Examination Management Services, Inc. v. Kersh Risk Management Inc., d/b/a Kersh Wellness

Annotate this Case

REVERSE and RENDER; Opinion Filed April 27, 2012.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-10-00777-CV
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 07-03121
Before Justices Lang, Murphy, and Myers
Opinion By Justice Myers
Appellant, Examination Management Services, Inc. (EMSI), appeals
a judgment granted in favor of appellee, Kersh Risk Management, Inc.
d/b/a Kersh Wellness (Kersh). In four issues, EMSI argues (1) there is
neither legally nor factually sufficient evidence to support the
$156,996.05 of lost profits damages awarded by the jury; (2) there is
neither legally nor factually sufficient evidence EMSI failed to comply
with a material obligation of the contract; (3) there is neither legally
nor factually sufficient evidence EMSI breached the contract first; and
(4) the evidence established as a matter of law that Kersh wrongfully
refused to pay EMSI $245,586.60. In a cross-issue, Kersh contends the
trial court abused its discretion by awarding Kersh $80,000 in
attorney's fees for its breach of contract claim because the evidence
established reasonable and necessary attorney's fees of $124,809.80. For
the following reasons, we reverse the award of lost profits and render
judgment that Kersh take nothing.
Background and Procedural History
EMSI is in the business of providing biometric testing services
for corporate “wellness” programs. Wellness plans are incentive programs
offered by companies to their employees to reduce insurance premiums,
and often include biometric testing such as recording the medical
history of participating employees, taking their body weight and blood
pressure information, and testing the glucose and cholesterol levels of
their blood. Those blood tests, in turn, typically involved a trained
examiner drawing a drop of an employee's blood with a prick of the
finger and placing the blood onto a “cassette,” which was then placed in
a machine that measured blood glucose and cholesterol. The cassettes
were maintained in sealed packages that had a limited shelf life.
Because of the limited shelf life, EMSI typically required customers to
pay for all of the cassettes ordered for a particular wellness event,
even if they were not actually used at the event.
In 2005, Kersh entered into agreements with various companies to
provide wellness programs, and one of those companies was Envelopes
Unlimited (EU). Another Kersh client, Bemis Company, Inc. (Bemis), was
Kersh's largest account, comprising approximately seventy percent of its
business. In May of 2005, Kersh subcontracted to use EMSI to perform
biometric testing services, particularly with the Bemis wellness
program. The two page agreement between Kersh and EMSI provided that,
for cholesterol screenings, Kersh was to be charged “$25.00 per test.”
The agreement specified that “[t]ests are performed with fingerstick
methodology, utilizing Cholestech LDX Analyzers.”
EMSI started working for Kersh in the fall of 2005 and began
billing Kersh in September of 2005. The relationship between the two
parties, however, soon deteriorated. Kersh contended EMSI employees
failed to “show up” at one Bemis work site, were late at others, lacked
sufficient equipment to conduct the cholesterol tests, and were
“unprofessional” in the way they conducted the tests because of a lack
of proper training in how to use the testing equipment. Kersh also
contended it was not being charged for tests actually “performed,” as
the contract required, and it was instead charged for every cassette
ordered by EMSI, regardless of whether they were used. EMSI alleged
Kersh was not paying its bills within thirty days as required under the
contract, and that it was forced to “front” money to pay for cassettes
and examiners it had used at Kersh's events.
Kersh was billed a total of $390,586.60 by EMSI, for the period
of September of 2005 through April of 2006. In February of 2006, Kersh
made its first payment to EMSI of $88,425.25. In May of that same year,
Kersh made a $56,574.75 payment, for a total of $145,000 paid to EMSI.
EMSI attempted to collect $245,586.60 from Kersh in unpaid invoices,
eventually referring the matter to a collection agency.
On April 5, 2007, Kersh sued EMSI for breach of contract, breach
of express warranty, violation of the Texas Deceptive Trade Practices
Act, and negligence. Kersh alleged EMSI's examiners were inadequately
trained, were provided in insufficient numbers, used insufficient
testing equipment, and that the testing equipment was improperly
calibrated. EMSI counter-claimed for breach of contract. Shortly before
the start of trial, Kersh nonsuited all its causes of action against
EMSI other than breach of contract.
