United States District Court 

NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

NEXPOINT ADVISORS, L.P., and § 

HIGHLAND CAPITAL MANAGEMENT § 

FUND ADVISORS, L.P. § 

§ 

V. § 

§ 

HIGHLAND CAPITAL MANAGEMENT, § 

L.P. § 

§ 

§ 

INRE: § 

§ 

HIGHLAND CAPITAL MANAGEMENT, § 

L.P. § 

CIVIL ACTION NO. 3:22-CV-2170-S 

BANKRUPTCY CASE 

NO. 19-34054-SGJl 1; 21-03010-SGJ 

MEMORANDUM OPINION AND ORDER 

Before the Court is an appeal from the Judgment entered by the United States Bankruptcy 

Court for the Northern District of Texas ("Bankruptcy Court") in an adversary proceeding between 

Appellants NexPoint Advisors, L.P. ("NexPoint") and Highland Capital Management Fund 

Advisors, L.P. ("HCMFA") and Appellee Highland Capital Management, L.P. The Court has 

considered the Brief of Appellants ("Appellants' Brief') [ECF No. 6], Answering Brief of 

Appellee ("Answering Brief') [ECF No. 10], Appellants' Reply Brief [ECF No. 14], the record on 

appeal ("Record") [ECF Nos. 2, 5, 33-1], the arguments of counsel at the January 30, 2024, 

hearing, and the applicable law. For the following reasons, the Court finds the Bankruptcy Court 

did not err and AFFIRMS the Judgment. 

I. BACKGROUND 

Appellants are registered investment advisors that contracted Appellee to provide certain 

services that enabled Appellants to operate as a business and to manage funds for their clients. 

R. 254-56. This adversary proceeding arises from competing breach of contract claims concerning 

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four intercompany agreements (collectively, "Agreements"): two Shared Services Agreements 

("SSAs") and two Payroll Reimbursement Agreements ("PRAs"). Appellee entered into the SSAs, 

one with each of the Appellants, for the provision of "back-office" and "middle-office" services 

such as finance and accounting, payments, operations, bookkeeping, cash management, accounts 

payable, and accounts receivable. See id. at 2282, 2295-97. At issue are the two amended SSAs: 

the Second Amended and Restated Shared Services Agreement between Appellee and HCMF A 

("HCMF A SSA") and the Amended and Restated Shared Services Agreement between Appellee 

and NexPoint ("NexPoint SSA"). Id. at 2280-92, 2293-311. 

Appellee also entered into two PRAs, one with each of the Appellants, for the provision of 

"front-office" advisory services: the Payroll Reimbursement Agreement between Appellee and 

HCMF A ("HCMF A PRA") and the Payroll Reimbursement Agreement between Appellee and 

NexPoint ("NexPoint PRA"). Id at 2245-51, 2265-71. Each PRA contains one amendment: 

Amendment Number One to Payroll Reimbursement Agreement ("HCMF A PRA Amendment") 

and Amendment Number One to Payroll Reimbursement Agreement ("NexPoint PRA 

Amendment"). Id. at 2274-77. The HCMFA PRA Amendment and NexPoint PRA Amendment 

were the only changes to the PRAs, and each represented "a one time payment of estimated 

additional Actual Costs owed to [Appellee] for additional resources used." Id. at 2274, 2276. 

Pursuant to the HCMF A PRA Amendment, HCMF A paid Appellee an extra $1,200,000, and 

pursuant to the NexPoint PRA Amendment, NexPoint paid Appellee an extra $1,300,000. Id. 

On October 16, 2019, Appellee filed for Chapter 11 bankruptcy in the United States 

Bankruptcy Court for the District of Delaware ("Bankruptcy Case"), and that court transferred 

venue to the United States Bankruptcy Court for the Northern District of Texas. Charitable DAF 

Fund, L.P. v. Highland Cap. Mgmt., L.P. (In re Highland Cap. Mgmt. L.P.), No. 19-34054-SGJ2 

Case 3:22-cv-02170-S Document 35 Filed 02/28/24 Page 2 of 18 PageID 4477
11, 2022 WL 780991, at *l (Banlcr. N.D. Tex. Mar. 11, 2022). On November 30, 2020, Appellee 

provided written notice to Appellants of its intention to terminate the SSAs as of January 31, 2021. 

