R. Scott Brown v. Allen D. Keel

Opinion issued March 8, 2012. In The Court of Appeals For The First District of Texas ———————————— NO. 01-10-00936-CV ——————————— R. Scott Brown, Appellant V. Allan D. Keel, Appellee On Appeal from the 234th District Court Harris County, Texas Trial Court Case No. 2009-04679 MEMORANDUM OPINION R. Scott Brown appeals from the trial court’s judgment notwithstanding the verdict (JNOV) in this partnership dispute. In his first and second issues, Brown contends that the trial court erred in granting JNOV in favor of Allan Keel because there was sufficient evidence to support the jury’s findings on the existence of a partnership and causation. In his third, fourth and fifth issues, Brown challenges the trial court’s alternative JNOV reducing the damages award and failure to grant Brown’s JNOV to increase the damages award. We hold that the evidence is legally sufficient to support the jury’s partnership finding but not legally sufficient to support the finding on causation. We therefore affirm the trial court’s judgment. Background A. The transaction In 2004, Brown and Keel began discussing the possibility of starting their own private equity fund with a focus on oil and gas investments. Brown brought finance experience to the endeavor, while Keel brought operational experience in the energy sector. They dubbed their venture “Maverick Energy” and traveled to New York to pitch their fund to potential investors. The New York trip did not bear fruit, but shortly after they returned to Houston, Brown contacted Keel about an investment opportunity involving GulfWest Energy, a Houston-based oil and gas company. GulfWest suffered cash-flow problems in 2004 and was looking for investors to provide the cash-infusion needed to get the company back on track. Maverick entered into a confidentiality agreement with GulfWest so that Brown and Keel could obtain the information necessary to perform due diligence on a potential investment in GulfWest. After discovering that the name Maverick Energy was already in use, Brown and Keel formed a Texas limited liability company under the name Volant Energy.[1] The following day, Volant sent GulfWest an acquisition proposal for a cash purchase of GulfWest’s shares. Brown and Keel then began looking for an investor to finance the transaction. As part of this effort, Keel contacted Oaktree Capital Management, a California private investment fund. Keel and Brown began discussions with Oaktree about the GulfWest investment opportunity in late-November. In early-December, Keel sent Oaktree a proposed term sheet. The term sheet provided for $75 million in initial funding from investors, which would be used to purchase GulfWest’s outstanding shares, converting GulfWest from publicallyowned to privatelyowned. Under the term sheet, Keel and Brown were identified as “Management,” who would provide $300,000 in initial funding, be retained by the new company under five-year employment contracts, and receive a 1% transaction fee at closing as well as considerable equity and options in the new entity. Under their proposal, Brown would be CFO of the new company and Keel would be CEO. Oaktree was interested in the investment but not under the terms proposed by Brown and Keel. Instead of investing $75 million to purchase all of GulfWest’s shares and take the company private, Oaktree decided to leave GulfWest public and invest $40 million to acquire a majority interest. Oaktree decided to use its own investment vehicle for the transaction, rather than Volant. Oaktree rejected Brown and Keel’s 1% transaction fee and instead suggested a $600,000 transaction fee at closing to be invested in new preferred shares of GulfWest. Oaktree also resisted paying an investment banking fee to Brown’s employer, Southwest Securities, arguing that Southwest had not been involved in the deal other than as Brown’s employer when he worked on the deal; Oaktree suggested any payment to Southwest should come out of Brown and Keel’s transaction fee. Oaktree altered the terms of Brown and Keel’s anticipated employment contracts, including a reduced salary, reduced bonuses and a shortened three-year term. Oaktree also wanted to give Brown and Keel less equity and no options. In mid- and late-December, Keel sent Oaktree revised term sheets from Volant containing most of the terms dictated by Oaktree. Beginning in December 2004, friction arose between Brown, who took the lead in negotiations with Oaktree on behalf of Brown and Keel, and Skardon Baker, Oaktree’s point man in the negotiations. Baker was displeased with Brown’s negotiation style and demeanor. Baker also expressed concern that Brown had never served as CFO of a publicly traded company. Baker began to communicate primarily with Keel, leaving Brown off emails about the transaction. Keel also began sending email to Baker and