At trial, Kersh argued EMSI improperly charged it $101,550 for
cassettes and that EMSI caused Kersh to lose $3.6 million in profits
from EU and over $165,000 from Bemis. EMSI argued Kersh owed it
$245,586.60 for unpaid invoices, after credits for payments. Kersh
abandoned the portion of its lost profits claim that was based on EU;
the trial court granted a partial directed verdict as to the EU claim.
The jury was asked (1) whether EMSI breached the contract; (2) whether
Kersh breached the contract; (3) who breached first; (4) if EMSI
breached first, the damages Kersh sustained from (a) overcharges for
cassettes and (b) lost profits; and (5) if Kersh breached first, the
damages EMSI sustained from the loss of the “benefit of the bargain.”
See Footnote 1
The jury found both parties breached the contract and that EMSI
breached first. In response to question four, the jury found “zero”
damages on Kersh's claim that EMSI breached by overcharging for
cassettes, and that Kersh lost profits in the amount of $156,996.05. As
a result of the conditioning language in the charge, the jury did not
answer question five regarding EMSI's damages for unpaid invoices,
because it found EMSI breached the contract first. Both parties agreed
before trial to submit the issue of attorney's fees for the prevailing
party to the court following the jury verdict. The trial court awarded
attorney's fees to Kersh but reduced Kersh's requested amount of
attorney's fees from $124,809.80 to $80,000. Both parties filed notices
of appeal.
Lost Profits
In its first issue, EMSI alleges there is neither legally nor
factually sufficient evidence to show Kersh sustained lost profits
damages in the amount of $156,996.05, which is the amount found by the
jury in response to question 4(b) of the charge.
When, as in this case, an appellant attacks the legal
sufficiency of an adverse finding on an issue on which it did not have
the burden of proof, it must demonstrate that no evidence supports the
finding. See Exel Transp. Servs., Inc. v. Aim High Logistics Servs.,
LLC, 323 S.W.3d 224, 232 (Tex. App.--Dallas, 2010, pet. denied); Private
Mini Storage Realty, L.P. v. Larry F. Smith, Inc., 304 S.W.3d 854, 860
(Tex. App.--Dallas 2010, no pet.) (citing Croucher v. Croucher, 660
S.W.2d 55, 58 (Tex. 1983)). We review the evidence presented at trial in
the light most favorable to the jury's verdict, crediting evidence
favorable to that party if reasonable jurors could and disregarding
evidence unless reasonable jurors could not. See Exel Transp. Services,
323 S.W.3d at 232. Anything more than a “scintilla of evidence” is
legally sufficient to support the jury's finding. Id More than a
scintilla of evidence exists when the evidence rises to a level that
would enable reasonable and fair-minded people to differ in their
conclusions. Id. In conducting our review, we realize that the jury, as
the fact finder, is the sole judge of the credibility of the witnesses
and the weight to be given their testimony. See City of Keller v.
Wilson, 168 S.W.3d 802, 819 (Tex. 2005); Exel Transp. Services, 323
S.W.3d at 232; Private Mini Storage Realty, 304 S.W.3d at 860. We may
not substitute our judgment for the fact finder's, even if we would have
reached a different answer on the evidence. See Excel Transp. Servs.,
323 S.W.3d at 232. When reviewing a challenge to the factual
sufficiency of the evidence, we examine the entire record, considering
both the evidence in favor of, and contrary to, the challenged finding.
Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Rusty's Weigh Scales and
Serv., Inc. v. North Texas Scales, Inc., 314 S.W.3d 105, 109-110 (Tex.
App.--El Paso 2010, no pet.). After considering and weighing all the
evidence, we set aside the fact-finding only if it is so contrary to the
overwhelming weight of the evidence as to be clearly wrong and unjust.