R. 255. The termination date was extended twice through February 28, 2021, in exchange for 

Appellants' advance payment for services Appellee provided in February 2021. Id. at 256. On 

January 9, 2020, the Bankruptcy Court entered "an order removing [Appellee's] founder, James 

Dondero ... , from control [ over Appellee] and replacing him with an independent board of 

directors." Id. at 253. Although Dondero ceded control of Appellee, he retained control of 

Appellants. Id. at 254. And later during the Bankruptcy Case, the relationship between Appellee 

and Dondero became contentious. Id. at 267. 

On February 17, 2021, Appellee commenced the adversary proceeding by filing its 

Verified Original Complaint for Damages and for Declaratory and Injunctive Relief ("Complaint") 

in the United States Bankruptcy Court for the Northern District of Texas. R. 28-44. Appellee 

alleged that Appellants breached the Agreements by failing to pay for services rendered by 

Appellee pursuant to the contracts. 1 Id. at 39. Shortly before the filing of the Complaint, Appellants 

filed their Application for Allowance of Administrative Expense Claim ("Application") in the 

Bankruptcy Case. Id. at 324-35. In their Application, and contrary to Appellee's claims, Appellants 

alleged post-petition overpayments under all four Agreements and further alleged that Appellee 

breached the Agreements by failing to provide certain services owed.2 Id. at 327-29. The 

Application was later consolidated with the adversary proceeding pursuant to the parties' 

stipulation. Id. at 129-30. 

1 Appellee' s Complaint included additional claims for declaratory and injunctive relief; however, those 

claims were resolved by stipulation of the parties and are not the subject of the instant appeal. See R. 124. 

2 Although the Application alleges Appellee did not perform under the PRAs, see R. 329, Appellants 

clarified at oral argument that "under the PRAs, which were the front office services, [ Appellee] kept 

providing ... front office services to the [Appellants]." Tr. of Jan. 30, 2024, Hr'g, ECF No. 32 at 90:9-15. 

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The competing claims were tried before the Bankruptcy Court on April 12 and April 13, 

2022, with closing argument on April 27, 2022. R. 268. The Bankruptcy Court heard testimony 

from six witnesses and admitted nearly 200 exhibits. Id. Following trial, the Bankruptcy Court 

entered judgment in favor of Appellee and issued Findings of Fact and Conclusions of Law in 

Support of a Judgment: (A) Granting Breach of Contract Claims Asserted by the Reorganized 

Debtor; and (B) Denying Defendants' Requests for Allowance of Administrative Expense Claims 

("Findings"). Id. at 4-6, 264-323. The Bankruptcy Court denied the Application, finding that 

Appellants failed to meet their burden of proving post-petition overpayments and proving that 

Appellee breached the SSAs. Id. at 268-69. The Bankruptcy Court concluded that even if 

Appellants had met their burden of proving post-petition overpayments, Appellants waived such 

claims under the Agreements. Id. In addition, the Bankruptcy Court found that Appellee met its 

burden of proving that Appellants breached the Agreements via nonpayment in late 2020 and early 

2021. Id. at 269. The Bankruptcy Court awarded Appellee an aggregate $2.596 million in damages. 

See id. at 323. Appellants timely appealed. Id. at 1. 

II. ANALYSIS 

District courts have jurisdiction to hear appeals from final judgments of bankruptcy courts 

pursuant to 28 U.S.C. § 158(a). In reviewing the judgment of a bankruptcy court, the district court 

"functions as a[n] appellate court and applies the standard of review generally applied in federal 

court appeals." Webb v. Reserve Life Ins. Co. (In re Webb), 954 F.2d 1102, 1103-04 (5th Cir. 1992) 

(citation omitted). "[R]eviewing courts-district and courts of appeals alike-must accept the 

findings of fact of the bankruptcy court unless the findings are clearly erroneous." Coston v. Bank 

Malvern (In re Coston), 987 F.2d 1096, 1098 (5th Cir. 1992) (citation omitted). "A finding of fact 

is clearly erroneous only if on the entire evidence, the court is left with the definite and firm 

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conviction that a mistake has been committed." Robertson v. Dennis (In re Dennis), 330 F.3d 696, 

701 (5th Cir. 2003) (internal quotation marks and citation omitted). Conclusions of law and mixed 

questions of law and fact are reviewed de novo. Lavie v. Ran (In re Ran), 607 F .3d 1017, 1020 

(5th Cir. 2010) (citation omitted); Cowin v. Countrywide Home Loans, Inc. (In re Cowin), 864 

F.3d 344, 349 (5th Cir. 2017) (citation omitted). 

