IN THE SUPREME COURT OF TEXAS

444444444444

NO. 15-0968

444444444444

LONGVIEW ENERGY COMPANY, PETITIONER,

v.

THE HUFF ENERGY FUND LP, WRH ENERGY PARTNERS LLC, WILLIAM R. “BILL”

HUFF, RICK D’ANGELO AND RILEY-HUFF ENERGY GROUP LLC, RESPONDENTS

4444444444444444444444444444444444444444444444444444

ON PETITION FOR REVIEW FROM THE

COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS

4444444444444444444444444444444444444444444444444444

Argued February 9, 2017

JUSTICE JOHNSON delivered the opinion of the Court.

JUSTICE GUZMAN did not participate in the decision.

This case involves the questions of whether two directors breached their fiduciary duties to a

corporation, and if so, whether the evidence and jury findings support the remedies imposed by the trial

court.

Longview Energy Company sued two of its directors and entities associated with them after

discovering one of the entities, Riley-HuffEnergyGroup LLC, purchased mineral leases in an area where

Longviewhad beeninvestigatingthe possibilityofbuyingleases. The case was tried to a jury, whichfound

that the directors breached their fiduciary duties to Longview in two ways: by usurping a corporate
opportunity, and by competing with the corporation without disclosing the competition to Longview’s

Board of Directors. The jury also found that Riley-Huff acquired leases as a result of the breaches. The

trialcourtrendered judgment awarding a constructive trust to Longview on most of the leases in question

and related property. The judgment also required the disgorgement of money derived from past lease

production revenues.

The court ofappealsreversed and rendered judgmentforthe defendants. It concluded that(1)the

evidence was legally insufficient to support the jury’s finding that the directors breached their fiduciary

duties byusurpinga corporate opportunity, and (2) the pleadings were notsufficient to support a claimfor

breach of fiduciary duty by undisclosed competition with the corporation.

We affirm.

I. Background

Longview Energy Company is an oil and gas exploration and production company incorporated

in Delaware and headquartered in Dallas. During the time relevant to this matter, Longview had

investmentsinmineraloperationsinArkansas, California, Louisiana, Mississippi, and Oklahoma. The Huff

EnergyFund LP (HEF)is a Delaware limited partnership that investsin energy companies. In 2006, HEF

purchased shares in Longview for $19 million, then purchased more shares for $20 million in 2007. 

Pursuant to the purchase agreement and its position as the major shareholder owning approximately 39%

of Longview’s shares, HEF had Bill Huff and Rick D’Angelo—HEF’s Chief Executive Officer and lead

investment evaluator, respectively—appointed to serve as two of Longview’s nine-member board of

directors.

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As drilling and mineral recoverytechnologies developed and became more efficient, certain types

ofmineral-containingformations became more valuable. The Eagle Ford Shale (the Eagle Ford) was one

such formation. Many investors and companies became focused on South Texas, where the formation,

estimated to encompass as many as thirteen million acres, was mainly located. HEF asked its portfolio

companies, including Longview, to look into investment opportunities related to the Eagle Ford.

During the summer of2009, HEF began discussions with Bobby Riley about possible investment

opportunitiesrelated to the Eagle Ford. InSeptember 2009, Rileyand HEF consummated a dealwhereby

they purchased some mineral leases in areas where production from the Eagle Ford was anticipated. In

October 2009, HEF and Riley joined forces and created Riley-Huff Energy Group LLC (Riley-Huff). 

Riley-Huffcontinued investigatinginvestmentsinEagle Ford acreage pursuant to the interest bothRileyand

HEF had in the formation.

Also in September 2009, HEF representatives, including both Huff and D’Angelo, met with

Longviewand encouraged it to considerinvestinginEagle Ford acreage. Longview claims Huffstated that

if it located an investment in Eagle Ford acreage that Rick Pearce—a senior petroleum engineer and

Longview’s Chief Operating Officer—liked, HEF would fund the investment.

