IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 17-40059

In the matter of: EDWARD MANDEL

 Debtor

EDWARD MANDEL, 

 Appellant

v.

STEVEN THRASHER; JASON COLEMAN, 

 Appellees

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

In the matter of: EDWARD MANDEL

 Debtor

STEVEN THRASHER; LAW OFFICES OF MITCHELL MADDEN, 

MADDENSEWELL, L.L.P., JASON SCOTT COLEMAN, 

 Appellees

v.

EDWARD MANDEL, 

 Appellant

United States Court of Appeals

Fifth Circuit

FILED

February 15, 2018

Lyle W. Cayce

Clerk

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Appeal from the United States District Court

for the Eastern District of Texas

USDC No. 4:15-CV-715

USDC No. 4:15-CV-743

Before KING, JONES, and ELROD, Circuit Judges.

PER CURIAM:*

Debtor-Appellant Mandel challenges the compensatory damage awards 

of the bankruptcy and district courts following remand by this court. Mandel 

also argues that the attorneys’ fees awards should be vacated. We find no 

reversible error and AFFIRM.

I. BACKGROUND

This case involves several disputes between co-founders of the company 

White Nile. The facts underlying these disputes are laid out in this Court’s 

first opinion in this matter. See In re Mandel (Mandel I), 13-40751, 578 Fed. 

Appx. 376 (5th Cir. Aug. 15, 2014). Mandel and Thrasher initially created 

White Nile to develop Thrasher’s invention. White Nile then hired Coleman 

as the chief creative officer. Mandel misappropriated White Nile’s trade 

secrets and formed a new company, NeXplore. As explained in Mandel I, the 

bankruptcy court had held “Mandel liable for 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.” Id. at 382. It had awarded “$400,000 in damages 

to Coleman; $1,000,000 to Thrasher; and $300,000 to White Nile.” Id.

 

* 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.

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Mandel I affirmed the liability holdings but remanded to the bankruptcy court 

so it could “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.” Id. at 382, 391.

A. THE BANKRUPTCY COURT’S OPINIONS

a. Thrasher’s Damages

On remand, the bankruptcy court again awarded Thrasher $1,000,000 

for Mandel’s trade secret misappropriation. In re Mandel, 10-40219, 2015 WL 

5737173, at *9 (Bankr. E.D. Tex. Sept. 30, 2015). This time, the court described 

four different theories that could support the damage award to Thrasher. 

First, the court assessed what a reasonable royalty for the trade secrets 

would have been based upon the settlement agreement that was announced, 

but never finalized, in the state court case between Mandel, Thrasher and 

Coleman. Id. at *7. This agreement provided for a $900,000 judgment to 

Thrasher and Coleman as well as a minimum royalty fee of $2,500 quarterly 

for five years. Id. The bankruptcy court reasoned as follows:

[T]he announced settlement agreement suggests an appropriate 

damages award would be $1,010,000, consisting of the $900,000 

agreed judgment, a royalty fee of $30,000 for three years of 

minimum quarterly payments of $2,500 per quarter, and a royalty 

fee of $80,000 arising from a two-year license Mandel testified 

NeXplore signed in October 2010.

Id. 

Second, the court assessed damages under a lost asset theory. Id. at *8. 

At trial, Thrasher and Coleman had presented expert evidence of Brad Taylor, 

who testified that companies comparable to White Nile were worth between $1 

million and $344 million. Id. The bankruptcy court held that “White Nile’s 

value is closest to the lowest valued company on Taylor’s list of companies, 

which is $1 million.” Id. The bankruptcy court came to this conclusion because 

it took “into account the significant rate of failures [of comparable companies], 

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the dysfunctional executive team [of White Nile], the lack of a functional 

product, NeXplore’s abandonment of its efforts to create its own search engine, 

and the lack of profits by White Nile and NeXplore.” Id.

Third, the court assessed damages by determining the benefit that 

Mandel received from his misappropriation. Id. at *9. Again, the court relied 

on the opinion of Coleman and Thrasher’s expert Taylor:

According to the claimants’ expert, Brad Taylor, the market 

capitalization of NeXplore was $47.17 million at the high end and 

$1.67 million at the low end – thus indicating a value range of 

$25.9 million to $920,000 for the value of Mandel’s 55% interest. 

White Nile was a nascent search market company with no 

financing, no usable product, no customers, no profit, and a 

dysfunctional executive team who engaged in litigation over 

control of White Nile and its intellectual property. This Court, 

therefore, again looks to the low end of the market capitalization 

spectrum for NeXplore in calculating damages for 

misappropriation, which is $920,000.