The Court agrees with the decisions of the Bankruptcy Court. In affirming the Judgment, 

the Court will first consider Appellants' arguments related to the PRAs and then will consider 

Appellants' arguments related to the SSAs. 

A. Payroll Reimbursement Agreements 

The Court begins with the PRAs, analyzing first the construction of PRAs. Finding that the 

Bankruptcy Court properly construed them as fixed-fee contracts, the Court next analyzes whether 

Appellee had a duty to modify the PRAs and whether Appellants breached the PRAs. Because the 

Court affirms the Bankruptcy Court's construction of the PRAs, the Court concludes by rejecting 

Appellants' appeal of the Bankruptcy Court's denial of the Application. 

i. Construction of the P RAs 

The Bankruptcy Court concluded that the PRAs were unambiguous contracts for the 

provision of front-office services in exchange for fixed monthly fees. R. 281-82. On appeal, 

Appellants challenge the Bankruptcy Court's construction of the PRAs, arguing that the PRAs 

were reimbursement contracts wherein the payment for front-office services was based on costs 

actually incurred. Appellants' Br. 25-31. Appellants also argue that the Bankruptcy Court erred by 

relying on extrinsic evidence to determine the meaning of the PRAs because "there is no way to 

reach the same conclusions the Bankruptcy Court did without considering extraneous evidence." 

Id. at 25-26. 

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When construing a contract, courts must ascertain and give effect to the parties' intentions 

as expressed in the writing itself. El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 

802, 805 (Tex. 2012) (citation omitted). "Consideration of surrounding circumstances is limited 

by the parol evidence rule, which prohibits a party to an integrated written contract from presenting 

extrinsic evidence 'for the purpose of creating an ambiguity or to give the contract a meaning 

different from that which its language imports."' URI, Inc. v. Kleberg County, 543 S.W.3d 755, 

764 (Tex. 2018) (footnote and citations omitted). 

Appellants contend the Bankruptcy Court erroneously relied on extrinsic evidence in 

construing the Agreements. Appellants' Br. 25-26. The Court disagrees. The Bankruptcy Court 

first analyzed the PRAs "[w]ithout considering any extrinsic evidence" and found that "the clear 

and unambiguous language of the definition of' Actual Cost' in the PRAs indicates that these were 

intended to be fixed amount contracts." R. 281-82. Thereafter, the Bankruptcy Court provided its 

alternate conclusion, assuming that the Agreements are ambiguous. Id. at 284, 286. However, even 

throughout this secondary analysis, the Bankruptcy Court explained that it was "hard-pressed to 

find any ambiguity in the content of the Agreements." Id. at 284; see also id at 307 ("As stated 

above, the [Bankruptcy Court] concludes that the PRAs are not ambiguous, and that the only 

reasonable interpretation is they contemplate a fixed monthly payment."). Although the 

Bankruptcy Court considered extrinsic evidence in reaching its alternate conclusion, the 

Bankruptcy Court did not err by first analyzing the plain language of the PRAs without considering 

any extrinsic evidence. 

As to the proper construction of the PRAs, Appellants argue that it was error to construe 

the PRAs as fixed-fee monthly contracts. Appellants' Br. 26-31. Although the parties contend that 

the PRAs are unambiguous, each party offered a competing interpretation of the PRAs. Id. at 25. 

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Appellants claim that the PRAs were reimbursement agreements that required them to reimburse 

Appellee for the "actual costs" incurred for certain employees who were (i) dual employees of 

Appellee and Appellants and (ii) "provide[ d] advice to any investment company registered under 

the Investment Company Act of 1940, as amended ... pursuant to an investment advisory 

agreement between [Appellants] and such investment company ... under [ each of the Appellants'] 

direction and supervision (each, a 'Dual Employee')." Id. at 24-25; R. 2246, 2266. Appellee, 

however, maintains Appellants were obligated to pay a flat monthly fee for the provision of 

investment advisory services rendered. Answering Br. 36-3 9. "A contract is not ambiguous merely 

because the parties disagree about its meaning and may be ambiguous even though the parties 

agree it is not." URI, Inc., 543 S.W.3d at 763 (citation omitted). 