others at Oaktree that did not include Brown, although on at least one occasion, Keel forwarded one of Baker’s emails about the transaction to Brown. Ultimately, Baker concluded that Oaktree should not hire Brown as CFO of the new company. On January 9, Baker sent an email to Keel and others stating that he had spoken with Jim Ford, managing director of Oaktree, about the “CFO issue” and Jim was “on board with the necessary action.” Baker suggested that Oaktree involve “Julien,” Oaktree’s lawyer, “so we are doing it in a professional and safe manner.” Keel did not disclose his discussions with Oaktree to Brown. At the same time, GulfWest’s cash flow problems posed a hindrance to the transaction. GulfWest did not have funds to cover the necessary due diligence costs. After Oaktree refused, Brown and Keel loaned GulfWest $200,000—$120,000 from Keel and $80,000 from Brown—to cover these costs. This loan took place on January 10—the day after Keel received Baker’s email about not hiring Brown. Throughout January, Keel did not disclose Oaktree’s intentions to Brown, but he did encourage Oaktree to handle the matter itself. In one email between Keel and Oaktree, Keel states: Scott senses there is something amiss and as soon as we can get comfortable that the deal will happen I think we/you should speak with him. He has worked very hard and even though I believe he ultimately could be a productive CFO, I understand your issues. It is important to me that Southwest receive a fair fee for their part in this transaction . . . I don’t know if there is a way to compensate Scott separately but he should share in his part of the transaction fee we agreed to if possible. During this time, Oaktree and GulfWest moved forward with the transaction. On January 30, 2005, Ford informed Brown that Oaktreewould not hire him as CFO of the new company, but Ford left open the possibility that Brown could take on another role with the company. Over the following week, Ford, Baker, and Keel had discussions regarding a role for Brown other than CFO. Keel’s position in these discussions was that it would be “tough to find a spot” for Brown other than CFO. Keel stated, “Although I do believe Scott is a capable and creative professional, I’m having difficulties seeing his role if it’s not that of CFO.” Keel noted that the person hired as CFO would want an ownership interest and that interest should come out of the stock options that would have gone to Brown. Oaktree decided not to hire Brown in any role. On February 7, Keel met Brown for lunch and “let him know there is no spot for him at new company[.]” Brown was upset by this decision, and he made it clear he still felt that Southwest was entitled to an investment banking fee based on his work on the transaction and that he should be compensated individually for bringing the opportunity to Oaktree. Oaktree determined that it needed a waiver from Brown, releasing Oaktree from any liability, before it closed the GulfWest transaction. In exchange for a release, Oaktree offered Brown his choice of $500,000 or $250,000 plus 250,000 common shares of the new entity at closing, which Brown was to share with SouthWest at his “discretion.” Brown rejected this offer, noting that the “three advisory firms were each already receiving $500,000 fees.” When Brown refused to sign the release, Baker contacted Brown’s boss at Southwest. In an email following Baker’s initial communications with Brown’s boss, Baker told Brown’s boss that Brown “has pressured us to arrange additional compensation for him in an individual capacity” and that Oaktree was “highly uncomfortable with that outcome” for “all the reasons we discussed.” Oaktree offered Southwest a $500,000 investment banking fee in exchange for signing a release and agreeing to indemnify Oaktree for any claims against it by Brown, unless Southwest could get Brown to sign the release as well. Brown refused to sign the release. Southwest accepted the $500,000 fee but required Oaktree to indemnify Southwest for any claims related to the transaction. Southwest then fired Brown. The GulfWest transaction closed at the end of February 2005. B. The lawsuit Brown sued Keel for breach of his partnership duties.