IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13-40751

In the matter of: EDWARD MANDEL,

Debtor,

------------------------------------------------------

EDWARD MANDEL,

Appellant, Cross–Appellee,

v.

STEVEN THRASHER; JASON COLEMAN,

Appellees, Cross–Appellants.

Appeals from the United States District Court 

for the Eastern District of Texas

USDC No. 4:11-CV-774

Before BARKSDALE, CLEMENT, and OWEN, Circuit Judges.

PER CURIAM:*

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

August 15, 2014

Lyle W. Cayce

Clerk

 

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The bankruptcy court entered judgment in favor of Stephen Thrasher 

and Jason Coleman on state-law claims, including the misappropriation of 

trade secrets, against Debtor Edward Mandel. The district court affirmed the 

decision in its entirety. All parties appeal and sixteen issues have been 

presented in this court. We affirm the judgment in part but vacate the award 

of damages and remand to the bankruptcy court for further proceedings. 

I

This lawsuit arose out of the failure of White Nile, a joint-venture 

between Mandel and Thrasher. Thrasher, an intellectual property attorney, 

conceived of an idea for a new type of search engine. He shared that idea with 

Mandel, who represented that he had expertise with the databases that would 

store the index for the search engine. They signed non-disclosure agreements. 

Thrasher submitted a provisional patent application, entitled “System, 

Methods, and Devices for Searching Data Storage Systems and Devices,” to the 

United States Patent and Trademark Office (USPTO). Thrasher was the sole 

inventor listed on the application. 

Mandel and Thrasher formed White Nile to develop this invention. 

Mandel agreed to finance a prototype, which they anticipated would cost 

approximately $300,000. Thrasher signed a consulting agreement with White 

Nile that named Thrasher as a co-founder, an inventor, and chief executive 

officer. Shortly thereafter, Thrasher filed a second provisional patent 

application, “System, Methods, and Devices for Searching Data Storage 

Systems and Devices.” Thrasher again was shown as the sole inventor.

Mandel and Thrasher then met with representatives of Meaningful Data 

Solutions (MDS), who agreed to develop the software for the search engine. 

MDS forecast a cost of $216,500, and Mandel represented that he would pay 

MDS. Thrasher assigned to White Nile his search engine intellectual property. 

The document provided:

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[S]hould White Nile Software, Inc. fail to timely prosecute any 

such invention by failing to timely file appropriate responses to 

government entities, including the USPTO statutorily shortened 

response periods, all rights in the inventions or creations 

transferred to White Nile Software, Inc. are then void, and any 

rights remaining transfer back to [Thrasher], and [Thrasher] may 

prosecute the applications [and] other documentation needed, and 

this agreement shall have no effect as to those items. 

Thrasher and Mandel then signed a document titled, “Unanimous 

Consent in Lieu of Organizational Meeting of Directors of White Nile Software, 

Inc.” It named Mandel as president/treasurer of White Nile and Thrasher as 

chief executive/secretary. It granted both men 26 million shares of White Nile 

stock in exchange for the following consideration: (1) Thrasher agreed to assign 

his then-existing provisional patent applications as well as any future 

intellectual property to White Nile and (2) Mandel agreed, among other things, 

to develop White Nile’s search engine at his expense by December 31, 2005. 

White Nile retained Paul Williams as the Chief Financial Officer. His 

role was to develop a business plan and raise capital. Mandel and Williams 

led Thrasher to believe that Williams was a licensed broker-dealer. This was 

untrue. 

White Nile also retained Jason Coleman to develop a graphic 

representation of the search engine. Coleman signed a consulting agreement, 

which provided that he was to be “chief creative officer” and a co-founder. 

Coleman was to produce a demonstrative version of Thrasher’s idea, to be 

called SAQQARA, for which he was to receive an annual salary of $133,000 

and an equity interest in the venture if he completed the prototype on schedule. 

Coleman assigned his work product, including patentable ideas, to White Nile 

as part of this agreement. 

Mandel assured Coleman that White Nile had detailed financial 

projections, that he intended to pay MDS to create system documents, and 

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later, when MDS’s participation did not materialize, that he would contribute

the funds that were to have been paid to MDS directly into White Nile. 

Thrasher subsequently submitted a third provisional patent application to the 

USPTO titled “Real-Time Search Visualization.” It listed both Thrasher and 

Coleman as inventors. Despite completing his work, Coleman never received 

an equity interest in White Nile.

Instead of proceeding with the plan to hire MDS to develop the search 

engine, Mandel suggested that an acquaintance of his, Eduardo Carrascoso, 

could perform the same work at a lower cost in the Philippines. Mandel 

represented that Carrascoso had agreed to invest in White Nile, and that 

Carrascoso had hired a team of PhDs to develop a prototype search engine. 

Mandel represented that Carrascoso had placed $1 million in escrow to invest 

in White Nile. Thrasher included these representations in a written 

presentation, reviewed by Mandel, to potential investors. Mandel had 

previously visited the Philippines and represented that he had met the 

developers working for White Nile.

White Nile persuaded Rod Martin to become a member of the board of 

directors and hired Skinner Layne as an employee. Skinner thought that his 

parents, Eddie and Ellen Layne, should invest in White Nile. The bankruptcy 

court found that Martin “cautioned the Laynes about the risks of investing in 

a start-up company.” Nevertheless, the Laynes invested $300,000 in exchange 

for 75,000 shares of stock. 

Thrasher, Mandel, and Coleman thereafter traveled to the Philippines. 