The Court will conduct a de novo analysis of the PRAs by looking first at the plain language 

of the contracts themselves and without considering any extrinsic evidence. In both the HCMF A 

PRA and NexPoint PRA, Section 2.01 provides that "[ d]uring the term, [ each of the Appellants] 

shall reimburse [ Appellee] for the Actual Cost to [ Appellee] of certain employees." R. 2246, 2266. 

Neither of the PRAs define "reimburse," so the Court interprets it according to its "plain, ordinary, 

and generally accepted meaning." Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 

(Tex. 1996). Merriam-Webster defines "reimburse" as "to pay back to someone: repay." 

Reimburse, MERRIAM-WEBSTER DICTIONARY, https://www.merriam-webster.com/dictionary/ 

reimburse (last visited Feb. 27, 2024). Based on this definition, Appellants argue for a rigid 

construction of the term "reimburse"; however, "words are simply implements of communication, 

and imperfect ones at that. Oftentimes they cannot be assigned a rigid meaning, inherent in 

themselves. Rather, their meaning turns upon use, adaptation and context as they are employed to 

fit various and varying situations." URI, Inc., 543 S. W.3d 755 at 763 (quoting Cal. Dep 't of Mental 

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Hygiene v. Bank of Sw. Nat'/ Ass'n, 354 S.W.2d 576, 579 (1962)). Accordingly, the Court's 

analysis does not end there. The Court must objectively determine the terms of the reimbursement. 

Section 2.01 of the PRAs provides that each of the Appellants were to pay back Appellee 

"for the Actual Cost ... of certain [Dual] [E]mployees .... " R. 2246, 2266. The HCMF A PRA 

defines "Actual Cost" as "the actual costs and expenses caused by, incurred or otherwise arising 

from or relating to each Dual Employee, in each case during such period. Absent any changes to 

employee reimbursement, as set forth in Section 2.02, such costs and expenses are equal to 

$416,000 per month." Id. at 2245 (emphasis added). The definition in the NexPoint PRA is 

identical, except "such costs and expenses" under the NexPoint PRA "are equal to $252,000 per 

month." Id. at 2265 ( emphasis added). The Court "cannot interpret a contract to ignore clearly 

defined terms, and, thus, [the Court] must accord [Actual Cost] its due meaning." FPL Energy, 

LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59, 64 (Tex. 2014) (citation omitted). 

The Court finds that the PRAs are unambiguous as a matter of law and that the plain 

language of the "Actual Cost" definition provides that the PRAs were fixed-fee contracts. The 

Court declines to adopt Appellants' proposed interpretation of the PRAs. Their interpretation 

would be dependent on a rigid construction of the term "reimburse" and would wholly ignore the 

parties' own definition of "Actual Cost," which specifies that what "such costs and expenses are 

equal to." Id. at 2245, 2265 (emphasis added). Because the Court's "primary objective is to 

ascertain and give effect to the parties' intent as expressed in the instrument," the Court finds that 

each of the PRAs is a fixed-fee contract. URI, Inc., 543 S.W.3d 755 at 763 (citation omitted). 

Accordingly, the Court agrees with the Bankruptcy Court in construing the PRAs as fixed-fee 

contracts. 

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Having concluded the PRAs are unambiguous as a matter of law, the Court need not 

address the Bankruptcy Court's alternate conclusion or the parties' sources of extrinsic evidence. 

Because each of the PRAs' unambiguous terms must be enforced as written, without regard to 

extraneous facts, parol evidence of the parties' alleged intent behind the PRAs cannot be 

considered where it "contradict[s] or var[ies] the meaning of the explicit [contract] language." 

Nat'[ Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517,521 (Tex. 1995) (citation omitted). 

To the extent the Bankruptcy Court's alternate conclusions must be reached, the Court agrees with 

the Findings for the reasons articulated therein. 

ii. Duty to Modify the P RAs 

Appellants next argue that even if the PRAs were fixed-fee contracts, Appellee is at fault 

for not catching their alleged overpayments. Appellants' Br. 31. According to Appellants, 

Appellee had an obligation under the SSAs to monitor any changes to the status of the Dual 

Employees and make corresponding adjustments to the monthly amount owed under the PRAs. Id. 

at 31-3 5. This argument misses the mark for three reasons. 