Cain, 709 S.W.2d at 176; Rusty's Weigh Scales, 314 S.W.3d at 110. We
again note that the trier-of-fact is the sole judge of the credibility
of the witnesses and the weight to be given to their testimony, and that
we will not substitute our own judgment for the trier-of-fact's, even if
we would have reached a different answer regarding the evidence. Rusty's
Weigh Scales, 314 S.W.3d at 110.
The general rules regarding adequate evidence of lost profit
damages are well known: Recovery for lost profits does not require that
the loss be susceptible of exact calculation. However, the injured party
must do more than show that they suffered some lost profits. The amount
of the loss must be shown by competent evidence with reasonable
certainty. What constitutes reasonably certain evidence of lost profits
is a fact intensive determination. As a minimum, opinions or estimates
of lost profits must be based on objective facts, figures, or data from
which the amount of lost profits can be ascertained. Although supporting
documentation may affect the weight of the evidence, it is not necessary
to produce in court the documents supporting the opinions or estimates.
Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992)
(citations omitted); see also ERI Consulting Eng'rs, Inc. v. Swinnea,
318 S.W.3d 867, 876 (Tex. 2010) (citing Holt Atherton). The injured
party must do more than show it suffered “some” lost profits. Helena
Chem. Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001). .Lost profits are
damages for the loss of net income to a business and, broadly speaking,
reflect income from lost business activity, less expenses that would
have been attributable to that activity.. Bowen v. Robinson, 227 S.W.3d
86, 96 (Tex. App.--Houston [1st Dist.] 2006, pet. denied). The
calculation of lost profits must be based on net profits, not gross
revenues. Holt Atherton, 835 S.W.2d at 83 n.1; Texaco, Inc. v. Phan, 137
S.W.3d 763, 771 (Tex. App.--Houston 2004, no pet.).
In this appeal, EMSI asserts Kersh presented no evidence from
which the jury could determine lost profits with any reasonable
certainty. We agree. Kersh did not present any expert testimony
regarding lost profits nor did it provide a damage model to the jury or
otherwise inform the jury how it should determine lost profits, and our
own review of the record does not reveal any objective facts, figures,
or data from which lost profits could have been determined with
reasonable certainty.
At trial, Kersh's lost profits calculation was partially based
on its September 2005 contract with Bemis, which was valued at
$2,065,739, and a second contract with Bemis in September 2006, which
was valued at $1,900,480--a difference of $165,259. Kersh alleged that
Bemis had demanded a ten percent “price break” because of its “testing
experience going into year two,” and the parties ultimately agreed to
eight percent. The provisions of the two agreements, however, are not
identical, and they contain some differences in overhead costs between
the testing services that Kersh outsourced to EMSI in 2005 and performed
itself in 2006. The 2006 agreement, for example, required Kersh to
“[c]onduct a Fast Track program for new hires and new spouses.” The 2005
agreement contained no such obligation. The 2005 agreement specified
that Kersh was obligated to mail all eligible Bemis employees a
“tri-fold” information brochure; the 2006 agreement indicated Kersh was
obligated to “Provide a Program Overview Guide to all meeting attendees
and mail to employees at remote locations.” The 2006 agreement contained
a service guarantee which specified that, if Kersh did not receive an
80% passing score on an attached “Account Management Scorecard,” Kersh
would pay a penalty “of 1% of the quarterly fees” to Bemis. There was no
such provision in the 2005 agreement.
In addition to the contracts, Kersh relied on testimony from its
vice president of account management since 2005, Kimberly Ahbert. See
Footnote 2 She testified that the difference in pricing between the
2005 and 2006 Bemis contracts was “about $155,000,” and that the
“services” between the two contracts were “comparable.” She did not know
how much, if any, of the price difference between the two agreements
represented any kind of lost profits to Kersh: Q. [COUNSEL FOR EMSI:]
You weren't involved in actively negotiating the terms of the 2006
contract between Kersh and BEMIS, were you?