Id. The court noted that it did not take Mandel’s salary and other benefits into 

account because “the trial record did not establish that Mandel received his 

salary or benefits on account of misappropriation.” Id. at *9 n.9.

Fourth, the court stated that it “also considered the amount of 

investments NeXplore secured using ideas and materials very similar to those 

prepared for White Nile.” Id. at *9. The court reasoned that “NeXplore raised 

approximately $2.5 million from investors before abandoning its attempt to 

create its own search engine. This would indicate a value of $1,375,000 

attributable to Mandel's 55% interest in NeXplore.” Id.

Taking all of this evidence into account, the court awarded $1 million 

dollars to Thrasher for misappropriation of trade secrets. Id. The court also 

found that Thrasher should be awarded $300,000 for Mandel’s fraudulent 

misrepresentation “that he would invest $300,000 in White Nile in order to 

induce Thrasher to do business with him.” Id. at *6. However, the court 

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awarded Thrasher $1 million in total because it held that Thrasher’s 

misappropriation damages “are co-extensive with and subsume the damages 

he incurred on account of his other compensable claims against Mandel.” Id.

at *9.

b. Coleman’s Damages 

The bankruptcy court awarded Coleman $400,000 in damages for 

misappropriation, which the court held were “subsumed by and co-extensive 

with his fraudulent inducement damages.” Id. The court arrived at this 

number by examining Coleman’s consulting agreement with White Nile, which 

would have provided him with $133,000 each year for three years as well as 

“an approximately 0.5% equity interest in White Nile.” Id. The court found 

that “[b]ased on the Court’s valuation of White Nile, the value of a 0.5% of an 

equity interest in White Nile is approximately equal to the amount White Nile 

paid Coleman.” Id. 

c. Attorneys’ Fees

The bankruptcy court held that Mandel I did not vacate the court’s initial 

award of attorneys’ fees and therefore declined to alter its initial award. Id. at 

*6.

d. Damages to White Nile

After a motion for reconsideration, the bankruptcy court held that 

Mandel I did not vacate the court’s initial award of $300,000 in compensatory 

damages to White Nile. In re Mandel, 10-40219, 2016 WL 1178441, at *7 

(Bankr. E.D. Tex. March 23, 2016). However, the court described what it would 

do if the damages award had been vacated. The court explained that it initially 

awarded $300,000 in damages for Mandel’s “breach of his non-disclosure 

agreement with White Nile, breach of his fiduciary duty to White Nile, and 

fraud.” Id. at *5. If the award were vacated, the bankruptcy court would award 

an additional $197,000 to White Nile, which is the amount that Mandel 

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diverted from White Nile’s bank account to NeXplore. Id. at *7. The 

bankruptcy court rejected White Nile’s arguments that it was entitled to the 

salary Mandel received from NeXplore or other investments received by 

NeXplore. Id. at *5-7.

B. THE DISTRICT COURT’S OPINION

The district court affirmed the bankruptcy court’s orders on all damage 

determinations other than the damages for White Nile. Mandel v. Thrasher, 

4:15-cv-715, 2016 WL 7374428 (E.D. Tex. Dec. 20, 2016). On Thrasher’s 

damages, the district court’s analysis differed in a couple of respects. First, it 

held that the bankruptcy court had not awarded damages based on the failed 

state court settlement, but had merely “pointed out that Thrasher argued in 

closing that the [settlement] was some evidence of a reasonable royalty rate 

and that the ultimate amount of damages that the bankruptcy court awarded 

to Thrasher was similar to the agreed upon sum in the [settlement].” Id. at 

*11 (internal citations omitted). Second, the court held that the bankruptcy 

court had not actually accepted the benefit of misappropriation theory, since it 

stated that “the trial record did not establish that Mandel received his salary 

or benefits on account of misappropriation.” Id. at *12. The district court 

upheld the bankruptcy court’s assessment of damages under the lost asset 

theory. Id. at *11. 