Following the September meeting, Longview focused a substantial part of its resources on

investigatingpossible investmentsinEagle Ford acreage. As part ofthatprocess, Longviewhired geologist

and geophysicist Mark Lober as a consultant. Loberidentified and advised Longview ofanoil“window”

in Eagle Ford acreage that he believed would be productive (the Lober window). Longview also began

working with lease brokers Tamara Ford and Pat Gooden to determine what Eagle Ford acreage might

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be available. InDecember2009, Longview’smanagement and Lober met withbrokers Ford and Gooden,

who generally described tracts available for lease, discussed lease terms, and gave Longview a map with

circles noted on it locating general areas of available acreage called “blobs.” The amount of acreage

located within the blobs is described variously in the record as ranging from 235,000 to 254,000 acres. 

The brokers would not identify specific acreage or lease locations in order to protect their interests with

regard to any future leasing transactions. D’Angelo requested that Longview mail copies of the brokers’

map to him, which it did on December 23, 2009. During this time D’Angelo continued to express

enthusiasm about the possibility of Longview investing in Eagle Ford acreage.

Longview scheduled a board of directors’ meeting for January 28, 2010, to review the materials

its investigation had produced, and for its board to consider whether to invest in Eagle Ford acreage. 

Shortly before the meeting Longview provided materials to the board members, including a proposed

investment and development strategy and economic projections. The proposal was to invest up to $40

millionto lease 7,000 acresineachofthree different locationsfor a total of 21,000 acres, drillone wellper

lease tract to prove up its mineral-producing capability, then sell packages of leases in the areas that

produced. The proposal neither identified nor targeted any specific acreage or leases in the large blobs

described by brokers Ford and Gooden. The proposalwasto partner withanother entityin acquiring the

leases and drillingthe wells. Longview was countingonthe promise Huff made inSeptember 2009 to fund

its part of the project.

After Longviewpresented its proposalat the January28 board meeting, D’Angelo announced that

HEF would not support an investment in Eagle Ford acreage. As a result, the board did not vote on

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whether to pursue the proposed strategy. After the meeting, a Longview representative informed Lober

and Gooden that the board decided not to invest in Eagle Ford acreage. Gooden asked if Longview

objected to his submitting lease acreage to other HEF portfolio companies, which Longview did not. At

the next meetingofLongview’sboard onFebruary1, 2010, the possibilityofusingsources offundingother

than HEF for investing in Eagle Ford acreage was discussed. The other possibilities included using

internally generated cash flow and selling assetssuchasthose Longview owned in Oklahoma. Longview

claimsthat D’Angelo stronglyobjected to sellingthe Oklahoma assets. After minutes ofthe board meeting

were circulated, D’Angelo emailed Longview, stating that he did not agree with the minutes. In the email

D’Angelo explained that his opposition to selling the Oklahoma assets was due to the lack of a formal

process for appraising the assets before offering them for sale.

Inlight ofD’Angelo’s position and the board’s concern about possible legal action by HEF if the

proposal to sell assets and invest in Eagle Ford acreage proceeded, the Longview board did not pursue

investing in the Eagle Ford.

Longview laterlearned that HEF and Riley had formed Riley-Huff in October 2009 to locate and

fund oil and gas investments, including investing in Eagle Ford acreage; that D’Angelo was a manager of

Riley-Huff; and that HEF was a limited partner witha 99% ownership interest. Neither Huffnor D’Angelo

had disclosed Riley-Huff’s existence to Longview’s board. Longview also learned that three days before

its January 28 board meeting, Riley-Huff agreed to purchase Eagle Ford leases from Ford’s company,

Wyldfire, whichwas one ofthe lease brokers Longviewconsulted in developing the proposal it presented

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to its board. Riley-Huff eventually acquired mineral leases to approximately 50,000 Eagle Ford acres,

approximately 5,200 of which were within the blobs on maps Longview’s board had considered.

InSeptember 2011, Longviewsued the parties involved in Riley-Huff’s acquisition ofEagle Ford

acreage leases (collectively, the Huff Defendants). Longview alleged various causes of action, including

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fraud, breach of fiduciary duty, usurpation of corporate opportunity, tortious interference with business

relationships, misappropriation of trade secrets, aiding and abetting, and conspiracy.