A. [AHBERT:] I was on all conference calls and had many discussions,
but I wasn't the active spokesperson on the calls when it came to
Q. This 2005 contract with BEMIS that paid roughly $2 million in terms
of gross revenue to Kersh, you don't know how much of that was profit to
Kersh, do you?
A. No, I do not.
Q. The amount that you testified before roughly, I think you said
$155,000 difference in the second year of the contract with BEMIS, 2006
contract, you don't know what, if any, amount of that revenue in the
2006 contract represents any kind of lost profit, do you?
A. No, I do not.
Kersh also relied on the testimony of its chief operating
officer, Melbourne O'Bannion, who testified regarding the two contracts
and Kersh's relationship with Bemis. O'Bannion testified that he started
working for Kersh in January of 2007, after the two Bemis contracts had
been negotiated, and part of his job responsibilities included reviewing
the two contracts with Bemis. He noted that, based on “the way that I
read the contract,” the relative performance costs or expenses between
the two contracts were “very similar.” The relevant portion of his
testimony reads as follows: Q. [COUNSEL FOR KERSH:] You testified
yesterday, Mr. O'Bannion, and we've heard lots of testimony about the
pricing between the 2005 and 2006 BEMIS contract of $165,000, do you
recall that testimony?
A. [O'BANNION:] Yes, I do.
Q. Okay. And we went through yesterday, well, to summarize, the
differences we laid out were the services between 2005 and 2006
substantially similar?
A. Yes, they were.
Q. Was the cost associated with performing those services substantially
similar between those two years?
A. Very similar. On the 2006 year, the way that I read the contract,
our expenses would have been slightly higher, if anything, than 2005
Q. Let's, for the sake of fairness, let's call them even and not spot
that to Kersh. Is that fair?
A. That's fair.
Q. And when you say costs, or when we're talking about costs, would
that be the same thing as overhead for the two contracts?
A. Yes.
O'Bannion did not testify regarding overhead attributable to the two
contracts or otherwise specifically explain what costs were similar or
whether they were fixed or variable, nor did he provide objective facts,
figures or data to show either year's costs. He was asked about profit
margin percentages, but did not answer the question because EMSI's
counsel objected to the question based on Kersh's discovery responses.
See Footnote 3
Kersh disagrees its proof of lost profits is legally
insufficient, noting Texas law does not require “precise calculation” of
damages. Although recovery for lost profits does not require that the
loss be susceptible to exact calculation, the injured party must do more
than show it suffered “some” lost profits. Helena Chem. Co., 47 S.W.3d
at 504 (citing Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc.,
877 S.W.2d 276, 279 (Tex. 1994)). Texas law requires supporting facts,
figures, or data. Holt Atherton, 835 S.W.2d at 84-85. In particular, the
injured party must prove the amount of the loss by competent evidence
with reasonable certainty. Helena Chem. Co., 47 S.W.3d at 504 (citing
Szczepanik v. First State Trust Co., 883 S.W.2d 648, 649 (Tex. 1994);
Heine, 835 S.W.2d at 84). “Reasonable certainty” is not shown when the
profits claimed to be lost are largely speculative, as from an activity
dependent on uncertain or changing market condition, on “chancy”
business opportunities, or on promotion of untested products or entry
into unknown markets or unproven enterprises. Tex. Instruments, Inc.,
877 S.W.2d at 279; Atlas Copco Tools, Inc. v. Air Power Tool & Hoist,
Inc., 131 S.W.3d 203, 206-07 (Tex. App.--Fort Worth 2004, pet. denied).
This determination is fact-intensive but, as noted earlier, opinions on
lost profit estimates must, “at a minimum,” be based on objective facts,
figures, or data from which the lost profits amount may be ascertained.
Helena Chem. Co., 47 S.W.3d at 504 (citing Szczepanik, 883 S.W.2d at
649; Holt Atherton, 835 S.W.2d at 84).