Thrasher and Coleman discovered that no one had been working on the search 

engine and that Carrascoso had not, in fact, escrowed $1 million to invest in 

White Nile. Carrascoso not only had not invested any money in White Nile, he 

did not plan to do so, and he had not hired any developers. Just the opposite, 

Carrascoso expressed interest in being paid in excess of $1 million in return 

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for providing services to White Nile. Thrasher eventually reached a tentative, 

oral agreement with Carrascoso to provide development services. Thrasher, 

Mandel, and Coleman interviewed applicants to begin work on the project in 

Manila. During the interviews, Thrasher and Coleman learned that “Mandel 

was not particularly knowledgeable about . . . database programming,” despite 

his earlier representations. The three of them also discussed new names for 

White Nile, including “Nexplore,” but did not reach an agreement. After they 

returned to the United States, Carrascoso declined to proceed with providing 

services to White Nile.

On December 15, 2005, Williams conducted an investor meeting in 

Arkansas using the demonstrative materials developed by Coleman. The next 

day, Thrasher discovered that Williams was not a licensed broker. As the 

bankruptcy court found, “Thrasher was well aware of the legal repercussions 

of a misrepresentation about Williams’ status to potential investors and took 

immediate action to address what he viewed as a disaster.” 

By mid-December 2005 Mandel and Thrasher’s relationship was

disintegrating. There was no development team functioning in the 

Philippines. It had also become evident that Mandel did not intend to 

contribute any of his own funds to White Nile despite his previous 

representations. Instead, Mandel and Skinner formed a new company. On 

December 18, Skinner reserved NeXplore.com as a domain name. Mandel sent 

Joseph Savard, the chief technology officer that Mandel had hired for White 

Nile, to Thrasher’s home to review White Nile’s patents and projects. Mandel 

then hired Savard at NeXplore. Mandel also recruited Williams to join 

NeXplore. At about this time, Thrasher instructed White Nile’s bank to make 

a payment to Thrasher’s father as reimbursement for hardware purchased for 

White Nile. These instructions conflicted with instructions Mandel had 

already given the bank, unbeknownst to Thrasher, to place all the funds in 

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White Nile’s account into a new account under Mandel’s sole control. Thrasher 

and Martin met with Mandel to discuss the situation. Mandel did not tell them 

that he was forming a new company, NeXplore, or that Mandel had asked the 

Laynes to move their invested funds from White Nile to NeXplore. Thrasher 

and Martin discovered much later that NeXplore received $197,000 from the 

Laynes and $286,500 from Arkansas Investment, a limited liability company 

formed by the Laynes after the December 15 White Nile presentation. 

On January 11, 2006, Mandel signed corporate documentation 

purporting to remove Thrasher from office and purporting to appoint Skinner 

and Williams to serve as new directors of White Nile. On January 16, 2006, 

Mandel, Williams, and Skinner held a directors’ meeting without informing 

either Thrasher or Martin. At the meeting, they purported to declare that 

White Nile was no longer a going concern, and also purported to release all 

individuals from the non-compete and non-disclosure agreements they had

signed with White Nile. The next day, Skinner incorporated NeXplore. 

Skinner, Mandel, and Williams all became shareholders and directors and the 

Laynes became investors. Williams drafted a business plan “virtually 

identical” to the one he created for White Nile. Savard testified that Mandel 

referred to NeXplore as “just a name change” from White Nile and that Mandel 

told him to hide from Thrasher that NeXplore was building a search engine.

Thrasher filed two non-provisional (or utility) patents relating to White 

Nile’s search engine during 2006. Prior to that time, Mandel, the acting CEO 

of White Nile, had taken no action to protect White Nile’s intellectual property 

from NeXplore or other possible encroachers. The first patent application (299 

patent), listing Thrasher as the sole inventor, was filed on June 30, 2006 and 

issued on September 14, 2010. The second (802 patent), listing both Thrasher 

and Coleman as inventors, was filed on December 14, 2006. Shortly after the 

filing of the 299 utility patent, Williams filed a grievance against Thrasher 

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with the Texas State Bar. Skinner testified that this was an attempt by 

Mandel “to cow” Thrasher by threatening his livelihood. The Bankruptcy 

Court found that “Mandel’s testimony that he did not participate in filing the 

grievance, or that he did not intend to threaten Thrasher’s livelihood, was 

contradicted by the documentary evidence.” The Texas Bar dismissed the 

grievance.

In early 2006, Coleman approached Mandel and Thrasher to seek 

payment for his work for White Nile. Thrasher agreed to pay Coleman but 

Mandel declined and instead sued Coleman in state court on behalf of White 

Nile. Mandel later sued Thrasher as well. Coleman and Thrasher responded 

by asserting counter-claims against Mandel and brought claims against others. 

The parties reached a tentative settlement in which Thrasher and Coleman 

were to receive payments of $450,000 and a royalty fee of two percent of 

NeXplore’s gross revenue for five years in return for agreeing to license their 

patents to NeXplore. After the settlement had been announced in open court,

Mandel refused to proceed with it. The state court appointed a receiver for 

White Nile, but Mandel refused to pay his portion of the receiver’s fees. Mandel 

filed a grievance against Thrasher with the USPTO contending that he was 

the one who actually invented the intellectual property. The USPTO dismissed 

his complaint. The bankruptcy court found that “Mandel was not, in fact, an 

inventor or co-inventor of any of the intellectual property at issue.”

