entities formed by the parties after Blackwell's employment. Texas courts have previously found that fair market value can serve as a measure of damages, but its sufficiency as a contract term varies by context. While certain jurisdictions have accepted "fair market value" as definite in option contracts, this does not universally apply to all contracts using the term.

In this case, Blackwell's testimony revealed a lack of understanding regarding how market value would be determined in 1999, indicating that the parties had not established a method for valuation during subsequent negotiations.

On March 27, 2002, Larry Blackwell proposed a working arrangement with Ann Blake, stating he would receive 25% of the sale amount or value of the company, minus $1,250,000, if the company was sold or he left. A subsequent email on October 25, 2002, highlighted that the valuation methodology was the primary unresolved issue in their employment contract discussions. Blackwell characterized earlier documents from 2000 and 2002 as proposals for "replacement deals," not as a description of a prior oral agreement made in 1999, which he claimed was reached through a handshake. He indicated that the 1999 agreement was not documented by Powell despite her promise to do so. 

He noted that Powell's growing comfort with equity concepts led to discussions about a replacement deal, partly for potential tax benefits, and that she wished to delay his payment of 25% after wanting to extract funds from the business. Although the 2000 and 2002 proposals included some equity terms, they did not differ from the original oral agreement regarding entity valuation. The evidence indicated that Blackwell acknowledged the need for a specific valuation formula, which had yet to be determined through negotiations. 

This uncertainty about the valuation method suggests the agreement lacked a critical term, rendering it indefinite as a matter of law, similar to a precedent where a lease option based on "fair market value" was deemed unenforceable due to insufficient agreement on valuation methods. Thus, the absence of consensus on this material term leads to the conclusion that the agreement is indefinable and unenforceable.

The trial court ruled that the lessee's attempt to enforce a purchase option in the lease was invalid due to the agreement's indefinite terms. The court of appeals upheld this decision, emphasizing that the lease's requirement for determining "fair market value" through good-faith negotiation constituted an unenforceable "agreement to agree." The court noted that if the term "fair market value" had been used alone, it could have been interpreted based on common understanding. Blackwell argued that the term was sufficiently defined by IRS Revenue Ruling 56-60, which outlines valuation approaches but does not establish a definitive formula for determining fair market value. The ruling indicates that fair market value is based on negotiations between a willing buyer and seller without compulsion, but it also states that no uniform formula applies to all valuation issues. Blackwell admitted a lack of clarity in how fair market value would be calculated in the 1999 agreement, with unresolved elements in later negotiations. Consequently, without a clear method for calculating fair market value, the agreement was deemed unenforceably indefinite. The appellate court affirmed the trial court's decision to grant judgment notwithstanding the verdict (JNOV), rendering Blackwell's additional issues moot.

The defendants, Powell, Playoff, and Donruss, challenge the trial court's denial of their motion for attorney's fees under the Texas Commission on Human Rights Act (TCHRA), asserting the court abused its discretion. TCHRA allows the prevailing party to recover reasonable attorney’s fees at the court's discretion, as indicated by the phrasing "may allow" in the statute. An abuse of discretion occurs when a court acts without adhering to established guidelines. Texas appellate courts have interpreted this provision in line with federal law, permitting fee recovery if a plaintiff's claims are deemed frivolous, meritless, or unreasonable, or if litigation continues despite the claims' clear lack of merit. Simply losing a case does not justify an award of fees. To prove a claim is groundless, the defendant must show it lacks foundation. In previous cases, fees were awarded when defendants demonstrated the plaintiff's claims were legally unfounded. Under federal law, a defendant is not considered a prevailing party if a plaintiff voluntarily dismisses their claim unless it is shown that the dismissal was to evade an unfavorable judgment. This determination typically relies on the existing record, supplemented by additional evidence if necessary. Blackwell, the plaintiff, filed TCHRA claims for sexual harassment, retaliation, and sex discrimination, but nonsuited his claims the day before a summary judgment hearing. Subsequently, the defendants sought attorney's fees several months later.

Extensive testimony during the trial addressed the personal and professional relationship between Blackwell and Powell, indicating they had an exclusive romantic relationship and cohabited from 1997 until February 2002. Post-February 2002, they had reconciliations, but their accounts differed on who initiated these. Blackwell claimed Powell terminated his employment in November 2002 upon learning of his involvement with another woman, while Powell denied firing him, stating he could have remained employed if their personal relationship continued. 

Following the jury trial regarding Blackwell's claims, the trial court considered the defendants' request for $618,554 in attorney’s fees related to defending against Blackwell's TCHRA claims. Initially, the court granted a judgment notwithstanding the verdict (JNOV) in favor of Donruss and awarded the fees. However, after further arguments, the court vacated this judgment, issued a final take-nothing JNOV for all defendants, and denied the motion for attorney’s fees, implying it found facts supporting this denial. 

The defendants contended that the trial court abused its discretion by denying the fees, arguing they were prevailing parties. In contrast, Blackwell asserted that his nonsuit was a strategic choice, not an attempt to evade an adverse ruling. The court noted that while it had not previously reviewed denials of attorney’s fees under TCHRA, it had examined similar denials under other statutes, emphasizing that trial courts have discretion in awarding fees. The unclear reasoning for the trial court’s decision to deny fees raises questions similar to those in prior cases, allowing for multiple interpretations regarding Blackwell's dismissal of claims and the merit of those claims under the Dean guidelines.

The trial court's decision regarding the denial of attorney's fees under the Texas Commission on Human Rights Act (TCHRA) lacks clarity, preventing the defendants from demonstrating an abuse of discretion. The defendants contend that the precedent set in Smith is not applicable due to the different interpretations of TCHRA and the civil practice and remedies code, which should align with federal case law. However, the federal and Texas cases cited do not address the specific context of reviewing a trial court's discretionary denial of fees with an unclear basis. Therefore, the court relies on its own precedent, Smith, and concludes the defendants failed to show an abuse of discretion. Consequently, the court affirms the trial court's judgment, having overruled the relevant issues raised by the parties involved.