Kersh cites cases where business owners testified concerning
business economic damages or the market value of property converted from
the business. See, e.g., Helena Chem. Co., 47 S.W.3d at 505-06; D/FW
Commercial Roofing Co. v. Mehra, 854 S.W.2d 182, 188 (Tex. App.--Dallas
1993, no writ); Allied Bank West Loop, N.A. v. C.B.D. & Assocs., Inc.,
728 S.W.2d 49, 54-55 (Tex. App.--Houston [1st Dist.] 1987, writ ref'd
n.r.e.); see also Wiese v. Pro Am Services, Inc., 317 S.W.3d 857, 862-63
(Tex. App.--Houston [14th Dist.] 2010, no pet.) (owner of company can
testify to value of converted property and, absent controverting
evidence, such testimony will sustain a verdict); Burns v. Rochon, 190
S.W.3d 263, 270-71 (Tex. App.--Houston [1st Dist.] 2006, no pet.)
(owner's uncontested testimony regarding value of his converted property
will sustain a verdict); Burlington N. R.R. v. General Projection Sys.,
No. 05-97-00425-CV, 2000 WL 1100874, at *8-10 (Tex. App.--Dallas August
8, 2000, pet. denied) (not designated for publication) (opinion on
rehearing) (testimony by plaintiff's chief financial officer regarding
converted property's rental value was legally and factually sufficient
to support award of loss of use damages). The cases cited by Kersh,
however, generally involve calculations of damages based on specific
facts, figures, or data regarding lost profits, often supported by
expert testimony or the testimony of the owner of the business. The
situation in the present case is different.
O'Bannion testified that the costs or overhead between the two
contracts were “very similar.” But he based his testimony on “the way
that I read the contract,” and he did not enumerate costs or overhead in
the two agreements or provide objective facts, figures, or data from
which those costs or overhead could be determined with reasonable
certainty. Furthermore, he did not testify as an expert on lost profits.
O'Bannion's testimony is simply too speculative to establish lost
profits with the required reasonable certainty. See Szczepanik, 883
S.W.2d at 649-50 (defendant's counterclaim for lost profits speculative
when defendant's secretary and treasurer testified they expected to make
a profit of $250,000 to $500,000 per year without any showing of how
they determined the amount of lost profits). We also note that we have
not found a case where evidence was found to be sufficient to support an
award of lost profits damages based on a witness's contention that
expenses between two contracts were “similar.”
Kersh also argues the two contracts themselves constituted
“objective evidence and data” that was “sufficient to establish net lost
profits.” But we find no support for the proposition that a price
reduction between two contracts, absent supporting facts, figures, or
data, is sufficient evidence of lost profits. See Holt Atherton, 835
S.W.2d at 85 (“the bare assertion that contracts were lost does not
demonstrate a reasonably certain objective determination of lost
profits”); Allied Bank, 728 S.W.2d at 54-55 (“In order to recover lost
profits, a party must show either a history of profitability or the
actual existence of future contracts from which lost profits can be
calculated with reasonable certainty.”). Moreover, the jury's award of
$156,996.05 is $8,262.95 less than the $165,259 price differential
between the two contracts, and we find no evidence in the record to
account for the reduction.
Arguing that the reduction was within the jury's discretion,
Kersh cites Mayberry v. Tex. Dept. of Agriculture, 948 S.W.2d 312,
316-17 (Tex. App.--Austin 1997, writ denied), where the jury's damage
award of $1,206 was upheld because the supporting evidence showed a
range of damages of between $1,028 to $1,292. As a general rule, the
jury has broad discretion to award damages within the range of evidence
presented at trial, so long as a rational basis exists for its
calculation. Holland v. Lovelace, 352 S.W.3d 777, 792 (Tex. App.--Dallas
2011, no pet.). The jury's findings will not be disregarded merely
because its reasoning in arriving at its figures may be unclear, and the
fact that there is nothing in the record to show how the jury arrived at
a specific amount is not necessarily fatal to the verdict. Id. Instead,
when the evidence supports a range of awards, an award of damages within
that range may be an appropriate exercise of the jury's discretion. Id.
But in this case, as discussed earlier, the evidence does not show Kersh
offered the jury a range of lost profits damages, calculated with
reasonable certainty, from which it could have exercised its discretion.