First, this argument assumes the PRAs provided for payment of costs actually incurred 

with respect to Dual Employees rather than a fixed monthly fee. For the reasons explained above, 

the Court finds that the PRAs are fixed-fee contracts. 

Second, for the reasons articulated by the Bankruptcy Court, this Court finds that the PRAs 

did not impose a duty on Appellee to unilaterally modify the PRAs as a result of changes to the 

employment status of the individuals on the Dual Employees lists. R. 306-07. 

Third, the Court concludes that the SSAs did not impose a duty on Appellee to modify the 

PRAs. Appellants argue that the Bankruptcy Court misinterpreted their argument by focusing 

solely on the PRAs. See Appellants' Br. 34-35. Appellants contend that Appellee's duty to modify 

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the Agreements arises under the SSAs and applies equally to the PRAs, but (1) there is no evidence 

that the service standards under the SSAs included a requirement that Appellee monitor changes 

to the Dual Employees' statuses and (2) Appellants fail to identify any other provision of the 

Agreements that imposes such a duty. Pursuant to Section 6.01 of the HCMFA SSA, Appellee was 

to "provide the Shared Services and the Shared Assets in the same manner as if it were providing 

such services and assets on its own account." R. 2285. Pursuant to Section 2.02(a) of the NexPoint 

SSA, Appellee was to provide "[a]ssistance and advice with respect to back- and middle-office 

functions including, but not limited to, ... finance and accounting, payments, operations, book 

keeping, cash management, cash forecasting, accounts payable, accounts receivable, [ and] expense 

reimbursement .... " Id at 2295-96. The Record indicates that Appellee performed accordingly. 

The Bankruptcy Court found, and the Court agrees, that Appellants made consistent monthly 

payments under the Agreements for a thirty-five-month period, from January 1, 2018, to 

November 30, 2020. See id at 298. The only changes that took place during this period were the 

additional payments of $1.2 and $1.3 million made through the HCMF A PRA Amendment and 

NexPoint PRA Amendment, respectively. Id. at 298, 2274, 2276. Thus, the Court finds that 

Appellee administered the Agreements pursuant to their terms and thereby satisfied the service 

standards under the SSAs. 

The SSAs do not contain provisions that required Appellee to monitor the status of the 

Dual Employees and absent such representations, Appellants fail to show how the services 

rendered fell short of the articulated service standards. Contrary to Appellants' contention, the 

HCMFA SSA contained a limited warranty, which cautioned, "[e]xcept as specifically provided 

in this Agreement, [Appellee] makes no express or implied representations, warranties or 

guarantees relating to its performance of the Shared Services." Id at 2286. Moreover, Section 2.06 

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of the NexPoint SSA makes clear that Appellee, as the staff and services provider, "shall not have 

any duties or obligations to [NexPoint] unless those duties and obligations are specifically 

provided for in this Agreement ( or in any amendment, modification or novation hereto or hereof 

to which [Appellee] is a party)." Id. at 2300. Neither SSA specifically provides that Appellee has 

a duty to monitor the Dual Employees' statuses or modify the PRAs based on changes in such 

employees' statuses. 

Accordingly, the Court finds that Appellee had no duty to monitor changes to the status of 

the Dual Employees or make corresponding adjustments to the monthly payment under the 

Agreements. 

iii. Appellee 's Breach of Contract Claim 

Appellants further challenge the Bankruptcy Court's ruling on Appellee's breach of 

contract claim, which required Appellee to establish: "(I) the existence of a valid contract; (2) 

performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; 

and (4) damages to the plaintiff as a result of the defendant's breach." Williams v. Wells Fargo 

Bank, N.A., 884 F.3d 239, 244 (5th Cir. 2018) (citation omitted). To recover compensatory 

damages, the plaintiff must prove that he suffered some pecuniary loss as a result of the breach. 

Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741, 758 {Tex. App.-El Paso 2000, no pet.) 

(citation omitted); Multi-Mato Corp. v. ITT Com. Fin. Corp., 806 S.W.2d 560, 569 (Tex. App.-

Dallas 1990, writ denied) ( citation omitted). 