As for Coleman’s damages, the district court clarified the bankruptcy 

court’s order by providing a rationale for using Coleman’s contract to assess 

his misappropriation damages: 

. . . Coleman assigned his intellectual property rights to White Nile 

in exchange for a $133,000 annual salary for three years, plus a 

0.5% equity interest in White Nile. The agreement between 

Coleman and White Nile is some evidence of the value of Coleman’s 

intellectual property rights, and thus, evidence of the value of 

White Nile’s trade secrets, to Mandel. Three years of Coleman’s 

annual salary of $133,000 would have totaled $399,000. The 

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bankruptcy court valued White Nile at $1 million. 0.5 percent of 

$1 million is $5,000. In sum, the value of Coleman’s salary plus the 

value of his equity interest in White Nile, as promised under the 

contract, is roughly $400,000. When measured against the peculiar 

facts and circumstances of this case, valuing the damages to 

Coleman for Mandel’s misappropriation of Coleman’s trade secrets 

by determining the value of Coleman’s initial contract with White 

Nile fits within the flexible and imaginative approach used to 

calculate damages in a case like this one, as condoned by the Fifth 

Circuit in Wellogix.

Id. at *13 (footnote and citation omitted).

The district court held that Mandel I had vacated White Nile’s damages 

award because “(1) Thrasher brought claims both individually and derivatively 

on behalf of White Nile; (2) the Fifth Circuit affirmed the findings of the 

bankruptcy court regarding the claims on which White Nile prevailed; and 

(3) the Fifth Circuit vacated the entire compensatory damages award.” Id. at 

*13. The district court increased the award to White Nile by $197,000 for the 

reasons given in the bankruptcy court’s opinion. Id. at *15. 

The district court affirmed the bankruptcy court’s award of attorney’s 

fees. Id. at *13.

II. STANDARD OF REVIEW

This Court applies the same standards of review to the bankruptcy 

court’s order as those employed by the district court. Matter of Hawk, 

871 F.3d 287, 290 (5th Cir. 2017). Therefore, it reviews “questions of fact for 

clear error and conclusions of law de novo.” Matter of Cowin, 864 F.3d 344, 349 

(5th Cir. 2017).

III. ANALYSIS

As noted above, Mandel I remanded the compensatory damages awards 

to the bankruptcy court. Mandel I explained:

Damages need not be proved with great specificity. A flexible 

approach is applied to the calculation of damages in a 

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misappropriation of trade secrets case. “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.” 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.

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, 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.” From the bankruptcy court's 

opinion we do not see an approximation—only numbers chosen by 

the court.

. . . 

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.

578 Fed. Appx. at 390-91 (footnotes omitted). 

Mandel I quoted from Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867

(5th Cir. 2013), which gives some examples of ways to assess trade secret 

misappropriation damages: 

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.

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578 Fed. Appx. at 390 (quoting Wellogix, 716 F.3d at 879). This flexible 

approach has been approved by the Texas Supreme Court, which has held that 

“[a] ‘flexible and imaginative’ approach is applied to the calculation of damages 

in misappropriation-of-trade-secrets cases.” Sw. Energy Prod. Co. v. BerryHelfand, 491 S.W.3d 699, 710 (Tex. 2016) (quoting Univ. Computing Co. v. 

Lykes–Youngstown Corp., 504 F.2d 518, 538 (5th Cir.1974)). Texas requires 

“reasonable certainty” to establish lost profits, but not for other methods of 

assessing damages. See id. at 711-12 (“[L]ack of certainty does not preclude 

recovery.”).

A. THRASHER’S DAMAGES

Mandel challenges all four of the methodologies employed by the 

bankruptcy court to assess Thrasher’s damages. Mandel argues that the 

bankruptcy court violated the law of the case doctrine by crediting damage 

models and expert testimony it had previously rejected. However, as explained 

by the district court, the bankruptcy court did not violate the law of the case 

doctrine because Mandel I vacated the bankruptcy court’s opinion regarding 

compensatory damages. See Mandel v. Thrasher, 2016 WL 7374428 at *11;

Mandel I, 578 Fed. Appx. at 391. Thus, “anything that the bankruptcy court 

decided regarding compensatory damages in its initial Findings of Fact and 

Conclusions of Law is not the law of the case.” Mandel, 2016 WL 7374428, at 

*11.

Mandel challenges the damages award based on the lost asset theory 

because it relies on Taylor’s testimony. Mandel argues this was improper 

because “Taylor did not include failed companies in his valuation—and the vast 

majority of Internet search engine startups fail.” Furthermore, Mandel 

criticizes the bankruptcy court for merely picking a number within a range 

provided by the expert, rather than accepting the value proposed by the expert. 

However, as outlined above, the bankruptcy court did not merely pick a 

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number within a range but gave a reasonable explanation for choosing a 

number at the lower end of the expert’s testimony. The bankruptcy court also 

accounted for the “significant rate of failures” of comparable companies in its 

analysis. In re Mandel, 2015 WL 5737173, at *8. Furthermore, under Texas 

law, a “jury generally has discretion to award damages within the range of 

evidence presented at trial.” Sw. Energy Prod. Co., 491 S.W.3d at 713. The 

bankruptcy court sitting as factfinder is entitled to the same amount of 

deference.