The case was tried to a jury, with two liability questions submitted in the charge. In response to

Question 1, the jury found that Huff and D’Angelo breached their fiduciary duties to Longview by taking

a corporate opportunity. Inresponse to Question2, the juryfound that Huff and D’Angelo breached their

fiduciary duties to Longview by engaging in competition with Longview without the informed approval of

its board of directors. The jury also found thatRiley-Huffwrongfullyobtained assetsinthe Eagle Ford as

a result ofbreaches offiduciaryduties by Huff and D’Angelo. Based onaffirmative answersto the breach

offiduciarydutyquestions, the juryanswered questionsregardingthe market value ofthe Eagle Ford assets

Riley-Huffacquired as a result of the breaches of fiduciary duties; the amountRiley-Huffpaid forits Eagle

Ford assets; the amount of past productionrevenues acquired fromthe Eagle Ford assets as a result ofthe

breaches of fiduciary duties by Huff and D’Angelo; and the amount Riley-Huff paid to develop its Eagle

Ford assets. The trialcourtrendered judgment awardingLongview$95.5 million; imposing a constructive

trust in Longview’s favor on substantially all Riley-Huff’s Eagle Ford acreage leases and associated

Defendants included the Huff Energy Fund, LP, WRH Energy Partners, LLC, W.R. Huff Asset Management 1

Co., William R. “Bill” Huff, Rick D’Angelo, Ed Dartley, Bryan Bloom, Riley-Huff Energy Group, LLC, and Bobby Riley. 

Longview also sued Tamara Ford and Wyldfire Energy, Inc., but later nonsuited them.

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properties, together with future productionfrom the leases; and ordering Riley-Huff to transfer the leases

and properties to Longview.

The Huff Defendants appealed. In a pluralityopinion, the court ofappealsreversed and rendered

a take-nothing judgment in favor of the Huff Defendants. 482 S.W.3d 184 (Tex. App.—San Antonio

2015). First, the court determined that the evidence was legally insufficient to support the “yes” answer

to jury Question 1 regarding the claim for taking a corporate opportunity. Id. at 193–94. Although

acreage where Longview considered buying leases partially overlapped with acreage Riley-Huff leased,

the courtreasoned that Longview had not identified any specific leasesinthe proposalto its directors, and

Riley-Huff’s acquisitions did not “hinder or defeat the plans and purposes of the corporation.” Id. at

191–93. Because millions ofacresinthe Eagle Ford were stillavailable to be leased, the court concluded

that legally sufficient evidence did not support the implied finding that Longview had “an interest or a

reasonable expectancyinthe opportunity.” Id. at 193–94. Next, the court held that the petitiononwhich

Longview went to trial did not plead a claim for breach of the fiduciary duty of loyalty by competition

without disclosure to Longview’s board, and thus a judgment could not be based onthe jury’sfindingthat

Huffand D’Angelo breached their fiduciary duties byundisclosed competitionwithLongview. Id. at 197.

Because of its determinations regarding the breaches of fiduciary duties, the court of appeals did

not address other issues raised by the parties. In this Court, the parties address all the issues and crossissuesraised. The HuffDefendantsurge that ifwe determine the court ofappeals erred, thento avoid delay

and inthe interest of judicial economy we should addressthe remainingissuesratherthanremandingto the

court of appeals for it to do so. See G. T. Leach Builders LLC v. Sapphire V.P., LP, 458 S.W.3d 502,

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511 (Tex. 2015); Rusk State Hosp. v. Black, 392 S.W.3d 88, 97 (Tex. 2012). We agree in principle

with that approach. And as we explain below, we conclude that a cross-issue urged by the Huff

Defendants is dispositive. In order to address that issue, we will assume, without deciding, that a claim

against directors for competing with the corporation without disclosure to and approval by the

corporation’s board is viable under Delaware law and that the court of appeals erred by holding that

Longview’s pleadings were notsufficient to supportsucha claim. We willfurther assume that the evidence

is sufficient to support the jury’s finding that Huff and D’Angelo breached boththat duty and their duty to

not take a corporate opportunity. Those assumptions lead to our consideringthe HuffDefendants’ crossissue that there is no evidence tracing Riley-Huff’s acquisition of any specific leases to the breaches. On

that cross-issue we agree with the Huff Defendants, which leads us to conclude that there is no evidence

to support the trial court’s damages award.