On January 25, 2010, Mandel filed a Chapter 11 petition. The state court 

was proceeding to sanction Mandel for his failure to pay the receiver’s fees

when he filed for bankruptcy. Since 2006, NeXplore had paid Mandel a total 

of $2,726,926 in salary and incurred approximately $750,000 in legal fees on 

his behalf. Thrasher and Coleman, on their own behalf and derivatively on 

behalf of White Nile, asserted numerous state law claims in the bankruptcy 

court. Mandel counterclaimed against Thrasher and Coleman. The 

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bankruptcy court conducted a bench trial and found Mandel liable for (1) theft 

or misappropriation of trade secrets; (2) breach of contract; (3) breach of 

fiduciary duty; (4) fraud and fraudulent inducement; (5) oppression of 

shareholder rights; and (6) conspiracy. The bankruptcy court awarded: 

$400,000 in damages to Coleman; $1,000,000 to Thrasher; and $300,000 to 

White Nile. The Court denied the request for exemplary damages. It awarded 

attorneys’ fees to Thrasher and Coleman because they prevailed on their theft

of a trade secret claim. The parties appealed and cross-appealed to the district 

court, which affirmed the judgment in its entirety. The parties now appeal and 

cross-appeal to this court. We affirm the judgment of the district court in part 

and vacate in part. We vacate only the damages award by the bankruptcy 

court, and we remand the issue of damages to the bankruptcy court so that it 

may explain, support, or revise its compensatory damages award in order to be

consistent with state and federal precedents. 

II

This court reviews the decision of a district court, sitting in an appellate 

capacity, by applying the same standards employed by the district court in its 

review of the bankruptcy court’s findings of fact and conclusions of law.1 We 

review findings of fact, including a damages award, for clear error, and we 

review conclusions of law de novo.2 Under the clearly erroneous standard, we 

will “defer to a bankruptcy court’s factual findings unless, after reviewing all 

of the evidence, we are left with a firm and definite conviction that the 

bankruptcy court made a mistake.”3

1 In re Tex. Commercial Energy, 607 F.3d 153, 158 (5th Cir. 2010). 

2 Id.; see also Delahoussaye v. Performance Energy Servs., L.L.C., 734 F.3d 389, 394 

(5th Cir. 2013) (“A district court’s award of damages is a finding of fact, which we will reverse 

only for clear error.”). 

3 In re Cahill, 428 F.3d 536, 542 (5th Cir. 2005) (internal quotation marks omitted). 

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Mandel raises a number of errors on appeal. He contends no damages

should have been awarded, there was no breach of contract as to Coleman, the 

misappropriation or theft of trade secrets causes of action cannot be sustained, 

there is no evidence of fraud, the finding of shareholder oppression in favor of 

Thrasher cannot stand, Mandel did not breach a fiduciary duty to White Nile, 

and there is no basis for the finding of conspiracy. 

Thrasher and Coleman challenge the award of damages, claiming that 

the award should have been greater. They also challenge the exclusion of 

certain evidence by the bankruptcy court and the denial of punitive damages.

III

Mandel asserts that the bankruptcy court erred by finding that he 

misappropriated trade secrets. Misappropriation is established by showing 

that (a) a trade secret existed, (b) the trade secret was acquired through a 

breach of a confidential relationship or discovered by improper means, and (c) 

there was use of the trade secret without authorization.4 Mandel alleges that 

the third element, use, was not established. The term “use” is defined broadly 

under Texas law.

[A]ny exploitation of the trade secret that is likely to result in 

injury to the trade secret owner or enrichment to the defendant is 

a use . . . . Thus, marketing goods that embody the trade secret, 

employing the trade secret in manufacturing or production, relying 

on the trade secret to assist or accelerate research or development, 

4 Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 874 (5th Cir. 2013); see also Trilogy 

Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 463 (Tex. App.—Austin 2004, pet. 

denied). 

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or soliciting customers through the use of information that is a 

trade secret all constitute use.5 

Our review of the record reflects that there were sufficient facts to support a 

finding of actual use. 

Mandel formed NeXplore in order to develop a search engine technology 

that experts testified was very similar to the technology developed and 

patented by White Nile. The bankruptcy court found these experts to be 

credible. Additionally, NeXplore hired a number of former employees of White 

Nile and developed an almost identical business plan. Mandel joked that the 

only difference between the two companies was the name. Mandel ensured 

that he and NeXplore’s employees retained access to White Nile’s intellectual 

property by purporting to vote Thrasher and Coleman out of White Nile’s 

management and by sending NeXplore employees to inspect Thrasher and 

Coleman’s patent applications and SAQQARA documents. As an example, 

Mandel instructed Savard to discuss the White Nile patents, specifications, 

and algorithms with Thrasher and Coleman before hiring him at NeXplore.

Mandel argues that Coleman testified that there were no other search 

engines on the market with the functionality envisioned by Thrasher and 

Coleman. Mandel alleges that Coleman, in referring to other search engines 

on the market, “was of necessity including NeXplore,” which implies that 

NeXplore was not using White Nile’s technology. But Coleman compared the 

NeXplore patent application to the White Nile patents and determined that 

there was “substantial duplication.” Further, NeXplore’s product had not 

launched at the time that Coleman testified. 