Mandel also argues that the use of the lost asset theory is not suitable to 

value the misappropriation. Mandel argues this is the case because he did not 

destroy or otherwise prevent Thrasher from using those trade secrets. Under 

Wellogix, however, the correct inquiry is what the misappropriation did to the 

market value of the company, not whether or not the trade secret was 

destroyed. In Wellogix, this Court upheld a judgment of compensatory 

damages for trade secret misappropriation that was equal to the value of the 

company (after deducting licensing fees) before the misappropriation. 

Wellogix, 716 F.3d at 879. This was because the “misappropriation created a 

competitive disadvantage” that “caused Wellogix's value to drop to ‘zero.’” Id. 

at 880. Therefore, because White Nile’s value dropped to zero after the trade 

secrets were misappropriated, the bankruptcy court did not clearly err or 

violate this Court’s mandate by assessing damages on this theory.

Mandel argues it was improper for the bankruptcy court to rely on the 

failed state court settlement. Thrasher and Coleman appear to agree, because 

instead of responding to this argument they state that “the bankruptcy court 

clearly did not seek to support its damages award on remand for 

misappropriation based upon the failed state court settlement.” Because this 

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Court finds the award was supported under the lost asset theory, it need not 

address this issue.1

Mandel also challenges the award to Thrasher for fraud, breach of 

contract, and breach of fiduciary duty. These damages are subsumed within

the misappropriation damages. Therefore, because this Court upholds the 

misappropriation damages, there is no need to address these other arguments. 

Without having cross-appealed, but in further response to Mandel’s 

contentions, the Appellees argue that, “if the bankruptcy court erred with 

respect to its re-evaluation of [their] expert’s testimony it[] only did so by 

woefully undervaluing the IP and the damages awarded.” They also argue that 

the bankruptcy court could have awarded much larger sums using NeXplore’s 

value or investments. Given the bankruptcy court’s compelling reasons for 

choosing numbers at the lower end of Taylor’s testimony, the bankruptcy court 

did not clearly err or violate this Court’s mandate by awarding claimants much 

less than they asked for.

B. COLEMAN’S DAMAGES

Mandel argues that the award to Coleman is improperly based upon 

Coleman’s void contract with White Nile. However, as explained by the district 

court, this contract merely provides some evidence of a reasonable royalty for 

Coleman’s intellectual property that was misappropriated by Mandel. Mandel 

I held that “the damages awarded must have some rational relationship to the 

evidence presented.” Mandel I, 578 Fed. Appx. at 391. The district court has 

 

1 Mandel also challenges the other two damage theories that were discussed by the 

bankruptcy court: the interest of NeXplore Mandel received as a result of the 

misappropriation or the investments NeXplore acquired using “ideas and materials very 

similar to those prepared for White Nile.” 2015 WL 5737173, at *9. This Court need not 

address these arguments in detail because Thrasher’s damages may be upheld on the lost 

asset theory. However, these theories do provide further evidence that the bankruptcy court 

had reasonable justifications for the $1,000,000 award to Thrasher.

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adequately explained how the value of Coleman’s contract has a rational 

relationship to the value of his misappropriated intellectual property. 

Mandel also challenges the award to Coleman for fraudulent inducement 

and conspiracy. However, these damages were subsumed by the 

misappropriation damages. Therefore, because this Court upholds the 

misappropriation damages, there is no need to address these other arguments. 

C. WHITE NILE’S DAMAGES

Mandel and the appellees agree that Mandel I vacated the bankruptcy 

court’s initial award of $300,000 to White Nile. Mandel challenges both awards 

to White Nile. First, Mandel correctly points out that the bankruptcy court and 

district court failed to provide an explanation for the $300,000 award. If 

Mandel’s representation to Thrasher that he would invest $300,000 in White

Nile can support this award, then the award may be upheld on this basis. 

Mandel argues this would be improper because Texas law does not allow 

benefit-of-the-bargain damages for fraud. He cites a Texas Supreme Court 

case that holds “[w]hat the plaintiff might have gained is not the question, but 

what he had lost by being deceived into the purchase.” George v. Hesse, 

93 S.W. 107, 108 (Tex. 1906). However, it appears that the Texas Supreme 

Court has held the opposite more recently: “Texas recognizes two measures of 

direct damages for common-law fraud: the out-of-pocket measure and the 

benefit-of-the-bargain measure.” Formosa Plastics Corp. USA v. Presidio 

Engineers and Contractors, Inc., 960 S.W.2d 41, 49 (Tex. 1998). No matter the 

resolution of this possible conflict, however, both the loss and benefit-of-thebargain to White Nile were the same, $300,000.