II. Applicable Law

Under choice of law principles, Texas courts apply the law of the jurisdiction that has the most

significant relationship to the particular substantive issue to be resolved. See Sonat Expl. Co. v. Cudd

Pressure Control, Inc., 271 S.W.3d 228, 233 (Tex. 2008). The parties agree that Delaware law applies

to substantive issues. The law ofTexas, as the forumstate, governs matters ofprocedure. Arkoma Basin

Expl. Co. v. FMF Assocs. 1990-A, Ltd., 249 S.W.3d 380, 387 n.17 (Tex. 2008); see also California

v. Copus, 309 S.W.2d 227, 230 (Tex. 1958). We conduct our review accordingly.

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III. Discussion

A. Constructive Trust

Jury Question 5, which the parties reference as the basis for the trial court’s imposition of a

constructive trust on Riley-Huff’s leases and associated properties, was:

Did Riley-Huff Energy Group LLC wrongfully obtain assets in the Eagle Ford shale as a

result of Rick D’Angelo’s orBillHuff’sfailure, ifany, to comply with his or their fiduciary

duty?

The jury answered “yes.”

The Huff Defendants argue, among other things, that the constructive trust award is erroneous

because: (1) nothing in the judgment traces the assets in the constructive trust to fiduciary breaches, and

(2) Longview failed to submit a jury question tracing the specific assets to any fiduciary breaches.

Inresponse, Longviewasserts that the Huff Defendants did not preserve error bytheir objection,

and even if they did, they are wrong on the evidence: the evidence shows all the leases on which the

constructive trust was imposed were acquired as a result of Huff’s or D’Angelo’s breaches of their

fiduciaryduties. Thus, Longview maintains, the evidence and jury findings support the jury’s answer, and

any necessary findings not made by the juryare deemed to have been made by the trial court—or should

be made bythis Court—insupport of the judgment. That is because a constructive trust is anindependent

ground of recovery and the juryfound anelement ofit whenit answered Question5. Longview also posits

that(1) once it proved that assets were commingled, the burdenshifted to the Huff Defendants to trace the

assets that were acquired independentlyofD’Angelo’s and Huff’s breaches offiduciaryduties, and (2)the

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trialcourt’sequitablepowersinclude the powerto determine the scope ofa constructive trust and evidence

supports the trial court’s determination.

First, we must address Longview’s contention that the Huff Defendants did not preserve error by

their objections. The Huff Defendants objected to Question 5 on several grounds, including the grounds

that (1) there was “no evidence of identifiable property belonging to Longview which ended up in

Riley-Huff’s possession,” and (2) “to the extent Longview seeks to use Question Number 5 as a basisfor

constructive trust overRiley-Huff’s assets, Longview’s claimfor a constructive trustfails because it cannot

trace by strict proof or otherwise something misappropriated from it to an identifiable res.” By those

objections, theHuffDefendantsclearlypreserved error asto the legalsufficiencyofthe evidence to support

tracing any specific lease Riley-Huff acquired to Huff’s or D’Angelo’s breaches of fiduciary duties. See

TEX. R. CIV. P. 274.

Second, we must decide whethertracingwasrequired. Under Delaware law, “a constructive trust

isthe remedial device through which precedence of self is compelled to give way to the sterndemands of

loyalty.” Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939);see also Hogg v. Walker, 622 A.2d 648, 652

(Del. 1993)(“The doctrine of constructive trust effectuates the principle of equity that one who would be

unjustly enriched, if permitted to retain property, is under an equitable duty to convey it to the rightful

owner.”). A “constructive trust is a remedy that relates to specific property or identifiable proceeds of

specific property.” Hogg, 622 A.2d at 652 (citingMcMahon v. New Castle Assocs., 532 A.2d 601, 608

(Del. Ch. 1987)). “The constructive trust concept has been applied to the recovery of money, based on

tracing an identifiable fund to which plaintiff claims equitable ownership, or where the legal remedy is

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inadequate—such asthe distinctivelyequitable nature ofthe right asserted.” Id.; see also Triton Constr.