[2] After a four-day trial, the jury found that Keel and Brown had entered into a partnership to identify and invest or acquire oil and gas companies and that Keel failed to comply with his duty of loyalty to Brown. The jury found that Keel’s breach proximately caused Brown damages of $1,250,000, based on “the value of the stock options on February 28, 2005 that Brown would have received but for the breach.” Finally, the jury rejected Keel’s contention that Brown ratified his conduct. Keel moved for JNOV and to disregard the jury’s damages finding. Keel argued that the trial court should enter JNOV because there was no evidence of a partnership or that Keel’s alleged breach proximately caused Brown’s damages. Keel also argued that the trial court should disregard the jury’s damages finding because it valued Brown’s lost stock options on the date of closing, when the law required the stock options to be valued “on the first day (after the breach) when the owner can take delivery of the stock.” Valuing the stock options on the correct date, Keel asserted, Brown’s damages were no more than $111,375. Brown moved for JNOV on damages, arguing that the evidence conclusively established that the value of the stock options was $7.3 million. The trial court denied Brown’s motion for JNOV. It granted Keel’s motion for NOV as follows: Defendant’s Motion for Judgment Notwithstanding the Verdict in the amount of $111.375 in damages is GRANTED, but such ruling in rendered moot by the Court’s other rulings below; Defendant’s Motion for Judgment Notwithstanding the Verdict regarding proximate cause is GRANTED, but such ruling is rendered moot by the Court’s other ruling below; and Defendant’s Motion for Judgment Notwithstanding the Verdict regarding formation of a partnership is GRANTED. The trial court then entered a take-nothing judgment in favor of Keel. Standard of Review “We review a JNOV under a no-evidence standard, meaning we ‘credit evidence favoring the jury verdict if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not.’”Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex. 2009) (quoting Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007)). Under this standard, we will uphold the jury’s finding if it is supported by more than a scintilla of competent evidence. Id. (citing Walmart Stores, Inc. v. Miller, 102 S.W.3d 706, 709 (Tex. 2003)). We will uphold the trial court’s JNOV, on the other hand, if there is no evidence to support the jury’s finding on a vital fact or if the evidence conclusively establishes the opposite of a vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). The ultimate test for legal sufficiency is“whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review.”Id. at 827; see also Tanner, 289 S.W.3d at 830. Thus, to merit the trial court’s JNOV and take-nothing judgment, Keel was required to show that the evidence conclusively proved that a partnership did not exist or that Keel’s breach of his partnership duties did not cause Brown damages and that no reasonable jury was free to think otherwise. See Tanner, 289 S.W.3d at 830.Similarly, for either Brown or Keel to demonstrate a right to JNOV on the jury’s damages finding, he was required to show that the evidence conclusively proved the value of Brown’s lost stock options under the applicable measure of damages in the amount of the judgment sought. See id. Partnership Evidence In his first issue, Brown contends that the trial court erred in entering JNOV on the ground that there was no evidence of a partnership. The parties agree that the determination of whether a partnership existed between Brown and Keel is made in consideration of the five factors identified in Ingram v. Deere, 288 S.W.3d 886, 896 (Tex. 2009).[3] These factors are: (1) receipt or right to receive a share of profits of the business; (2) expression of intent to be partners in the business; (3) participation or right to participate in control of the business; (4) sharing or agreeing to share: (A) losses of the business; or (B) liability for claims by third parties against the business; and (5) contributing or agreeing to contribute money or property to the business. Id. at 895; see also Tex. Bus. Orgs. Code Ann. § 152.052(a) (West Supp. 2011). Proof of each of these elements is not necessary to establish a partnership. Ingram, 288 SW.3dat 896. Instead, all of these factors should be considered in determining whether a partnership exists and no single factor is determinative. Id. at 896–97. Under this totality-of-the-circumstances test, even conclusive evidence of only one factor normally will not be sufficient to establish the existence of a partnership. Id. at 898. On the other hand, conclusive evidence of all five factors will establish a partnership as a matter of law. Id. A. Sharing profits Shared rights to profits and to control the business are generally considered the most important factors in establishing the existence of a partnership. Ingram, 288 S.W.3d at 896; see also Big Easy Cajun Corp. v. Dallas Galleria Ltd., 293 S.W.3d 345, 348 (Tex. App.