Second, Mandel argues that White Nile is not entitled to the $197,000 

award because Mandel didn’t divert these funds. Rather, he argues that he 

“refunded the funds to the Laynes . . . . [and] the Laynes later invested those 

same funds in NeXplore.” Mandel argues that it was proper for him to “refund” 

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the investment to the Laynes because he defrauded the Laynes into making 

the investment in the first place. However, as stated by the bankruptcy court, 

he breached his fiduciary duty to White Nile by releasing these funds. 

D. ATTORNEY’S FEES

Mandel argues that Mandel I vacated the attorney’s fees awards because 

actual damages must be found in order to award attorneys’ fees. He also 

argues that Mandel I must have vacated attorneys’ fees because he argued in 

Mandel I that the award should be vacated if the actual damages were vacated. 

However, Mandel I explicitly found that Claimants “suffered some damage” 

and affirmed the attorneys’ fees to Coleman. Mandel I, 578 Fed. Appx. At 391. 

Mandel I also only explicitly vacated the compensatory damages award. Id. at 

392. Therefore Mandel’s appeal on this ground is meritless.

IV. CONCLUSION

For the foregoing reasons, we conclude that the bankruptcy and district 

courts fulfilled this court’s mandate on remand. Neither clear error nor legal 

error occurred on remand. The judgment of the district court is AFFIRMED.

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JENNIFER WALKER ELROD, Circuit Judge, dissenting:

I agree with the majority opinion that it was permissible for the 

bankruptcy court and district court to reconsider the evidence on remand

without running afoul of the mandate rule or violating the law of the case 

doctrine. Indeed, we specifically instructed the bankruptcy court 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.” In re Mandel, 578 F. App’x 376, 391 (5th Cir. 2014) (Mandel I). 

However, the majority opinion errs in holding that the revised method used, 

which the bankruptcy court had previously rejected, provides a just and 

reasoned basis for awarding damages. While we allow flexible and creative 

approaches for approximating damages in misappropriation cases, that 

flexibility can only stretch so far before it snaps. That is what happened here. 

Therefore, I respectfully dissent.

I.

Our caselaw cannot be bent to support the award of unproven damages. 

A holistic view of our cases shows that there are limits to how far our flexible 

and creative standard can be stretched. We recognize that damages can be 

uncertain in trade secret cases and “do not feel that uncertainty should 

preclude recovery,” which is why we allow flexibility in calculating damages. 

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

“[P]laintiffs are entitled to adapt their damages theory to fit within the 

particular facts of the case” and should be afforded every opportunity to prove 

damages once misappropriation is shown. Id.; Carbo Ceramics, Inc. v. Keefe, 

166 F. App’x 714, 724 (5th Cir. 2006). Even when approximating a damages 

award, however, the evidence must show “the extent of damages as a matter 

of just and reasonable inference.” Wellogix, 716 F.3d at 879. But Wellogix is 

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not a magic incantation that can be used to obviate the limits of that flexible 

approach, which are expressed in the caselaw on which Wellogix directly relies. 

See id. (citing University Computing Co. v. Lyke-Youngstown Corp., 504 F.2d 

518 (5th Cir. 1974) and Carbo Ceramics, Inc. v. Keefe, 166 F. App’x 714 (5th 

Cir. 2006)). 

In Carbo, we held that damages were too speculative because there was 

no evidence of: (1) lost profits; (2) actual sales by the defendant; (3) 

development costs saved; (4) what a reasonably prudent investor would have 

paid for the trade secret; or (5) a reasonable royalty. 166 F. App’x at 724–25. 

We stated that “any damage model built on speculative revenues and operating 

profit from an unbuilt plant, is in an[d] of itself, inherently speculative.” Id. at 

724. 

In University Computing, we stated that while “every case requires a 

flexible and imaginative approach to the problem of damages . . . [c]ertain 

standards do emerge from the [caselaw].” 504 F.2d at 538–39. These 

standards primarily require that the defendant “must have actually put the 

trade secret to some commercial use.” Id. The usual approach is to measure 

the value of the secret to the defendant through lost profits, a reasonable 

royalty, or development costs, or the value of the secret to the plaintiff if a 

specific injury can be proven. Id. at 535–38; see also James Pooley, Trade 

Secrets § 12.04(2)(f) (2017) (stating a plaintiff may establish the value of its 

secret “through the amount of effort or money invested in its development, the 

willingness of others to pay for securing access to it, and the various ways in 

which using the information improved the efficiency or success of the plaintiff’s 

business”). In most cases, “the proper measure is to calculate what the parties 

would have agreed to as a fair price for licensing the defendant to put the trade 

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secret to the use defendant intended at the time the misappropriation took 

place.” Id. at 535. 