The first three elements are undisputed. The parties agree that ( 1) the PRAs were valid 

contracts, (2) Appellee tendered performance by providing the services it owed Appellants under 

the PRAs, 3 and (3) at the direction of Dondero, Appellants stopped making payments under the 

3 Appellants conceded during oral argument that ''under the PRAs, ... [ Appellee] kept providing ... front 

office services to [Appellants]." Tr. of Jan. 30, 2024, Hr'g, ECF No. 32 at 90: 13-15. 

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PRAs in December 2020 and January 2021 and thus breached the PRAs. R. 3019-20. With respect 

to the fourth element, the Court concludes that Appellee proved it suffered a pecuniary loss 

resulting from Appellants' breach of the PRAs in December 2020 and January 2021. The Court 

finds that Appellee established that its compensatory damages were $832,000 for unpaid amounts 

under the HCMF A PRA and $504,000 for unpaid amounts under the NexPoint PRA. Id at 320, 

323. 

The Court now evaluates Appellants' argument that Appellee committed the first material 

breach of the PRAs. "It is a fundamental principle of contract law that when one party to a contract 

commits a material breach of that contract, the other party is discharged or excused from further 

performance." Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) 

(citing Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d 691, 692 (Tex. 1994)). "[O]ne consideration 

in determining the materiality of a breach is 'the extent to which the nonbreaching party will be 

deprived of the benefit that it could have reasonably anticipated from full performance.'" Prodigy 

Commc'ns Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374,378 (Tex. 2009) (citation 

omitted). 

According to Appellants, Appellee materially breached the PRAs by not engaging in good 

faith negotiations. Appellants argue that the Bankruptcy Court ignored evidence that, by raising 

the overpayment issue with Appellee, they triggered Section 2.02 of the PRAs, which required 

Appellee to negotiate modifications of the PRAs in good faith. Appellants' Br. 35-37; R. 2246, 

2266. Specifically, Appellants contend that the Bankruptcy Court overlooked (1) testimony from 

Frank Waterhouse, who served as Appellee' s Chief Financial Officer and as Treasurer to each of 

the Appellants, that he first raised the issue of overpayments in 2019, (2) a December 1, 2020, 

email from Dustin Norris, who served as Head of Distribution and Chief Product Strategist for 

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NexPoint and as an Executive Vice President of HCMFA, to Waterhouse and others, asking to 

"discuss next steps" on the PRAs, and (3) a letter sent to Appellee on December 11, 2020, 

requesting a modification of the amount owed under the PRAs. Appellants' Br. 35-37; R. 2447-

49; ECF No. 33-1. 

The Bankruptcy Court found that "[Appellants] failed to provide sufficient evidence that 

they made a formal request of [ Appellee] to modify the fixed monthly amount, pursuant to the 

terms of the PRAs." R. 309. Even considering Waterhouse's testimony, the Bankruptcy Court 

emphasized that Waterhouse "never recalled requesting amendment of the PRAs." Id. n.113. This 

Court, on review, "defers to the bankruptcy court's determinations of witness credibility." Saenz 

v. Gomez (In re Saenz), 899 F.3d 384, 392 (5th Cir. 2018) (citing In re Dennis, 330 F.3d at 701); 

see also First Nat'/ Bank LaGrange v. Martin (In re Martin), 963 F.2d 809, 814 (5th Cir. 1992) 

("If the bankruptcy judge finds one version of events more credible than other versions, [the 

reviewing court] is in no position to dispute the finding."). On review of the evidence as a whole, 

the Court does not have a "definite and firm conviction that a mistake has been committed" in this 

respect. In re Dennis, 330 F.3d at 701 (citation omitted). 

The second piece of evidence Appellants identify-the December 1, 2020, email-is also 

insufficient evidence of a request to modify the amount Appellants owed under the PRAs. 

Although Appellants concede that the December 1, 2020, email "is not a formal request signed off 

by a lawyer," they argue that the email was "an informal request" to renegotiate. Tr. of Jan. 30, 

2024, Hr'g, ECF No. 32 at 19:5-20:8. The Court finds that while Norris's email does ask 

Waterhouse and another employee of Appellee to discuss the PRAs, it fails in any specific terms 

to request a modification of the Agreements. See R. 244 7-49 ("[L ]et' s discuss next steps on these 

contracts, since they didn't submit termination notices for these, but did for the shared services."). 