—Dallas 2009, pet. denied) (“The most important of these factors are sharing profits and participating in control of the business.”). As evidence of profit sharing, Brown relies on his own testimony at trial as well as certain exhibits providing for equal payments and rights for Brown and Keel under their investment proposals. Brown testified that he and Keel agreed to share profits and losses. He further testified that he and Keel had agreed to a 50-50 split of both the risk of their venture and any revenues and “upside from the investment.” The evidence at trial included a “Maverick Energy” budget proposal from October 2004 that anticipated equal compensation for Brown and Keel and multiple “Volant Energy” term sheets sent to Oaktree that provided for equal compensation, employment rights, and stock options for Brown and Keel. Keel attacks Brown’s profit sharing evidence on the grounds that some of Brown’s testimony relates to “revenues,” rather than profits, and that payment of wages or other compensation is not evidence of profit sharing. See Ingram, 288 S.W.3d at 899 (noting the distinction between gross revenues and profits); see also id. at 898 (noting that profits paid as compensation for work performed is not indicative of a partnership interest). But Brown specifically testified that he and Keel agreed to share “profits,” not just revenues. And sharing equally in revenues can equate to sharing in profits when expenditures are also equally shared, as Brown testified here. See id.at 899 (citing to definition of “profits” as the “excess of revenues over expenditures in a business transaction”). Finally, although the profit sharing evidence Brown relies on includes proposals under which Brown and Keel would be paid equal salaries, the evidence is not limited to salary evidence. Brown testified about “profits” broadly, as well as investment management fees earned by the partnership entity and increases in the value of their investment. As the sole judge of the witnesses’ credibility, the jury was free to credit Brown’s testimony that he and Keel had agreed to share profits. See City of Keller, 168 S.W.3d at 819 (“Jurors are the sole judges of the credibility of the witnesses and the weight to give their testimony.”); Hoss v. Alardin, 338 S.W.3d 635, 641 (Tex. App.—Dallas 2011, no pet.) (quotingCity of Keller for this principle in context of dispute over existence of partnership).Keel cites no evidence tending to disprove such an agreement. This factor provides support for the jury’s partnership finding. B. Expression of intent to be partners When considering whether the parties expressed an intent to be partners, courts look at the parties’ speech, writings, and conduct. Ingram, 288 S.W.3d at 899. “Evidence of intent could include, for example, the parties’ statements that they are partners, one party holding the other party out as a partner on the business’s letterhead or name plate, or in a signed partnership agreement.” Id. at 900. This inquiry is “separate and apart from the other factors” and should only include evidence not specifically probative of the other factors.Id. at 899–900. Thus, evidence of profit or loss sharing, control, or contribution of money or property is not evidence of an expression of intent to be partners. Id. at 900. “Otherwise, all evidence could be an ‘expression’ of the parties intent, making the intent factor a catch-all for evidence of any of the factors, and the separate ‘expression of intent’ inquiry would be eviscerated.” Id. As evidence of an expression of intent to be partners, Brown relies on his testimony that he and Keel were partners, that they “express[ed a] mutual intent to be partners,” and that they “shook hands” on the agreement before leaving for the New York trip in September 2004. Brown also relies on the Maverick PowerPoint presentations Brown and Keel gave to potential investors in New York, which identified Brown and Keel as “principals,” which Brown understood to be short for “principal partners.” Brown also points out that he and Keel were identified as the only two “managers” of Volant in documents filed with the Texas Secretary of State. Finally, Brown relies on testimony in which he disputes Keel’s testimony that they did not agree to be partners and Keel never expressed an intent to be partners. A lay witness’s conclusion as to whether a partnership has been formed is generally not competent evidence of the formation of a partnership. See Hoss, 338 S.W.3d at 644–45 (holding that plaintiff’s testimony that he and defendant “specifically agree[d] to be partners” was conclusory and therefore no evidence of an expression of intent to be partners); Torres v. Kelley, No. 13–04–313–CV, 2007 WL 528849, at *4 (Tex.App.—Corpus Christi Feb. 22, 2007, no pet.) (mem. op.)