Co. v. E. Shore Elec. Servs., Inc., No. 3920-VCP, 2009 WL 1387115 (Del. Ch. May 18, 2009)

(holdingthat inorderto impose a constructive trust, there must be some “identifiable asset orfund to which

equitable title can be traced”), aff’d, 988 A.2d 938 (Del. 2010). 

Thus, to obtain a constructive trust over these properties located in Texas, Longview must have

procedurallyproved that the properties, or proceedsfromthem, werewrongfullyobtained, orthat the party

holding them is unjustly enriched. See KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 88 (Tex. 2015). 

“Definitive, designated property, wrongfully withheld from another, is the very heart and soul of the

constructive trust theory.” Id. Impositionofa constructive trust is notsimplya vehicle for collecting assets

as a form of damages. Id. And the tracing requirement must be observed with “reasonable strictness.”

Id. That is, the party seeking a constructive trust on property has the burden to identify the particular

property on which it seeks to have a constructive trust imposed.

Longview argues that it did not have the burden to trace because that burden shifted to the Huff

Defendants once Longview proved the assets were commingled. The authorities Longview citesinsupport

of its commingling argument are exemplified by Wilz v. Flournoy, in which a father used funds from his

incapacitated son’s account to pay the father’s monthlypayments ona farm. 228 S.W.3d 674, 676 (Tex.

2007). The mothersued onbehalfofherson, and the juryfound thatthe fatherbreached hisfiduciaryduty. 

Id. The trial court imposed a constructive trust on the entire farm. Id. This Court held that a “party

seeking to impose a constructive trust has the initialburdenoftracingfundsto the specific property sought

to be recovered.” Id. Once this burden is met, the entire property is subject to the constructive trust

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except for the property the trustee can distinguish as his or her separate property. Id. The mother

presented evidence of tracing by proving that several checks were drawn on the son’s account and

deposited to the father’s personal account, then the deposits were used to make payments on the farm. 

Id. As a result, the burden then shifted to the father to demonstrate what portion of the farm’s purchase

price and monthly payments came from his own funds. Id. However, the father failed to obtain a jury

finding on his affirmative claim that part of the money used to purchase the farm came from his personal

funds. Id. at 676–77. Thus, the trial court did not abuse its discretion in finding that the son was entitled

to the entire farm. Id.

Longview’s argument fails. Wilz dealt with a single property on which payments from different

sources were made. Similarly, all of the cases Longview relies upon concern property purchased with

commingled funds and the courts hold that the tracing burden does not shift to the defendant until the

plaintiff satisfies the initial burden of provingcommingled funds were used to purchase specific property. 

See, e.g., Logan v. Logan, 156 S.W.2d 507, 511 (Tex. 1941); Graham v. Turner, 472 S.W.2d 831,

840 (Tex. App.—Waco 1971, no writ); Md. Cas. Co. v. Schroeder, 446 S.W.2d 117, 121 (Tex.

App.—ElPaso 1969, writref’d n.r.e.). Here, incontrast, the leases were separatelyidentifiable, were not

purchased with commingled funds, and were identified, lease by lease, in both the evidence and the

judgment. Given those facts, Longview had the burden to prove that, as to each lease for which it sought

equitable relief of disgorgement or imposition of a constructive trust, Riley-Huff acquired that lease as a

result of Huff’s or D’Angelo’s breaches of fiduciary duties. See KCM Fin., 457 S.W.3d at 88 (holding

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that a party must establishthat the propertiesitseeksto be disgorged were wrongfullyobtained or that the

party holding them is unjustly enriched).