The weight of expert testimony supported the conclusion that White 

Nile’s and NeXplore’s concepts were very similar. The bankruptcy court could 

5 Wellogix, Inc., 716 F.3d at 877 (internal quotation marks and citations omitted). 

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properly and reasonably conclude that actual use was demonstrated. At the 

very least it appears that NeXplore “rel[ied] on the trade secret to assist or 

accelerate research or development.”6 Even if these facts were insufficient to 

support a finding of actual use, they support a reasonable inference of actual 

use.7 NeXplore was formed by the same individuals, to create a substantially 

similar product, with funding from the same investors, based on intellectual 

property that those individuals had not invented and did not own. We affirm 

the bankruptcy court’s ruling on this claim. 

Mandel contests his liability under the Texas Theft Liability Act (TTLA). 

The TTLA imposes civil liability for “unlawfully appropriating property” as 

defined by Texas Penal Code § 31.05.8 Under § 31.05, a person commits theft 

of trade secrets if, without the trade secret owner’s consent, he knowingly (1) 

steals a trade secret, (2) makes a copy of an article representing a trade secret, 

or (3) communicates or transmits a trade secret.9 Mandel asserts that he did 

not commit theft of a trade secret because he lacked the requisite mens rea. 

The bankruptcy court found that “Mandel specifically intended to take control 

of White Nile’s intellectual property and use it to start up his own business” 

and that Mandel and his co-conspirators were “fully aware of exactly what they 

were doing.” These conclusions are not clearly erroneous based on the record. 

6 Id.

7 See Global Water Grp., Inc. v. Atchley, 244 S.W.3d 924, 930 (Tex. App.—Dallas 2008, 

pet. denied) (“Evidence of a similar product may give rise to an inference of actual use under

certain circumstances.”).

8 TEX. CIV. PRAC. & REM. CODE § 134.001-004. The civil remedy provided for by the 

TTLA for misappropriation of trade secrets was superceded by the Texas Uniform Trade 

Secrets Act (TUTSA), which took effect September 1, 2013. Id. § 134A.001-008. The TUTSA 

has no effect on the present litigation because the act only applies “to the misappropriation 

of a trade secret made on or after [September 1, 2013].” Uniform Trade Secrets Act, 83rd 

Leg., R.S., ch. 10, § 3, 2013 Tex. Gen. Laws 12, 14.

9 TEX. PENAL CODE § 31.05. 

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Rather, the facts present a premeditated, calculated plan to siphon the 

intellectual property of White Nile for the benefit of NeXplore. Mandel counters 

that, as an officer of White Nile, he had the ability to give “effective consent” 

to the theft of the trade secret and thus he cannot be held liable. But this 

argument is unconvincing. A single officer and shareholder cannot give

“effective consent” to breaching his own fiduciary duty to the company by 

stealing that company’s trade secrets. Mandel was not “legally authorized” to 

consent to this own theft.10 We affirm the bankruptcy court’s ruling on this 

claim.

IV

Mandel raises issues that relate to Coleman but not to Thrasher or White 

Nile. In particular, he contends that the court erred in (1) finding that Mandel 

breached a contract with Coleman, (2) finding that he had misappropriated 

Coleman’s trade secrets, (3) awarding Coleman attorneys’ fees, and (4) holding 

that he fraudulently induced Coleman. 

The bankruptcy court concluded that Coleman could not prevail on a 

breach of contract claim because he was not a third-party beneficiary of 

Mandel’s non-disclosure agreement. The court’s September 30, 2011 order 

reflects this conclusion, but the court’s initial opinion suggests that Coleman 

prevailed on his breach of contract claim. The district court held that the 

bankruptcy court’s conclusion of law with respect to breach of contract 

appeared to be a typographical error and was harmless. Mandel argues that 

awarding attorneys’ fees based on breach of contract was error. However, the 

attorneys’ fees awarded by the bankruptcy court were based on the theft of 

trade secrets claim, not the breach of contract claim. The bankruptcy court said

10 TEX. PENAL CODE § 31.01(3) (defining “Effective Consent” as “consent by a person 

legally authorized to act for the owner”). 

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the fees were “duplicative” of the fees based on breach of contract. Any errant 

statement that Coleman proved breach of contract was harmless.

Mandel asserts that Coleman’s misappropriation claim fails because 

Coleman assigned his intellectual property to White Nile. The courts below 

held that White Nile breached its contract with Coleman by failing to pay his 

salary and thus the assignment failed for lack of consideration. But Mandel is 

correct in asserting that a failure of a party to perform the contract does not 

void the obligations under that contract. As a bilateral contract, the 

consideration was the promise of performance not the actual performance.11 

However, this does not dispose of the issue because we may affirm a judgment 

upon any basis supported by the record.12 The courts below also held that 

Mandel was liable to Coleman for fraud in the inducement and “a fraudulently 

induced contract is void.”13 

Mandel counters that Coleman’s fraudulent inducement claims fail for 

two reasons: (1) Coleman did not timely file a fraud cause of action and (2) the 

misrepresentations that form the basis of the fraud claim came after Coleman 

agreed to the consulting contract. As to the first argument, Mandel claims that 

Coleman failed to include a fraudulent inducement claim in the joint pre-trial 

order and thus could not recover on that theory. Although Coleman may not 

have delineated his fraudulent inducement allegations as a specific count, he 

did include factual allegations of misrepresentations that Mandel made to 

11 E.g., Roark v. Stallworth Oil & Gas Inc., 813 S.W.2d 492, 496 (Tex. 1991) 

(“Consideration is a present exchange bargained for in return for a promise.”); see also

Westlake Petrochemicals, L.L.C. v. United Polychem, Inc., 688 F.3d 232, 239 (5th Cir. 2012) 

(stating that consideration requires mutual obligation or promises, not actual performance). 