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Finally, Appellants argue that the December 11, 2020, letter was an additional request to 

renegotiate the PRAs. Appellants' Br. 36-37. The letter referenced Section 2.02, noting that, 

"NexPoint and HCMFA are prepared to engage in good faith negotiations with [Appellee] 

regarding this issue, including, without limitation, regarding the appropriate reimbursement for 

[Appellee] for the months for which NexPoint and HCMFA have not yet made reimbursement 

payments." ECF No. 33-1 at 3. Additionally, "[t]o make negotiations productive, NexPoint and 

HCMF A request that [Appellee] provide data regarding the employees listed on the Exhibits A to 

the [PRAs] for the period during the chapter 11 case." Id. at 3-4. 

The Bankruptcy Court did not address whether the letter triggered Appellee' s obligation to 

negotiate in good faith or whether Appellants carried their burden of proving that Appellee 

breached this obligation. The Court finds that the December 11, 2020, letter triggered Appellee's 

obligation to negotiate the terms of the PRAs. However, given the timing of the letter, the Court 

finds that Appellants did not prove that Appellee breached its obligation because there is no 

evidence that Appellee acted in bad faith by not responding to the letter prior to the termination of 

the PRAs in January 2021. The PRAs do not require retroactive modification, so any modification 

to the PRAs would have been prospective. As a result, the only period subject to renegotiation was 

the period beginning January 2021. And there is insufficient evidence that Appellee refused to 

negotiate in the twenty days that remained in December 2020 after receiving the letter or that the 

lack of response was in bad faith. 

Even if the Court were to find that Appellee breached the PRAs for failing to renegotiate, 

which it does not, the alleged breach was not material for two reasons. First, the Texas Supreme 

Court has held that "agreements to negotiate toward a future contract are not legally enforceable." 

Dallas/Fort Worth Int'! Airport Bd. v. Vizant Techs., LLC, 576 S.W.3d 362, 371 (Tex. 2019) 

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(citing Fischer v. CTMI, L.L.C., 479 S.W.3d 231,242 {Tex. 2016)); see also John Wood Grp. USA, 

Inc. v. !CO, Inc., 26 S.W.3d 12, 21 (Tex. App.-Houston [1st Dist.] 2000, pet. denied) ("[A]n 

agreement to negotiate in the future is unenforceable, even if the agreement calls for a 'good faith 

effort' in the negotiations." (citation omitted)). 

Second, the requirement to negotiate in good faith did not commit the parties to reach an 

agreement, and the parties could not have reasonably anticipated that renegotiations would 

guarantee modification despite good faith efforts. See R. 3109 (noting that Appellee's relationship 

with Dondero "had really gone ... south" amid the Chapter 11 bankruptcy proceedings in 2020). 

Therefore, even if Appellee breached the PRAs, the breach was not material because it did not 

deprive Appellants of the benefit they could have reasonably anticipated from full performance. 

Prodigy Commc 'ns, 288 S.W.3d at 378 (citation omitted). 

iv. Appellants 'Administrative Expense Claim for Alleged Overpayments4 

Appellants seek an administrative expense claim for alleged overpayments they made 

under the PRAs from October 16, 2019 (the date Appellee filed its voluntary petition in the 

Bankruptcy Case) until November 30, 2020. Appellants' Br. 44-46. Because the Court concluded 

above that the PRAs are fixed-fee contracts and Appellee had no duty to adjust the monthly 

payment under the Agreements, the Court finds that Appellants did not meet their burden of 

proving that they made any overpayments under the PRAs. Further, the Court finds that the 

Bankruptcy Court did not err in concluding that through their conduct, Appellants waived their 

right to assert claims under the PRAs for the reasons articulated in the Bankruptcy Court's 

Findings. 

4 Appellants concede that Appellee "kept providing ... front office services to [Appellants]." Accordingly, 

the Court need not address Appellants' claim that Appellee breached the PRAs by failing to provide frontoffice services. Tr. of Jan. 30, 2024, Hr'g, ECF No. 32 at 90:13-15; R. 327. 