A jury does not determine the expediency, necessity, or propriety of equitable relief such as

disgorgement or constructive trust. See Burrow v. Arce, 997 S.W.2d 229, 245 (Tex. 1999). Whether

“a constructive trust should be imposed must be determined by a court based on the equity of the

circumstances.” Id. The scope and applicationofequitable reliefsuch as a constructive trust “withinsome

limitations, is generallyleft to the discretionofthe court imposingit.” Baker Botts, L.L.P. v. Cailloux, 224

S.W.3d 723, 736 (Tex. App.—SanAntonio 2007, pet. denied). If“contested factissuesmust be resolved

before a court can determine the expediency, necessity, or propriety of equitable relief, a party is entitled

to have a jury resolve the disputed fact issues.” DiGiuseppe v. Lawler, 269 S.W.3d 588, 596 (Tex.

2008). But uncontroverted issues do not need to be submitted to a jury. City of Keller v. Wilson, 168

S.W.3d 802, 815 (Tex. 2005).

The parties do not disagree about what assets Riley-Huff acquired; they disagree about whether

there was evidence that any of the assets were acquired as a result of Huff’s or D’Angelo’s breaches of

fiduciary duties. The Huff Defendants say that there was no evidence Longview considered any specific

leases, thus there was no evidence to support submission of Question 5, and no evidence to support the

jury’s answer to it.

Longview argues that there was evidence to support a tracingfinding, ifone wasrequired, and an

element of the requirements for a constructive trust was submitted to the jury, the jury found in its favor,

and the trial court could have, and necessarily did, deem any other findings necessary to support its

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judgment. See TEX.R.CIV.P. 279 (elements of a ground of recovery are deemed found bythe trialcourt

infavor ofitsjudgment if(1) an element of an independent ground ofrecoverywassubmitted to and found

by the jury; (2) elements were omitted without objection; and (3) the submitted element was “necessarily

referable” to the same ground of recovery as the omitted elements). But even if we assume a deemed

finding on tracing, and that the HuffDefendants’ objections were notsufficient to alert the trial court of the

omission of the tracing element from the charge, we must still determine whether there was evidence to

support a deemed finding. See Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221, 229 (Tex. 2011) (noting

that when an element of a claim is omitted from the jury charge without objection and no written findings

are made by the trial court, the omitted element is deemed found if there is legally sufficient evidence to

support the deemed finding); see also Ramos v. Frito-Lay, Inc., 784 S.W.2d 667, 668 (Tex. 1990)

(providing that an omitted element will be deemed found if supported by some evidence).

Longview contendsthat undisputed evidence identified the leasesthe trialcourt ordered subjected

to a constructive trust as havingbeenacquired byRiley-Huffas a result of Huff’s or D’Angelo’s breaches

of fiduciary duties. The Huff Defendants agree that the evidence was undisputed as to each of the leases

Riley-Huff acquired, including the location and origin of each of them. But in diametric opposition to

Longview’s position, theycontend, astheydid inthe trialcourt, there was no evidence Riley-Huffacquired

any specific lease as a result of the breaches of fiduciary duties by Huff or D’Angelo. We agree with the

Huff Defendants.

It is undisputed that the lease brokers identified and presented only blobs containing, in the

aggregate, at least 235,000 acres for Longview to consider in deciding whether to purchase leases on

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21,000 acres. There must have beenevidence tracing a breach of fiduciary duty by Huff or D’Angelo to

specific leases in order to support the imposition of a constructive trust on those leases. See KCM Fin.,

457 S.W.3d at 88 (providing that a constructive trust cannot be imposed where the tracingelement is not

met). The court of appeals noted, and we agree, that there is no evidence anyspecific leases or acreage

forleasingwere identified bythe brokers as possible targetsfor Longviewto purchase orlease, noristhere

evidence that any specific leases or acreage for leasing were recommended to or selected by Longview

orits board for pursuit or purchase. See 482 S.W.3d at 191–93. Thus, the evidence inthis case islegally

insufficient to support a finding tracing any specific leases Riley-Huffacquired to a breachoffiduciaryduty

by either Huff or D’Angelo. See KCM Fin., 457 S.W.3d at 88 (“In order to fasten a constructive trust

on property owned by the defendant, some particular propertymust be identified as to which plaintiff has

an equity.”). Accordingly, Longview was not entitled to have a constructive trust imposed on any leases

acquired by Riley-Huff or on property associated with them. Nor was Longview entitled to have title to

any of the leases or associated properties transferred to it. The trial court erred by rendering judgment

imposing the constructive trust on and requiring the transfer of leases and properties to Longview.