12 United States v. Chacon, 742 F.3d 219, 220 (5th Cir. 2014) (“We may affirm the 

district court’s judgment on any basis supported by the record.”). 

13 Fazio v. Cypress/GR Houston I, L.P., 403 S.W.3d 390, 419 (Tex. App.—Houston [1st 

Dist.] 2013, no pet.) (citing Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 

S.W.3d 323, 331 (Tex. 2011)). 

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entice Coleman into becoming a consultant for White Nile under a heading 

titled, “Representations to Coleman.” The pretrial order included assertions 

that Mandel represented to Coleman that Mandel intended to invest of his own 

money, that Mandel had hired a local firm to create system documents, and 

that Mandel had already invested $100,000 of his own money. “[A] pleading, 

or pretrial order, need not specify in exact detail every possible theory of 

recovery—it must only give the defendant fair notice of what the plaintiff’s 

claim is and the grounds upon which it rests.”14 

Mandel contends that Coleman’s failure to include these allegations in 

the first version of his complaint barred him from subsequently alleging these 

facts in the pre-trial order. But it is well established that a pre-trial order 

“supersede[s] all prior pleadings and ‘control[s] the subsequent course of the 

action.’”15 “Once the pretrial order is entered, it controls the scope and course 

of the trial.”16 Further, Mandel signed the pre-trial order and did not object to 

the inclusion of these allegations at the time of the order, and any argument 

regarding their propriety is waived. 

Mandel’s final assertions of error on this issue are that five of the six 

alleged misrepresentations occurred after Coleman signed his consulting 

agreement and therefore could not serve as the basis for a fraudulent 

inducement claim. This is incorrect. Coleman testified that at least three of 

the six alleged misrepresentations found by the bankruptcy court occurred 

prior to Coleman signing his consulting agreement on October 1, 2005. 

Coleman testified that he was told that Mandel had made a $100,000 

14 Thrift v. Hubbard, 44 F.3d 348, 356 (5th Cir. 1995) (internal quotation marks and 

citation omitted). 

15 Rockwell Int’l Corp. v. United States, 549 U.S. 457, 474 (2007) (citing Syrie v. Knoll 

Int’l, 748 F.2d 304, 308 (5th Cir. 1984) (internal quotation marks omitted)). 

16 Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 604 (5th Cir. 2000). 

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investment by both Mandel and Thrasher in September 2005. Coleman

testified that the representation that Mandel had arranged for a $1 million 

investment for the Manila development team occurred in September 2005. He 

testified that he was told that White Nile would hire a local firm, to be paid by 

Mandel in cash, to create system documents for White Nile, also in September 

2005. The other three misrepresentations found by the bankruptcy court 

occurred either before or at the same time that Coleman signed his contract. 

Coleman testified that he was told that Mandel had prepared pro-forma 

financial projections for White Nile “in or around the end of September, the 

beginning of October.” He was also incorrectly told that Rod Martin was 

working full-time for White Nile in September, before he signed the contract. 

That most of the alleged misrepresentations occurred before Coleman signed 

his consulting contract is sufficient to uphold the bankruptcy court’s finding of 

fraudulent inducement. To the extent that there is conflicting testimony on 

some of these statements or that some of these statements may have taken 

place after October 1, 2005, the bankruptcy court found Coleman’s testimony 

that the events took place before he signed the contract to be credible, and 

nothing in the record discredits this finding or shows that the bankruptcy court 

committed clear error in making this finding. Mandel’s second ground for 

reversing the district court fails. We affirm the judgment on these issues as 

well. 

V

Mandel assigns error regarding various other causes of action alleged by 

Thrasher and Coleman. 

A. Fraud as to Thrasher and White Nile

Mandel alleges that the bankruptcy court erred in finding fraud as to 

Thrasher and White Nile. The elements of fraud are: (1) a material 

misrepresentation was made, (2) it was false, (3) the speaker knew it was false 

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or made it recklessly, (4) the representation was made with the intention that 

it be acted on by the other party, (5) the party acted in reliance, and (6) the 

party suffered injury.17 The bankruptcy court found three statements by 

Mandel to be fraudulent: that Mandel had invested $300,000 in White Nile, 

an investor had placed $1 million in escrow, and there was a team in the 

Philippines developing White Nile’s intellectual property. 

Mandel contends that there was no fraud because there was no evidence 

that Thrasher and Coleman would have developed the intellectual property 

absent these statements. The materiality of this argument is unclear. To the 

extent that it pertains to the question of whether there was injury, there was

evidence of an injury. While at NeXplore, Mandel was able to attract 

investments of more than $18 million to develop the intellectual property that 

belonged to Thrasher and Coleman. Thrasher and Coleman’s intellectual 

property clearly had value, and investors were available to fund a venture had 

Thrasher and Coleman developed the intellectual property absent Mandel. The 

bankruptcy court found that Thrasher was prevented from attempting to 

develop this technology because of his reliance on Mandel’s 

misrepresentations. That finding is supported by the evidence. 

B. Shareholder Oppression

The bankruptcy court found six acts of shareholder oppression, including 

that Mandel usurped White Nile’s business opportunities, failed to prosecute 

White Nile’s intellectual property, used litigation in an attempt to prevent 

Thrasher and Coleman from reclaiming their intellectual property, and 

created NeXplore to develop substantially similar intellectual property. 