After reviewing the evidence in the light most favorable to the
jury's verdict, we therefore
conclude Kersh failed to provide legally sufficient evidence from which
lost profits could be determined with reasonable certainty. “Lost
profits must be non-speculative and corroborated.” Rusty's Weigh Scales,
314 S.W.3d at 111. Because there was no reliable, non-speculative
evidence on lost profits, we conclude the jury's finding that Kersh
sustained lost profits damages of $156,996.05 is not supported by
legally sufficient evidence. We decide in favor of EMSI on the portion
of its first issue challenging the legal sufficiency of the evidence as
to lost profits damages.
Material Breach
In its second and third issues, EMSI challenges the legal and
factual sufficiency of the evidence supporting the jury's findings (in
question one of the charge) that it materially breached the contract,
and (in question three) that it was the first to breach a material
obligation of the contract.
“A breach of contract occurs when a party fails to perform an
act that it has expressly or impliedly promised to perform.” Case Corp.
v. Hi-Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 769-70 (Tex.
App.--Dallas 2005, pet. denied). “It is a fundamental principle of
contract law that when one party to a contract commits a material breach
of that contract, the other party is discharged or excused from further
performance.” Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d
195, 196 (Tex. 2004). Whether a party's breach of contract is so
material as to render the contract unenforceable is ordinarily a
question of fact to be determined based on several factors, including:
(a) the extent to which the injured party will be deprived of the
benefit which he reasonably expected; (b) the extent to which the
injured party can be adequately compensated for the part of that benefit
of which he will be deprived; (c) the extent to which the party failing
to perform or to offer to perform will suffer forfeiture; (d) the
likelihood that the party failing to perform or to offer to perform will
cure his failure, taking account of the circumstances including any
reasonable assurances; [and] (e) 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.
Id. at 199 (citing Restatement (Second) of Contracts § 241 (1981)).
Because we are dealing with dual findings that both parties breached the
agreement, we must determine whether there is legally and factually
sufficient evidence that EMSI materially breached the contract first.
See Casarez v. Alltec Constr. Co., Inc., No. 14-07-00068-CV, 2007 WL
3287933, at *4 (Tex. App.--Houston [14th Dist.] Nov. 6, 2007, no pet.)
(mem. op., not designated for publication).
The evidence supports the jury's findings. Kersh alleged in its
pleadings that EMSI materially breached the contract by either not
performing the services and duties required under the contract or not
performing them adequately. According to EMSI, Kersh materially breached
the contract by failing to pay, in a timely manner, invoices sent
pursuant to the contract.
Under the contract, payment was due within thirty days of the
“date of invoice.” The first invoice from EMSI to Kersh had a “Billing
Period Date” of September 30, 2005. Each page of that first invoice also
contained, at the bottom of every page, a “footer” date of October 3,
2005. But whether we use the “Billing Period Date” of September 30 or
the date set out on the “footer” of the first invoice--October 3--as the
“date of invoice” under the agreement of the parties, the first invoice
would have been due to be paid not earlier than October 30 and no later
than November 2, 2005.
Ahbert testified that, prior to performing any testing services
at Bemis work sites, EMSI represented to Kersh its employees were
already “fully trained.” But Ahbert added that, at the first Bemis
facility where EMSI began the testing services, in Mankato, Minnesota,
on September 7 and 8, 2005, the EMSI employees were untrained, arrived
late, “did not know how to use the equipment,” and were “not
professional.” These problems continued over the next several weeks and
did not improve, according to Ahbert's testimony. Ahbert described what
occurred at the Bemis work site in Clinton, Iowa on September 27, 2005:
They were at the, I believe this was at the Clinton site where it
just completely fell apart. They did not show to one of our largest
sites. They were completely no shows. When they did show up they were
completely unprofessional. They weren't trained. The equipment that they
had brought wasn't enough. They were supposed to bring, I believe four
to five Cholestech machines, and they only brought two of the printers.
Actually the individual that we had sent from our site, or from
Kersh, they actually ended up having to be the ones that were helping to
do the finger sticks, because the individuals that EMSI sent out were
not trained to do the sticks.