(“While it is true that both parties and their attorneys made numerous statements about a partnership to be formed, such conclusory statements are no evidence of the formation of a partnership contract.Mere personal belief there may be a partnership is not probative evidence.”). Thus, Brown’s testimony that he believed himself to be partners with Keel is not, alone, evidence of a legal partnership. While Brown identified certain bases for his conclusion, such as his and Keel’s agreement to share profits and losses 50-50, we may not consider evidence of the other partnership factors in determining whether the parties expressed an intent to be partners. Ingram, 288 S.W.3d at 900. Moreover, while Brown testified that he understood the term “principals” to mean “partners,” there is no evidence that anyone else shared that understanding. Cf. Hoss, 338 S.W.3d at 644(“Moreover, ‘there must be evidence that both parties expressed their intent to be partners.’”) (quotingReagan v. Lyberger, 156 S.W.3d 925, 928 (Tex. App.—Dallas 2005, no pet.)). But the jury could reasonably have inferred from Brown’s testimony that he and Keel “express[ed] [their] mutual intent to be partners” and “shook hands” on it, that he and Keel made mutual statements to each other that they were partners. See Ingram, 288 S.W.3d at 900 (stating the evidence of intent “could include, for example, the parties’ statements that they are partners . . . .”). Although Keel denied having made such a statement, the jury was free to credit Brown’s testimony and discredit Keel’s contradictory testimony. See City of Keller, 168 S.W.3d at 819; Hoss, 338 S.W.3d at 641. Brown’s testimony that he and Keel “shook hands” on their agreement before embarking on their trip to New York in search of investors is some evidence that they intended their expression to have significance to their business endeavor. Cf. Ingram, 288 S.W.3d at 900 (stating that “merely referring to another person as ‘partner’ in a situation where the recipient of the message would not expect the declarant to make a statement of legal significance” is not sufficient because the parties could be using the term in a colloquial sense, but the term “could constitute legally significant evidence of expression of intent when made in a circumstance that indicates significance to the business endeavor.”). This factor provides support for the jury’s partnership finding. C. Sharing control of business As noted above, sharing of control, like sharing of profits, is typically given particular importance in the analysis of whether a partnership exists. Seeid. at 896; Big Easy Cajun, 293 S.W.3d at 348.The right to control a business is the right to make executive decisions.See Ingram, 288 S.W.3d at 901–02; Guerrero v. Salinas, No. 13–05–323–CV, 2006 WL 2294578, at *11 (Tex.App.—Corpus Christi Aug. 10, 2006, no pet.);Tierra Sol Joint Venture v. City of El Paso, 155 S.W.3d 503, 508 (Tex.App.—El Paso 2004, pet. denied). As evidence of shared control, Brown relies on his testimony that one of the terms of their partnership agreement was that he and Keel would “both be a part of the management team” and that they both agreed to “participate in the control of the business.” He also testified that he and Keel worked together and “went back and forth” on all of the spreadsheets, presentations, and documents they prepared for their venture. Keel likewise testified that he and Brown worked together on the spreadsheets they presented to Oaktree and that Brown took the lead in the negotiations with Oaktree on behalf of both of them. Keel testified that Brown would negotiate with Oaktree and report back to Keel on the progress. This evidence constitutes some evidence that Brown participated in the decision-making process of his venture with Keel. There is no contrary evidence that decision-making authority was vested in Keel alone. This factor provides support for the jury’s partnership finding. D. Sharing losses or liability The only evidence relating to the sharing of losses or liabilities is Brown’s own testimony that he and Keel agreed to share losses when they met before the New York trip in September 2004 and that they agreed to share the “risk 50/50” when putting together early budget proposals. But Brown’s testimony is evidence, and the jury was within its prerogative to credit that testimony. See City of Keller, 168 S.W.3d at 819; Hoss, 338 S.W.3d at 641. Keel argues that Brown talked about expenses, which are not the equivalent of losses, and that Brown’s testimony about sharing the risk is “conclusory.” But Brown specifically testified, on more than one occasion, that he and Keel agreed to share “losses.” Keel’s “conclusory” challenge to Brown’s testimony is misplaced. The testimony relates to a specific, disputed factual circumstance—what the parties agreed to, if anything, regarding losses—and not the ultimate legal question—whether the parties were partners. Cf. Hoss, 338 S.W.3d at 644 (rejecting conclusory lay witness testimony as to whether the parties’ agreed to be partners); Ben Fitzgerald Realty Co. v. Muller, 846 S.W.2d 110, 121 (Tex. App.—Tyler 1993, writ denied) (under prior partnership law, rejecting conclusory lay witness testimony that parties were partners) (citing Murphy v. McDermott, Inc., 807 S.W.2d 606, 613 (Tex.App.