Subsequent to the bankruptcy court’s decision the Supreme Court of Texas

17 Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 

1998). 

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held that there is no common law cause of action for shareholder oppression, 

concluding instead that such a claim may only be brought pursuant to Section 

11.404 of the Texas Business Organizations Code.18 Under the statutory 

definition of shareholder oppression: 

[A] corporation’s directors or managers engage in “oppressive” 

actions under . . . section 11.404 when they abuse their authority 

over the corporation with the intent to harm the interests of one or 

more of the shareholders, in a manner that does not comport with 

the honest exercise of their business judgment, and by doing so 

create a serious risk of harm to the corporation.19

Even under this new standard we conclude that Thrasher has met his

burden to demonstrate shareholder oppression. Mandel does not challenge any 

of the findings of fact of the bankruptcy court on this issue. These findings of 

fact clearly lay out not only that Mandel abused his authority but that he did 

so with an intent to harm Thrasher’s interests in White Nile. However, we 

note that on remand, Thrasher is not entitled to compensatory damages on this 

claim even though he has prevailed. The Supreme Court of Texas made clear 

that Section 11.404 “creates a single cause of action with a single remedy.”20 

This remedy is not the award of compensatory damages but the “appointment 

of a rehabilitative receiver.”21 Therefore, on remand the district court should 

not award compensatory damages on the shareholder oppression claim. 

C. Breach of Fiduciary Duty

The bankruptcy court found seven breaches of the fiduciary duty Mandel 

owed to White Nile. The elements of a breach of fiduciary duty claim are: (1) a 

fiduciary relationship between the plaintiff and defendant exists; (2) a breach 

18 Ritchie v. Rupe, 2014 WL 2788335, at *6, 22 (Tex. Jun. 20, 2014). 

19 Id. at *9. 

20 Id. at *10.

21 Id.

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by the defendant of his fiduciary duty; and (3) an injury to the plaintiff or a 

benefit to the defendant from the breach.22 The bankruptcy court found that 

Mandel failed to prosecute White Nile’s patent rights, failed to enforce nondisclosure agreements, released members from nondisclosure agreements, 

competed with White Nile by forming NeXplore, transferred funds from White 

Nile to NeXplore, disseminated White Nile’s trade secrets, and failed to 

disclose to other officers and shareholders the formation of NeXplore. Mandel 

contends that he could not have breached his fiduciary duty because a 

resolution of the board of directors released him from his non-disclosure and 

non-compete agreements. This analysis elides that this resolution was adopted 

after Mandel purported to force Thrasher and Martin out of the company and 

purported to elect two of his allies to the board. In any event, a board

resolution adopted by interested directors does not negate a breach of fiduciary 

duties.23 Mandel has not shown that the bankruptcy court’s detailed findings 

on this issue were incorrect.

D. Breach of Contract as to White Nile and Thrasher

Mandel argues that the bankruptcy court wrongly concluded that 

Mandel breached his non-disclosure agreements with both Thrasher and 

White Nile. He cites no authority in this section of his brief. This argument is 

waived for being insufficiently briefed.24

22 Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [14th Dist.] 2008, pet. 

denied) (citing Jones v. Blume, 196 S.W.3d 440, 447 (Tex. App.—Dallas 2006, pet. denied)). 

23 See, e.g., Gearhart Indus., Inc. v. Smith Int’l, Inc., 741 F.2d 707, 719-20 (5th Cir. 

1984); Clark v. Lomas & Nettleton Fin. Corp., 625 F.2d 49, 52-53 (5th Cir. 1980); see also TEX.

BUS. ORGS. CODE ANN. § 21.418 (“Contracts or Transactions Involving Interested Directors 

and Officers”). 

24 United States v. Demmitt, 706 F.3d 665, 670 (5th Cir. 2013) (“As Demmitt has cited 

no authority in support of her contentions . . . we hold this argument waived.”); N.W. Enters., 

Inc. v. City of Hous., 352 F.3d 162, 183 n.24 (5th Cir. 2003) (“A litigant’s failure to provide 

legal or factual analysis results in waiver.”); see also FED. R. APP. P. 28(a)(8)(A). 

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E. Conspiracy

Mandel contends that “[i]f the Court reverses the conclusions of fraud 

and of misappropriation and theft of trade secrets in favor of Coleman, then

there is no underlying tort [for conspiracy] and the Court should reverse the 

conclusion of conspiracy.” As we do not reverse the conclusions of fraud and 

misappropriation, we affirm the bankruptcy court’s judgment regarding the 

count of conspiracy. 

VI

The bankruptcy court awarded $1.7 million in actual damages. Mandel 

asserts that this award should be vacated because there was insufficient, 

credible evidence presented to support it. Thrasher and Coleman claim that 

the damages award should be increased significantly because the evidence 

demonstrates that the actual value of either White Nile or the misappropriated 

trade secrets was significantly more than $1.7 million. Mandel also challenges 

the bankruptcy court’s award of attorneys’ fees to Coleman, and Thrasher and 

Coleman cross-appeal that the bankruptcy court erred in denying exemplary 

damages. 

A. Compensatory Damages

Thrasher and Coleman offered a number of damage theories in the 

bankruptcy court. First, they advanced a “lost asset” or “lost profit” theory of 

damages, asserting that they could recover the value of the asset that they lost. 