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B. Shared Services Agreements 

Appellants finally challenge the Bankruptcy Court's rulings on the parties' breach of 

contract claims under the SSAs, which, again, require the moving party to establish: (1) a valid 

contract; (2) performance by the plaintiff; (3) the defendant's breach; and (4) damages resulting 

from the defendant's breach. Williams, 884 F.3d at 244. 

i. Appellee 's Breach of Contract Claim 

The Court finds that the Bankruptcy Court did not err in concluding that Appellants 

breached the SSAs by failing to pay the requisite amounts. The first element is satisfied because it 

is undisputed that the SSAs were valid contracts. The parties agree that the NexPoint SSA 

contemplated a fixed monthly fee of $168,000 per month for the provision of front-office services 

and that while the HCMF A SSA was a variable fee contract, Appellee only charged Appellants 

according to the allocation formula for ''Actual Cost." R. 274; Appellants' Br. 9; Answering Br. 

9. The amounts owed under the HCMF A SSA generally ranged between $300,000 to $310,000 

each month. Answering Br. 9. 

As to the second element, Appellee argues that it performed the services it owed Appellants 

under the SSAs. Id at 47-49. The Court agrees. The Bankruptcy Court scrutinized the evidence 

presented at trial and found that Appellants made numerous representations to the third-party 

Retail Board that Appellee was sufficiently performing all services under the Agreements. R. 296. 

On review, the Court agrees with the Bankruptcy Court. See Taylor-Travis v. Jackson State Univ., 

984F.3d1107, 1116 (5th Cir. 2021) ("Under clear error review, if the trial court's factual findings 

are 'plausible in light of the record viewed in its entirety, we must accept them[.]"' (quoting Ali v. 

Stephens, 822 F.3d 776, 783 (5th Cir. 2016))). Accordingly, the Court finds that Appellee carried 

its burden of proving it performed under the SSAs, satisfying the second element. 

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The third element is also satisfied. Appellants do not contest that they stopped making 

payments under the Agreements in November 2020. 5 

Finally, the Court concludes that the fourth element is satisfied because Appellee proved it 

suffered a pecuniary loss resulting from Appellants' breach of the SSAs. As the Bankruptcy Court 

did, the Court finds that Appellee's damages are the amounts that were not paid under the SSAs: 

$924,000 for unpaid amounts under the HCMF A SSA in November 2020, December 2020, and 

January 2021, and $336,000 for unpaid amounts under the NexPoint SSA for December 2020 and 

January 2021. R. 323. 

ii. Appellants' Administrative Expense Claim for Alleged Overpayments and Breach of Contract 

Appellants also seek an administrative expense claim for alleged overpayments under the 

SSAs. Appellants' Br. 44-46. Appellants argue that Appellee failed to perform certain services 

owed under the SSAs, including legal and compliance services, and that such failure constituted a 

breach of the SSAs. Appellants' Br. 38-42. Relying on the analysis above, the Court finds that 

Appellants did not carry their burden of proving that Appellee breached the SSAs. Specifically, 

Appellants did not prove that Appellee withheld legal and compliance services it owed under the 

SSAs in light of multiple contemporaneous representations to the Retail Board that Appellee was, 

in fact, providing all services required under the Agreements. R. 286-92. In opposition, Appellants 

cite testimony from Norris that Appellants did not receive certain legal services owed, which 

resulted in $425,000 in cover damages. Appellants' Br. 39 & n.105-06; see also R. 2757, 2814-

15. However, Norris's testimony alone does not leave the Court with the "definite and firm 

5 Appellants did not make payments under the NexPoint SSA for services rendered in December 2020 and 

January 2021. Answering Br. 32. Because the HCMF A SSA was paid in arrears, Appellants did not make 

payments under the HCMF A SSA for services rendered in the months of November 2020, December 2020, 

and January 2021. Id. 

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conviction that a mistake has been committed." In re Dennis, 330 F.3d at 701 (citation omitted). 

Accordingly, the Court finds that the Bankruptcy Court did not err by denying the Application. 

For the reasons articulated by the Bankruptcy Court, the Court also finds that Appellants' 

claims under the SSAs were baned by the doctrine of waiver. 

III. CONCLUSION 

For the foregoing reasons, the Judgment of the Bankruptcy Court is AFFIRMED. 

SO ORDERED. 

SIGNED February 28, 2024. /4w~ 

KAREN GREN SCHOLER 

UNITED STATES DISTRICT JUDGE 

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