—Houston [14th Dist.] 1991, writ denied)). This factor provides support for the jury’s partnership finding. E. Contributing money or property to the business Brown’s evidence of contributing to the partnership includes (1) his testimony that he and Keel agreed to contribute money to the business “if and when needed for closing,” (2) his testimony that he incurred out-of-pocket expenses for travel and a Maverick pitch book, and (3) his $80,000 loan to GulfWest. Keel asserts that Brown’s travel expenses were reimbursed by SouthWest. Citing Hoss, 338 S.W.3d at 648, hefurther argues that “[t]o the extent Brown had some out-of-pocket expenses for travel and the like, payment of expenses is not a contribution to the partnership.” We agree that Brown’s incurrence of costs for a pitch book and for travel, to the extent not reimbursed by his employer, does not necessarily constitute contributing money to the partnership. See id.(“Evidence that business expenses were paid by a credit card, in and of itself, is not evidence that money or property was contributed as capital to the business.”) Brown’s loan to GulfWest, however, can constitute contributing money to a partnership. See Reagan, 156 S.W.3d at 928 (holding that loan from one party to another was evidence of fifth partnership factor); see also Hoss, 338 S.W.3d at 647 (citing Reagan, 156 S.W.3d at 928). The loan was not from a purported partner to the partnership entity or to another partner; instead, the loan was from two purported partners individually to third-party. But Keel admitted in his testimony that the loan was made in order to cover GulfWest’s due diligence costs relating to the proposed investment transaction and that he and Brown agreed to come up with the money together. Brown testified that the loan was made on behalf of the partnership and that they funded the loans individually, rather than through a partnership vehicle, only for legal and accounting simplicity. This is some evidence that Brown’s $80,000 loan to GulfWestwas made in contribution to Brown and Keel’s partnership venture. Brown’s testimony that he and Keel had agreed to contribute to closing costs as needed is also some evidence of an agreement to contribute money to the partnership. This factor provides support for the jury’s partnership finding. F. Conclusion Considering this evidence in its totality, we conclude that the evidence is legally sufficient to support the jury’s finding that Brown and Keel were partners.See Ingram, 288 S.W.3d at 899-904 (applying totality-of-the-circumstances test). The trial court therefore erred in granting JNOV on the ground that there was no evidence of a partnership. We sustain Brown’s first issue. Causation In his second issue, Brown contends that the trial court erred in entering JNOV on the ground that there was no evidence of causation. In his motion for JNOV, Keel asserted that there was no evidence that Keel’s conduct proximately caused Brown not to receive stock options in the new company. Keel relied on the following testimony from Baker as conclusively proving that Oaktree would not have proceeded with the GulfWest transaction if it required hiring Brown: Q. Would Oakree have hired Mr. Brown and Mr. Keel at Oaktree in February of 2005? A. We were not prepared to go forward with the investment with — if it required both Mr. Brown and Mr. Keel were employees. Q. What if — what if Mr. Keel in February of ’05 came to ya’ll and said he wasn’t coming to GulfWest without Mr. Brown? What would Oaktree have done? A. We would have walked away from the investment. We were — we were uncomfortable with Mr. Brown as the CFO at that point. Brown makes two responses to these arguments. First, Brown argues that even if Oaktree did not want to hire him as CFO, they could still hire him in another position and grant him the stock options that he had negotiated for himself and Keel, which Keel received. Second, Brown argues that even if Oaktree did not hire him, they could have given him the equivalent of the stock options in the form of warrants. A. Standards for causation of actual damages Under certain circumstances, a claimant in a breach of fiduciary duty action may recover damages in equity even when actual damages are not established; but when a claimant seeks to recover actual damages, he must prove that the damage he seeks were caused by the breach. See Burrow v. Arce, 997 S.W.2d 229, 234–35, 240 (Tex. 1999). Brown sought to recover actual damages and presented evidence based on the value of the stock options package awarded to Keel. Question threeasked the jury to value Brown’s damages, if any, that were proximately caused by Keel’s breach of his duty of loyalty to Brown. The sole damages element submitted to the jury was “the value of the stock options on February 28, 2005 that Brown would have received but for the breach.” “Proximate cause” subsumes two elements: (1) cause in fact and (2) foreseeability. Akin, Gump, Strauss, Hauer& Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106, 122 (Tex. 2009); Finger v. Ray, 326 S.W.3d 285, 291 (Tex. App.