An expert testified that the fair market value of White Nile was $56 million 

based on the sale of other, similarly situated start-up companies. The 

bankruptcy court rejected this evidence, concluding that the expert’s 

“calculations of market value fail[ed] to adequately account for the extremely 

high failure rate of companies like White Nile.” Thrasher and Coleman also 

offered evidence of the value of White Nile based on the investments made by 

the Laynes. Extrapolating from the Laynes’ purchase of 75,000 shares in White 

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Nile for $300,000, White Nile would have a value of $219 million. The 

bankruptcy court rejected this evidence because the Laynes had, like Thrasher 

and Coleman, “received false information about [Carrascoso’s] investment in 

White Nile at the investor meeting in Arkansas” prior to their decision to 

invest. 

Thrasher and Coleman introduced evidence of the value of NeXplore as 

evidence of either the value of the lost asset or the value of a fair licensing 

price. NeXplore never made a profit but it was trading, at its lowest point, at 

approximately $0.30 per share on the “Pink Sheets.” Using this price as a 

benchmark, Mandel owned $9.9 million in NeXplore stock. The bankruptcy 

court concluded that this value was on a “sharply downward trajectory,” and 

that the evidence of the fair market value of NeXplore was “fuzzy.” Finally, the 

bankruptcy court declined to base damages on the extent of the wrongful 

benefit to Mandel—$2,726,926 in salary from NeXplore and $725,789 in 

attorneys’ fees from NeXplore—because it was “not necessarily an indication 

of value” for the misappropriated trade secret. 

The bankruptcy court rejected each of Thrasher’s and Coleman’s theories 

of damages. It nevertheless assessed damages because “Thrasher and 

Coleman were damaged by the conduct of Mandel” and “should prevail on their 

claims.” The court then awarded $1,000,000 to Thrasher and $400,000 to

Coleman, without explaining the theory on which it relied or identifying the 

evidence that supported these awards. 

The district court affirmed the damages in their entirety. The district 

court first held that “the bankruptcy court did not error [sic] in determining 

that the damages models advanced by claimants are not helpful in assessing 

damages under the facts of this case.” The district court reasoned that the 

evidence adduced was not determinative of either the value of the trade secret 

as a lost asset or the value of the “reasonable royalty” that the owners of the 

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trade secret would have been due. The district court nevertheless affirmed the 

award, reasoning that “[t]he nature of Mandel’s misappropriation made it 

virtually impossible to prove the amount of damages with reasonable 

certainty,” but that this uncertainty should not completely prevent recovery. 

The district court concluded that assessing damages in this type of a case 

“require[d] a flexible and imaginative approach.” Both sides appeal this 

determination. 

Damages in misappropriation cases can take several forms: the 

value of plaintiff’s lost profits; the defendant’s actual profits from 

the use of the secret, the value that a reasonably prudent investor 

would have paid for the trade secret; the development costs the 

defendant avoided incurring through misappropriation; and a 

reasonable royalty.25 

Damages need not be proved with great specificity. A flexible approach is 

applied to the calculation of damages in a misappropriation of trade secrets 

case.26 “Where the damages are uncertain . . . we do not feel that the 

uncertainty should preclude recovery; the plaintiff should be afforded every 

opportunity to prove damages once the misappropriation is shown.”27 It is 

sufficient that the plaintiff demonstrates “the extent of damages as a matter 

of just and reasonable inference” even if the extent is only an approximation.28 

25 Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 879 (5th Cir. 2013) (quoting

Bohnsack v. Varco, L.P., 668 F.3d 262, 280 (5th Cir. 2012)). 

26 Id. (“This variety of approaches demonstrates the flexible approach used to calculate 

damages for claims of misappropriation of trade secrets.” (internal quotation marks 

omitted)). 

27 Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 539 (5th Cir. 1974). 

While University Computing was a decision under Georgia law the Fifth Circuit has cited it 

favorably in regard to Texas trade secret law on multiple occasions. See Wellogix, 716 F.3d at 

879; Carbo Ceramics, Inc. v. Keefe, 166 F. App’x 714, 722 (5th Cir. 2006). 

28 DSC Commc’ns Corp. v. Next Level Commc’ns, 107 F.3d 322, 330 (5th Cir. 1997)

(internal quotation marks omitted). 

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In the present case the bankruptcy court did not make clear the theory 

upon which it was relying to award damages nor did it explain the evidence 

supporting the amount of damages. While it is true that uncertainty should 

not preclude recovery in a trade secrets misappropriation case,29 Thrasher and 

Coleman were required to produce enough credible evidence to show “the 

extent of the damages as a matter of just and reasonable inference,” even if the 

“result be only approximate.”30 From the bankruptcy court’s opinion we do not 

see an approximation—only numbers chosen by the court. 

Thrasher and Coleman contend that our recent decision in Wellogix, Inc. 

v. Accenture, L.L.P.31 supports awarding damages based on the evidence 

presented at trial. This is incorrect. In Wellogix, we affirmed a jury award of 

$26.2 million in compensatory damages in a Texas misappropriation of trade 

secrets case despite the defendant’s arguments that the valuation was “too 

speculative.”32 The amount awarded was the amount that the plaintiff’s 

damages expert had testified the company was worth, after deducting the cost 

of licensing fees.33 Unlike the present case, the trier of fact calculated the 

damages award by crediting the evidence presented at trial. Here, the 

bankruptcy court awarded a damages figure that does not appear to be based 

on any of the damages models presented.