B. Money Judgment

Jury Questions 6 through9 addressed monetaryvalues and amounts onwhichthe trialcourt based

itsjudgment awarding Longview $95.5 million. The jury was instructed to answer these questions only if

it found in response to either Question 1 or Question 2 that Huff or D’Angelo failed to comply with a

fiduciary duty to Longview. The questions were as follows:

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Question No. 6:What isthe market value ofthe assetsinthe Eagle Ford shale that RileyHuff Energy Group LLC acquired as a result of Rick D’Angelo’s or Bill Huff’s failure to

comply with his fiduciary duty?

Answer in dollars and cents, if any: Answer: $42,000,000.

Question No. 7: What did Riley-Huff Energy Group LLC pay for the assets it acquired

in the Eagle Ford shale?

Answer in dollars and cents, if any: Answer: $24,500,000.

Que stion No. 8: What is the amount of past production revenues Riley-Huff Energy

Group LLC derived fromthe assetsinthe Eagle Ford shale it acquired as a result of Rick

D’Angelo’s or Bill Huff’s failure to comply with his fiduciary duty?

Answer in dollars and cents, if any: Answer: $120,000,000.

Question No. 9: What did Riley-Huff Energy Group LLC pay to develop the assets it

acquired in the Eagle Ford shale?

Answer in dollars and cents, if any: Answer: $127,000,000.

In addressing the Huff Defendants’ challenges to these findings, we will again assume, without

deciding, that Longview’s claim that the Huff Defendants acquired assets as a result of competition with

Longview without disclosure to and approval by Longview’s board of directors is recognized under

Delaware law, Longview’s pleadings were sufficient to support such a claim, and the evidence was

sufficient to support the jury’s findings that the Huff Defendants breached that duty, as well as the duty to

not take a corporate opportunity from Longview.

Addressingthe Questions in numerical order, we first consider Question 6. The HuffDefendants

challenged the evidentiarysupportfor the question byobjectingto it, inpart, onthe groundsthat Longview

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had the burdento prove its entitlement to any recovery on a lease-by-lease basis and failed to do so. We

agree with that position.

As part of its task in answering Question 6, the jury had to determine what assets—i.e.,

leases—Riley-Huff acquired as a result of breaches of fiduciary duties by Huff or D’Angelo. Absent

findings as to which individual leases were so acquired, the jury could not find the value of the assets. 

Additionally, any findings as to which leases were acquired as a result of Huff’s or D’Angelo’s breaches

of fiduciary duties had to be supported by evidence. We have already considered whether the evidence

was legally sufficient to support the jury’s answer to Question 5, which in substance required the same

findings as did Question 6 regarding specific leases. Consistent with our analysis and conclusion as to

Question 5—that the evidence was legallyinsufficient to supportsuchfindings—we conclude no evidence

supported the findingsrequired byQuestion6 asto specific leases orspecific acreage forleasingthat were

identified by the brokers as possible targets for Longview to invest in, nor was there evidence that any

specific leases or acreage were recommended to orselected byits board for pursuit or purchase. Absent

such evidence, the jury’s answer to Question 6 was based on legally insufficient evidence and cannot

support a judgment for Longview.

The Huff Defendants did not object to either Question 7 or Question 8 on the grounds that there

was no evidence to support itssubmissionto the jury. But theyobjected to Question 8, inpart, ongrounds

that “the valuation should be based on the net of production cost and expenses, including taxes.”

Longview’s counselresponded, “[That]istakeninto account byQuestion9.” The trialcourt overruled the

objection.