It was--it became quickly a disaster. We lost participants,
people who were signed up took their names off, took their names off the
list, would not participate with us. We had to do a retest. It was a
really bad testing event
Two days later, on September 29, Ahbert participated in a conference
call between EMSI and Kersh, where these and other issues were
discussed. The agenda notes for the conference call, which were
prepared by Ahbert and admitted at trial, described various problems at
Bemis work sites in Clinton, Iowa, Pauls Valley, Oklahoma, and Kansas
City, Kansas; Ahbert made the following “overall” observations: *
Examiners are constantly arriving untrained and unfamiliar with our
program and the use of the Cholestechs and Omrons [machines].
* Examiners are arriving late.
* Paperwork is coming back with incomplete data (missing b.f., b/p,
* Supplies are, in most cases, not arriving at the branches until the
day before the event. Examiners are communicating to our leads that they
have no idea where the equipment is.
* Kersh has had to supply Omrons [machines] and printers at multiple
* Obvious lack of communication between Dallas and branches, or branch
leads and crew.
* EMSI has had this schedule since mid-July and there are still weekly
staff and equipment issues.
The agenda notes also stated, “There is room for error next week and
beyond. There is a 2.5 million dollar contract at stake. My Site
Managers are threatening to walk out.”
Asked how the untrained examiners affected the testing process,
Ahbert testified: It--it slows down the entire process. It makes the
entire work process look unprofessional. People will drop out because of
word-of-mouth, because of the previous person that just went through
testing. But it also slows down production time at BEMIS Company. Those
individuals are coming off of their production line. We're telling them
that they were only supposed to stay off of their production line for 10
to 15 minutes. During this testing individuals were off anywhere from 30
minutes to an hour, which slows down their production. They were having
to pay people over time because of this event. Any individuals just were
not trained on the machine itself. People were being double sticked on
the finger sticks. Inaccurate readings were being given on blood
pressure machines.
She added that the problems she described were not isolated issues or
complaints, and “we were hearing this pretty much across the board” at
other Bemis work sites. EMSI “[v]ery occasionally” handled the testing
services well, but, according to Ahbert, complaints were the rule rather
than the exception. Asked why, given EMSI's sub-standard performance,
Kersh then continued using its testing services for the duration of the
2005 “testing period,” which “ran from September all the way through
October,” Ahbert explained: We had no other relationship built with any
other testing company that we could just quickly switch to. We had a
contract with BEMIS. We already had testing dates already scheduled.
Individuals were already scheduled and had already scheduled this in
their life, and already scheduled for this testing event.
All of our manpower, all of our resources were solely dedicated
to handling this situation. We had no one who could just completely sit
back and try to find another vendor at this point. There was no time.
There was no resources. And we had had a contract that we had to be able
to uphold.
She also noted that the nature of the work at the Bemis facilities,
which often involved “24 hour shifts” and individuals working “on two
weeks, off two weeks,” made it difficult to quickly change testing
events, many of which were scheduled “all the way back from probably
July 2005.” All of EMSI's services at Bemis's facilities were completed
by the end of October of 2005, and EMSI did not perform any services,
other than “some make-up tests,” at Bemis's facilities in November of
that year.
Four EMSI employees testified at trial either live or by
deposition. No witnesses, however, disputed Kersh's evidence of EMSI's
performance of the testing services at Bemis's facilities during the
testing period, which was from September 7 until October 28, 2005. This
included EMSI's director of training and credentialing, Wendy Holcomb,
who oversaw the Kersh account.
Viewing the evidence in the light most favorable to the jury's
verdict, we conclude the jury could have reasonably found EMIS breached
the contract and that EMSI, not Kersh, was the first party to breach a
material obligation of the contract, and the material breaches occurred
prior to November 2, 2005. We further conclude the evidence supporting
the jury's findings is not so weak as to render them clearly wrong and
manifestly unjust. Therefore, the evidence is legally and factually
sufficient to support the jury's findings in questions one and three of
the charge. We overrule EMSI's second and third issues.