Rather, the bankruptcy court justified its damages award with a sole 

citation: a reference to a treatise on uncertainty in damages in Texas law that 

relied on a handful of decades-old Texas court of appeals cases that 

29 Univ. Computing Co., 504 F.2d. at 539. 

30 Wellogix, 716 F.3d at 879 (citing DSC Commcn’s Corp., 107 F.3d at 330).

31 716 F.3d 867 (5th Cir. 2013). 

32 Id. at 880. 

33 Id. at 879. 

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predominantly involved personal injury torts. The district court affirmed the 

awards with a citation to one of those personal injury cases. Neither of these 

citations justifies the damages award here. Even under our “flexible approach” 

to damages in a misappropriation of trade secrets case, the damages awarded 

must have some rational relationship to the evidence presented.

Thrasher and Coleman alternatively argue that we should

independently increase the damages awarded on the basis of the evidence that 

the bankruptcy court rejected. We decline to do so. 

Because neither the bankruptcy court nor the district court explained the 

evidentiary and legal basis for the damages awarded, we are unable to review 

the damages adequately. Because, however, Thrasher and Coleman did suffer 

some damage, we vacate the award of compensatory damages and remand to 

the bankruptcy court so that it may either conduct an additional evidentiary 

hearing on the issue of damages or explain its award of damages on the basis 

of the evidence in the present record.34 

B. Attorneys’ Fees

Mandel challenges the award of attorneys’ fees to Coleman. We review

the amount of attorneys’ fees granted by a bankruptcy court for an abuse of 

discretion.35 In the initial bankruptcy court opinion the court awarded 

$705,000 to the Law Offices of Elvin E. Smith. Mandel alleges that these fees 

were errantly awarded on the basis of Coleman’s breach of contract claim. But 

this is incorrect. The bankruptcy court explained in its opinion that the 

34 See, e.g., Lebron v. United States, 279 F.3d 321, 329 (5th Cir. 2002) (remanding issue 

of damages because court could not determine, from trial court’s opinion, whether the 

calculation of damages was correct); Great Pines Water Co. v. Liqui-Box Corp., 203 F.3d 920, 

925 (5th Cir. 2000) (“Because we cannot determine [the basis for the damages award] we 

must vacate the award and remand for a partial new damage trial.”); see also MBM Fin. Corp. 

v. Woodlands Operating Co., 292 S.W.3d 660, 665 (Tex. 2009).

35 In re Repine, 536 F.3d 512, 518 (5th Cir. 2008). 

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primary basis for the fees is the theft of trade secrets claim. The court stated

that “90% of [the claimed attorneys’ fees] relates to their theft of trade secrets 

claim, which is duplicative (at least in part) of their claim for attorneys’ fees 

and costs based on breach of contract.” In the accompanying order, the 

bankruptcy court found that Coleman “ha[d] established claims against 

Mandel for fraud, conspiracy, and misappropriation or theft of trade secrets.” 

The $705,000 in attorneys’ fees for Elvin E. Smith could only have been based 

on the theft of trade secrets claim.36 The bankruptcy court did not abuse its 

discretion in awarding these fees. 

C. Exemplary Damages

Thrasher and Coleman also assert that courts below erred by failing to 

award exemplary damages. Under Texas law, with exceptions not relevant 

here, “exemplary damages may be awarded only if the claimant proves by clear 

and convincing evidence that the harm with respect to which the claimant 

seeks recovery of exemplary damages results from . . . fraud . . . malice . . . or

. . . gross negligence.”37 The bankruptcy court held that exemplary damages 

were inappropriate because the Claimants had failed to prove malice. But even 

if the bankruptcy court erred by failing to consider fraud or gross negligence, 

exemplary damages are inherently discretionary. “[T]he determination of 

whether to award exemplary damages and the amount of exemplary damages 

to be awarded is within the discretion of the trier of fact.”38 Claimants have not 

shown that it was an abuse of discretion not to award such damages.

36 See TEX CIV. PRAC. & REM. CODE § 134.005(b) (“Each person who prevails in a suit 

under this chapter shall be awarded court costs and reasonable and necessary attorney’s 

fees.). 

37 Id. § 41.003. 

38 Id. § 41.010.

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VII

Thrasher and Coleman argue that emails prepared by an attorney, Jeff 

Travis, who was then counsel for both White Nile and Mandel, were wrongly 

excluded by the bankruptcy court on the basis of attorney-client privilege. To 

reverse based on an evidentiary ruling of a bankruptcy court, the court must 

have abused its direction39 and must have prejudiced the substantial rights of 

the objecting party.40 Thrasher and Coleman assert that these documents

supported their claim for exemplary damages. In particular, the emails “relate 

to impeaching Mandel about his testimony regarding his knowledge, 

participation and direction in the [bar grievance] procedure that was filed 

against Thrasher.” However, it is not clear how the admission of these 

documents would have altered the bankruptcy court’s ultimate conclusion. 

Even without these documents, the bankruptcy court accepted that Mandel’s 

purpose in filing the bar grievance was to “cow Thrasher by threatening his 

livelihood.” Nevertheless, the bankruptcy court declined to award exemplary 

damages. As we have already affirmed that it was not an abuse of discretion 

for the bankruptcy court to decline to award punitive damages, the exclusion 

of these documents, even if erroneous, did not substantially prejudice the 

rights of the Claimants. 

* * *

The judgment of the district court is AFFIRMED in part. We VACATE 

the award of compensatory damages and REMAND to the bankruptcy court 

for further proceedings consistent with this opinion.

39 In re Repine, 536 F.3d at 518. 

40 Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 265 (5th Cir. 2007). 

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