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Longview changed its position asto Questions 8 and 9 after the jury returned its verdict. At that

point it did not contend it was entitled to revenues from the assets as found in response to Question8 net

ofthe development costs found in response to Question 9, which would have resulted ina net lossinstead

ofa net profit. Rather, it contended that the jury’s answerto Question 9 could not be used to calculate the

net amountRiley-Huffderived fromthe assets because Question9 wasimmaterial—it did not limit the jury

to consideringonlythose costs necessary to develop assets acquired througha breachoffiduciarydutyby

Huff or D’Angelo, whichwas what Question8 asked. Thus, Longview maintained—and maintains in this

Court—that the answer to Question 9 should be disregarded.

The trialcourtfirstrendered judgment that, inpart, provided forLongviewto recover $95.5 million,

“based on the jury’s finding regarding the value of past-production revenues derived from the Subject

Properties minus the amount the jury found that the defendants paid to acquire the Subject Properties.”

The court later rendered an amended judgment whichdeleted the above language and simplyordered that

Longviewrecover $95.5 millionwithout explaininghow it arrived at the amount. The HuffDefendants urge

that the only explanation for the figure of $95.5 million is that the trial court disregarded the answer to

Question9 and did what it first said it did—reduced the $120 million answer to Question 8 by the $24.5

million answer to Question 7. Longview suggests the same basis for the $95.5 million amount. But

Longviewcontinuesto maintainthat the trialcourt could have properly considered Question8 without also

considering Question 9 because Question 9 was not limited to the assets Riley-Huff acquired as a result

of breaches of fiduciary duties by Huff and D’Angelo, as was Question 8. We agree with Longview’s

position in part: Question 9 was immaterial. But that does not mean that Longview is correct in whole.

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BothpartiesciteDelaware lawascontrollingthe amountrecoverable for a breachoffiduciaryduty. 

Delaware law limits disgorgement to a fiduciary’s profit. Guth, 5 A.2d at 510; see also Thorpe v.

CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996)(once disloyaltyhas been proven, “a fiduciary [may] not

profit personally from his conduct” (emphasis added)). Whether the amount recoverable is considered

substantive or remedial does not matter, because Texas law similarly limits disgorgement to a fiduciary’s

profits. ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 873 (Tex. 2010) (courts may

“disgorge all ill-gotten profits from a fiduciary when a fiduciary agent usurps an opportunity properly

belonging to a principal, or competes with a principal” (emphasis added)). Thus, under either Delaware

or Texaslaw, the disgorgement award must be based on profits Riley-Huff obtained as a result ofHuff’s

or D’Angelo’s breaches of fiduciaryduties. The amount ofprofitresultingfrom a breach of fiduciary duty

will generally be a fact question. In this instance, neither party contends that it was not. Under the

circumstances, the amount the trialcourt was authorized to ordertheHuffDefendantsto payLongview was

the amount ofprofitresultingfromHuff’s or D’Angelo’s breaches of fiduciary duties as found by the jury. 

Butsucha questionwas notsubmitted to the jury, even thoughthe HuffDefendantsspecificallypointed out

the omissionbyobjectingto Question8. Question8 did notrequire the juryto find howmuchprofit RileyHuff obtained from the assets it acquired bymeans ofHuff’s or D’Angelo’s breaches; it required the jury

to find only the amount ofrevenues Riley-Huff received. And Question 9 did not limit the jury to finding

the expensesrequired to produce the revenuesfound inanswerto Question8, as Longviewhas maintained

post-verdict. Because the answerto Question8 submitted anincorrectmeasure forequitabledisgorgement

of profit, Longview’s post-trial position is that Question 9 is immaterial and should be disregarded (a

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position with which we have agreed), and there was no other finding which could be used in conjunction

withthe answer to Question 8 to calculate Riley-Huff’s profit, Question8 and its answer were immaterial. 

See W.O. Bankston Nissan v. Walters, 754 S.W.2d 127, 128 (Tex. 1988).

Because there waslegallyinsufficient evidence to support the jury’s answer to Question 6 and the

jury’s answer to Question 8 was immaterial, there was no basis for the trial court to render judgment in

favor of Longview for money, and it erred in doing so.

IV. Conclusion

For the reasons set out above, we affirm the judgment of the court of appeals.

________________________________________

Phil Johnson

Justice

OPINION DELIVERED: June 9, 2017

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