—Houston [1st Dist.] 2010, no pet.). In turn, “cause in fact” has two sub-elements: (a) the injury would not have occurred “but for” the defendant’s conduct and (b) the conduct was a substantial factor in bringing about the injury. Akin, Gump, Strauss, Hauer& Feld, L.L.P., 299 S.W.3d at 122; Finger, 326 S.W.3d at 291. “Causation must be proved, and conjecture, guess, or speculation will not suffice as that proof.” Akin, Gump, Strauss, Hauer& Feld, L.L.P., 299 S.W.3d at 122. Thus, Brown had the burden at trial to present some evidence that: (1) Brown would have received the stock options package “but for” Keel’s breach; (2) Keel’s breach was a substantial factor in Brown’s not receiving the stock options; and (3) it was foreseeable that Keel’s breach would cause Brown not to receive the stock options. Keel was entitled to JNOV on the element of causation if there was no evidence of one or more of these three components of proximate cause. B. Causation evidence On January 30, 2005, Brown met with Ford, Oaktree’s managing director and Baker’s superior. According to Brown, Ford informed him that Oaktree would not hire him as CFO but stated that Oaktree was still “very open to hearing about other positions that [he] could have within the company and very open to discussions on that” and “open to [him] getting the compensation package that [he] had negotiated.” Later that same day, Ford sent an email to Baker telling Baker to “include [Brown] on the email.” Baker also testified that Oaktree “kept the door open for possibly hiring [Brown] in another position” after determining not to keep him on as CFO. But Baker also testified that he and Keel were opposed to hiring Brown at all: Q. . . . [S]o, he would have been part of the management team, even though you didn’t want him as a CFO, right? A. Correct. Q. And, of course, [as] part of the management team he would be entitled to all of the things that Mr. Keel got. A. Not all of [the] things, no. Q. Well — but you didn’t— never got to [that] point. A. We never had a negotiation because — Q. Right. Because you asked Mr. Keel what he thought about that, right? A. We did, yes. Q. And Mr. Keel said: No, don’t want him, didn’t he? A. Yes. And I felt the same way at that point. Q. Yeah. So, Mr. Keel is the one who basically, as far as Oaktree was concerned, cut that rope that Mr. Brown was hanging by, at least in February of ’05. A. I don’t agree with that. After Ford’s meeting with Brown, Ford raised the possibility of hiring Brown in another position with Keel. In an email to Ford two days after his meeting with Brown, Keel stated: Scott would like to speak with you regarding his role going forward, assuming we get the deal closed. He would also like for me to argue his value in taking the company forward. Although I do believe Scott is a capable and creative professional, I am having difficulty seeing his role if it is not that of CFO. Also, I would expect Joe [Grady] to want a meaningful piece of the upside, which would have to be extracted from Scott’s share of the management equity. Giving the above, I don’t see much room for a compromise position. If you see it differently please let me know and I will be glad to discuss it. I am not very interested in having a 3 way call where he wants me to demand his inclusion. If you get a chance in the morning you may want to give me a call and we can discuss how to move forward. Within a week after Ford’s discussion with Brown, Oaktree decided not to hire Brown at all. Even if the jury could have inferred that Keel’s resistance to hiring Brown in a position other than CFO was a proximate cause of Oaktree’s decision not to hire Brown in another position, there is no evidence that this caused the damages claimed by Brown. Brown’s damages were not calculated based on a salary for this new position. The damages question—which asked about the damages proximately caused by Keel’s breach of loyalty—was limited to the value of the stock options given to Keel. Keel contends that Oaktree had devoted all of the available stock options to him, Joe Grady, who was hired as CFO instead of Brown, and other members of the management team and that there is no evidence that his actions caused Brown to lose stock options. Brown’s testimony that Ford was open to discussions about Brown receiving the stock options is not, alone, evidence that Keel’s conduct caused Oaktree not to give Brown the stock options.