EMSI's Damages
In its fourth issue, EMSI contends the evidence establishes as a
matter of law that Kersh wrongfully refused to pay EMSI $245,586.60.
EMSI alleges that “[t]he jury did not have the opportunity to award EMSI
damages for Kersh's uncontested breach, but damages should nonetheless
be rendered in favor of EMSI.” The jury charge in this case
first asked the jurors two competing breach of contract questions, then
asked the jurors who breached the contract first. The jury was then
asked damages questions. The two damages questions were preceded by
conditioning instructions to only answer the question if the jury first
found a breach, and also found the other party breached first. Thus, for
question four of the charge, Kersh's damages question, the jury was told
to answer only if it found EMSI materially breached the contract first.
For question five, EMSI's damages question, the jury's response to that
question was conditioned on the jury finding that Kersh materially
breached the contract first. See Footnote 4
EMSI's argument in its fourth issue is related to its assertion
in issues two and three that the evidence conclusively showed Kersh
materially breached the contract first, not EMSI. The jury, however,
found EMSI, not Kersh, materially breached the contract first. We have
concluded the jury's findings are supported by legally and factually
sufficient evidence. Furthermore, due to the conditioning language in
the charge that preceded question five--to which EMSI did not
object--the jury did not answer EMSI's damages question. EMSI has not
shown it is entitled to recover any damages. See, e.g., Mustang Pipeline
Co., 134 S.W.3d at 196. We overrule EMSI's fourth issue.
We reverse the trial court's judgment insofar as it awards
damages to Kersh for lost profits. We render judgment that Kersh take
nothing on its claim of lost profits. Because we have concluded Kersh is
not entitled to lost profits, it has recovered no damages, thus
precluding an award of attorney's fees. See Exel Transportation Servs.,
323 S.W.3d at 235. In addition, because we sustain EMSI's first issue
and render a take-nothing judgment, we do not address the remaining
issues. See,
e.g., CenterPoint Energy Houston Elec. LLC v. Bluebonnet Drive, Ltd.,
264 S.W.3d 381, 392 (Tex.
App.--Houston [1st Dist.] 2008, pet. denied).
Court of Appeals
Fifth District of Texas at Dallas
No. 05-10-00777-CVV.
the 160th Judicial District Court of Dallas County, Texas. (Tr.Ct.No.
07- 03121).
Opinion delivered by Justice Myers, Justices Lang and Murphy
In accordance with the Court's opinion of this date, the
judgment of the trial court that appellee KERSH RISK MANAGEMENT, INC.
SERVICES, INC. the sum of $156,996.05 is REVERSED, and judgment is
WELLNESS recover nothing on its claims of lost profits.
INC. recover its costs of this appeal from appellee KERSH RISK
MANAGEMENT, INC. d/b/a KERSH WELLNESS. The obligations of Companion
Property and Casualty Insurance Company as surety on appellant's
supersedeas bond are DISCHARGED.
Judgment entered April 27, 2012.
/Lana Myers/
Footnote 1
The charge defined “[l]oss of benefit of the bargain” as
the difference, if any, between the value of services scheduled by Kersh
Risk Management, Inc. to be performed by Examination Management
Services, Inc. and not timely cancelled pursuant to the Agreement, and
the amount of money paid to Examination Management Services, Inc. by
Kersh Risk Management, Inc.
Footnote 2
In the reporter's record, the witness's name is spelled as “Ahbert.”
EMSI notes that Ahbert is the phonetic spelling of Hebert, which was the
witness's actual name. We use the spelling found in the reporter's
Footnote 3
When Kersh's counsel posed the question, EMSI's counsel objected,
arguing Kersh never responded to discovery requests regarding lost
profits. The trial court discussed this matter during an off-the-record
bench conference, after which O'Bannion was asked a different question.
Footnote 4
During the charge conference, EMSI objected to question four based on
a lack of evidence of lost profits, but it did not object to the
conditioning language preceding the question, and it did not object to
question five.

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