In sum, our caselaw allows for flexibility and imagination in awarding 

damages but also mandates that any such award still be tethered to a nonspeculative evidentiary anchor and based upon a theory appropriate to the 

harm in the case. See also James Pooley, Trade Secrets § 7.03(2)(a) (2017)

(“Which [theory], alone or in combination, should be pursued depends upon the 

facts of the case.”). As detailed below, that standard was not met here.

II.

In Mandel I, we determined that the award of compensatory damages to 

Thrasher, Coleman, and White Nile could not be supported on a record where 

the bankruptcy court had rejected all proposed damages models. Id. at 390–

91. The error was not with the bankruptcy court’s carefully reasoned 

explanation of why it rejected the various models as not suited to the facts of 

the case. See id. at 389–90. The error was that, even having rejected the 

damages models, the bankruptcy court proceeded to award damages, and we 

could not evaluate whether that award was correctly calculated without 

knowing the model the bankruptcy court used. Id. at 391 (“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.”). 

Importantly, we discussed in detail the bankruptcy court’s rejection of 

the “lost asset” theory and the evidentiary deficiencies with that damages 

model. Id. at 389. Mandel I was a cross-appeal and whether the bankruptcy 

court properly rejected the “lost asset” damage model was a question expressly 

before the court. Thrasher and Coleman had explicitly argued that Wellogix

supported the award of damages, and even greater damages, based on the 

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evidence at trial. Id. at 390. If the lost asset theory was viable based on the 

evidence from the original trial, we could have affirmed the award of damages

on that basis. Instead, we held that without knowing which damages model 

was used, we could not review whether the model was appropriate to the case 

or the evidence was sufficient to support the amount awarded under that 

model. Id. at 390. We explained that “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.’” Id. at 390 (emphasis added). 

On remand, without an evidentiary hearing, the bankruptcy court

awarded $1,000,000 to Thrasher based on the lost asset theory, $400,000 to 

Coleman based on the value of his consulting contract, and it also determined 

that the initial $300,000 award to White Nile had not been vacated by Mandel 

I. In re Mandel, No. 10-40219, 2015 WL 5737173, at *1 n.1, *9 (Bankr. E.D. 

Tex. Sept. 30, 2015). The district court affirmed the award of compensatory 

damages to Thrasher and Coleman, and determined that, White Nile’s 

damages were vacated in Mandel I, but that White Nile was entitled to 

$497,000 in damages. Mandel v. Thrasher, Civil Action No. 4:15-cv-715, 2016 

WL 7374428, at *11–15 (E.D. Tex. Dec. 20, 2016)

III.

I turn first to the award of damages to Thrasher based on the lost asset 

theory. The bankruptcy court awarded Thrasher damages based on a theory 

that it had characterized in its first opinion as “not helpful for determining 

damages based on the facts of this case.” In re Mandel, No. 10-40219, 2011 WL 

4599969, at *28 (Bankr. E.D. Tex. Sep. 30, 2011); Mandel v. Thrasher, Civil 

Action No. 4-11-cv-774, 2013 WL 336729, at *10 (E.D. Tex. July 3, 2013) 

(same). We did not disagree with that characterization of the lost asset theory 

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in Mandel I. See 578 F. App’x at 389. The initial explanation of the evidentiary 

deficiencies with the lost asset theory bears repeating: (1) the valuation of 

White Nile by expert Brad Taylor “fail[ed] to adequately account for the 

extremely high failure rate of companies like White Nile”; (2) expert Dr. Gilbert 

F. Amelio testified that any potential profitability in White Nile would not 

become bankable for years, if ever, and that 80% of similar companies fail to 

become profitable; (3) Dr. Amelio testified he had done no due diligence on 

White Nile specifically and was unsure whether he would invest; (4) the 

“evidence of NeXplore’s fair market value [was], at best, fuzzy”; (5) Mandel’s 

salary from NeXplore was not an indication of the company’s value; and (6) the 

Laynes’ investment in White Nile was not credible evidence of value because 

it was made based on false information. In re Mandel, 2011 WL 4599969 at 

*27. The bankruptcy court’s initial observations about the flaws in this 

evidence were correct, and it should not have second-guessed itself on remand.