[4] According to Keel, “Brown would not have received stock options except as CFO.” Brown cites to no evidence that, if he had been offered another position with the new company, he would have received the same stock options package given to Keel—or any stock options package. Cf. id. at 116–17 (holding evidence legally insufficient to support damages award for underlying judgment in malpractice action when there was no evidence that plaintiff would have been able to collect on underlying judgment); Doe v. Boys Clubs of Greater Dall., Inc., 907 S.W.2d 472, 477–78 (Tex. 1995) (holding that even if defendant had a duty to investigate its volunteers, breach of that duty was not the cause-in-fact of plaintiff’s sexual molestation because there was no evidence that defendant would not have accepted molester as volunteer if it had known about previous DWI conviction).Brown does not identify any evidence of what positions Oaktreewould have considered him for absent Keel’s resistance norany evidence that such positions would have come with a stock options package. Absent such evidence, the jury had no basis to conclude that, but for Keel’s conduct, Brown would have received the same stock options package as Keel.[5] Brown’s second argument, that Oaktree could have given him the stock options in the form of warrants even without hiring him, is similarly flawed. There is evidence in the record that Oaktree could have given Brown warrants representing the stock options, but there is no evidence that Oaktree ever considered doing so, much less that Oaktree would have done so but for Keel’s conduct. To the contrary, after deciding not to hire Brown at all, Oaktree offered Brown $500,000, or $250,000 plus 250,000 common share, in exchange for a release. Brown rejected that offer, specifically asking that he be awardedwarrants representing a meaningful number of the shares being awarded in equity options negotiated for management. Oaktree expressly refused that request, stating that it could not “give [Brown] an ‘employee’ stock package when [he] was not going to be an employee.” We overrule Brown’s second issue. We hold that the trial court did not err in granting JNOV on the ground that there is no evidence of causation. As a result of this holding, we need not reach Brown’s damages issues. Conclusion We affirm the trial court’s judgment on the ground that there is no evidence of causation. Harvey Brown Justice Panel consists of Justices Jennings, Sharp, and Brown. Justice Sharp, dissenting. [1] Brown does not contend that Volant is the partnership entity created between himself and Keel. Cf. Lentz Eng’ing, LC v. Brown, No. 14-10-00610-CV, 2011 WL 4449655, at *3 (Tex. App.—Houston [14th Dist.] Sept. 27, 2011, no. pet. h.) (“An association or organization is not a partnership if it was created under the statute governing the formation of LLCs.”). Volant is the investment vehicle that Brown and Keel proposed Oaktree use to buy into GulfWest. [2] Brown initially sued Oaktree too, but he nonsuited Oaktree before trial. [3] Ingram discusses these factors under the Texas Revised Partnership Act (TRPA), which expired on January 1, 2010. See Act of May 31, 1993, 73d Leg., R.S., ch. 917, § 1, 1993 Tex. Gen. Laws 3887, 3890 (expired Jan. 1, 2010) (formerTex. Rev. Civ. Stat. art. 6132b–2.02(a), 6132b–2.03(a)).After that date, the Texas Business Organizations Code (TBOC) applied to all partnerships, “regardless of their formation date.” Ingram, 288 S.W.3d at 894 n.4. Both TRPA and the TBOC identify the same five factors for determining whether parties have formed a partnership. CompareTex. Bus. Orgs. Code Ann.§ 152.052(a) (West Supp. 2011), withTex. Rev. Civ. Stat. art.6132b–2.03. [4] The dissent relies on the following testimony from Brown as evidence that Keel’s conduct caused Brown to lose the stock option package: Q: Was [Ford] open to your getting the compensation package that you had negotiated? A: Yes. But, crediting this testimony as true, it is not enough that Ford was open to the possibility; Brown must provide the jury with some evidence from which it could infer that Brown could have and, more-likely-than-not would have, actually received the stock option package if not for Keel’s conduct. We agree that Keel’s conduct need not be the only proximate cause of Brown’s loss of the stock package—the problem here is that there is no evidence that there was ever a reasonable probability of Brown receiving the same stock as the company’s CFO and CEO once Oaktree determined that he was unfit for the CFO position. [5] We note that the jury could have reasonably inferred that Keel breached his duty of loyalty to Brown by not informing him of the discussion of the “CFO issue” in Baker’s January 9 email,and Brown may have had a chance of repairing his relationship with Oaktree at that earlier date than he did on January 30. However, the same causation problem arises—i.e., there is no evidence of what position with the company Brown might have been offered if the relationship had been repaired or what sort of compensation package might have accompanied such a position.