The majority opinion dodges the inconsistency in the bankruptcy court’s 

evaluation of the lost asset theory on remand by explaining that Mandel I

vacated the compensatory damage award and did not bind the bankruptcy 

court to its prior findings under the law of the case doctrine. Simply because 

the bankruptcy court was not bound by that prior finding does not mean that 

any evidentiary defects that led the court to reject the lost asset theory were 

suddenly remedied. The fact that we held that Thrasher and Coleman suffered 

some damages did not transform a theory for which there was no rational 

relation to the evidence into a basis for the award of damages. See Mandel I, 

578 F. App’x at 391. The lost asset theory is not an appropriate damages model 

here where the technology is not yet functional and the potential profitability 

of the company is purely speculative. See Carbo, 166 F. App’x at 724. 

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The majority opinion contents itself with the bankruptcy court’s aboutface by stating there was a “reasonable explanation for choosing a number at 

the lower end of the expert’s testimony” and that the failure rate of comparable 

companies was accounted for in that analysis. Even assuming, arguendo, that 

the lost asset damages model is appropriate to use here, this logic fails to 

account for the inherently speculative nature of selecting a value for White 

Nile anywhere within Taylor’s range. Taylor’s valuation range only relied on 

data for successful companies and did not account for the specific risks of White 

Nile failing. See Mandel v. Thrasher, 2013 WL 3367297 at *10. That risk 

cannot be factored into the analysis on the back-end simply by picking a 

number at the low end of the range. These risk factors, as the bankruptcy 

court recognized, were significant: there was “the dysfunctional executive 

team, the lack of a functional product, NeXplore’s abandonment of its efforts 

to create its own search engine, and the lack of profits by White Nile and 

NeXplore.” In re Mandel, No. 10-40219, 2015 WL 5737173 at *8. Simply 

because an expert creates a value range of technology companies does not 

necessitate that the value of the company at issue falls within that range. 

White Nile, based on its specific risk factors, could have been valueless. 

Taylor’s model assumes the ability to get a product to market and secure the 

backing of investors. The evidence presented at trial makes it doubtful that 

White Nile would do so. Puzzlingly, the bankruptcy court seemed to 

acknowledge this, even on remand, stating that: White Nile’s executive team 

was not “capable of transforming an idea into a viable business” and “even 

before the misappropriation occurred, White Nile was having difficulty raising 

the funds necessary for development costs in sufficient time to beat 

competitors.” Id. The evidence here did not support an award of damages 

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anywhere within Taylor’s value range as a matter of just and reasonable 

inference. This was speculation all the way down. 

The majority opinion further claims that because “White Nile’s value 

dropped to zero after the trade secrets were misappropriated,” the holding in 

Wellogix supports the award of damages. Far from supporting the majority 

opinion, the evidence supporting the damages award in Wellogix only further 

illustrates the speculative nature of the evidence here. In Wellogix, the 

damage expert’s valuation of the company at $27.8 million was based on: (1) 

the decision by venture capital groups to invest $8.5 million for a 31% equity 

stake; (2) that an employee of the misappropriating company believed one 

application of the intellectual property alone could generate $20 million in 

annual fees; (3) other companies viewed the technology as valuable; (4) no 

other company had the technology at issue for a period of five years; and (5) 

the venture capital groups had done significant auditing of the company’s 

financials before investing. 716 F.3d at 879–80. An expert had testified that 

“based on his knowledge of the software industry, ‘the total value of Wellogix 

went to zero’ after the alleged misappropriation.” Id. at 880.

Unlike in Wellogix, where there was a company-specific valuation based 

on credible evidence, here the expert never specifically valued White Nile based 

on its particular characteristics. White Nile had one investor whose 

investment was eventually returned, there was no indication that other 

companies found the technology valuable—even NeXplore failed to bring it to 

market—nor was there any indication that the technology (if ever actually 

developed) would be sufficiently unique to carve out a market share. The 

majority errs in comparing the evidence of White Nile’s value in this case to 

Wellogix. A square peg cannot fit in a round hole. 

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IV.

The award of damages to Coleman fares no better. The majority opinion 

without further analysis accepts the district court’s conclusion that Coleman’s 

consulting contract provides some evidence of a reasonable royalty. Further 

examination shows that this too is an inappropriate basis on which to award 

damages. The district court relied on the flexibility afforded by Wellogix, 

adopting a reasonable royalty standard as the measure of damages in

expanding upon the bankruptcy court’s finding of damages based on the 

contract. Mandel v. Thrasher, 2016 WL 7374428 at *12–13; In re Mandel, 2015 

WL 5737173 at *9. The reasonable royalty standard is used to measure the 

value of the intellectual property to the misappropriating party. University 

Computing, 504 F.2d at 537. Even Coleman’s attorney admitted at oral 

argument that the contract likely was not the best basis for awarding damages 

but argued we should defer to the bankruptcy court as a factfinder. 

A salary contract is not an appropriate basis to use to calculate the value 

of misappropriated intellectual property here. See id. at 537–38 (stating the 

reasonable royalty standard measures the value of the intellectual property to 

person who misappropriated it); cf. Carbo, 166 F. App’x at 725 (holding that 

the value of the salary supported an award for breach of contract but not for a 

breach of fiduciary duty based on the misappropriation of a trade secret). 

Coleman’s consulting contract does not measure the value of the intellectual 

property in this case to Mandel, who misappropriated the technology. It only 

measures the value of Coleman’s services. Coleman bears the burden to show 

that the value of his salary is co-extensive with the value of any intellectual 

property created. See Carbo, 166 F. App’x at 725. Showing that intellectual 

property rights were assigned in exchange for that salary does not prove the 

value of any intellectual property that Coleman actually created or what

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intellectual property Mandel misappropriated. Moreover, we held in Mandel I

that the assignment of Coleman’s intellectual property rights to White Nile 

was void. 578 F. App’x at 385. 

In addition, Mandel was not able to monetize any intellectual property 

that he misappropriated from Coleman. The SAQQARA project that Coleman 

created was not a working prototype. In re Mandel, 2015 WL 5737173 at *4. 

The evidence also shows that NeXplore decided not to create a search engine 

from scratch. Id. As such, Coleman’s salary does not reflect the value of his

final work product or the value to Mandel from any use of Coleman’s work 

product. Our case law allows flexibility, but the reasonable royalty method 

cannot be bent to fit that scenario. 

V.

The majority opinion also does not support its conclusion that the award 

of damages to White Nile of $497,000 was proper. Both the bankruptcy court

and district court failed to explain the basis for $300,000 of the award. The 

majority opinion concludes, however, that “[i]f Mandel’s representation to 

Thrasher that he would invest $300,000 in White Nile can support this award, 

then the award may be upheld on this basis.” However, the majority opinion 

never undertakes the analysis to make that determination; it only refutes

Mandel’s argument that benefit of the bargain damages are not available for 

fraud under Texas law. See Formosa Plastics Corp. USA v. Presidio Engineers 

and Contractors, Inc., 960 S.W.2d 41, 49 (Tex.1998). The availability of a 

remedy does not equate to the entitlement to that remedy. Benefit of the 

bargain damages for fraud claims are only available in limited circumstances. 

See, e.g., Haase v. Glazer, 62 S.W.3d 795, 799 (Tex. 2001) (holding benefit of 

the bargain damages are not available if the claim is barred by the statute of 

frauds); D.S.A., Inc. v. Hillsboro ISD, 973 S.W.2d 662, 663 (Tex. 1998) (stating 

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benefit of the bargain damages are not available for negligent 

misrepresentation claims). The majority opinion never explains whether 

Mandel’s representation supports a claim for which benefit of the bargain 

damages are available, and if available, whether that claim supports an award 

of damages to White Nile. 

VI.

Today, we affirm an award of damages that uses damages models that 

cannot be justified by any reasonable inference from the evidence in this case. 

We give deference to the bankruptcy court as the fact-finder. But that 

deference only extends as far the credible evidence can support its findings. 

Here, there was no reasoned basis for the award that would merit deference. 

These models do not have credible evidence supporting them as a reasonable 

approximation of the intellectual property’s value. The evidence of White 

Nile’s value was too speculative to use as a reasonable approximation of the 

technology misappropriated. If anything, given the pre-existing management 

and capital-raising issues, the evidence indicated the company was valueless 

when the technology was misappropriated. Indeed, in the twelve years that

the parties have been litigating over White Nile, no party has actually been 

able to monetize the technology. 

Valuing intellectual property is hard, and the misappropriation of that 

technology is potentially as easy as a download to a flashdrive. The difficulty 

of determining a correct valuation methodology, however, does not excuse the 

burden to show that the technology’s value rises above mere speculation and 

is based on just and reasonable inferences from the credible evidence. Our 

flexible and creative standard is not a license for pie-in-the-sky damages; 

rather, damages must be grounded both in theory and fact. Respectfully, I 

dissent.

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