IN THE MISSOURI COURT OF APPEALS

WESTERN DISTRICT

ENERJEX RESOURCES, INC., )

)

Appellant, )

)

v. ) WD77228

)

JEFFERY HAUGHEY, ET AL., ) Opinion filed:

)

Respondents. )

APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI

THE HONORABLE JOHN M. TORRENCE, JUDGE

Before Division Two: Joseph M. Ellis, Presiding, Judge, 

Victor C. Howard, Judge and Mark D. Pfeiffer, Judge

Appellant EnerJex Resources, Inc. appeals from a judgment entered by the 

Circuit Court of Jackson County granting summary judgment in favor of Respondents 

Jeffrey Haughey, Robert Green, and Husch Blackwell, L.L.P. Appellant contends that 

the trial court erred in granting summary judgment because its damages theory is 

supported by Missouri law and is not otherwise inherently speculative. For the following 

reasons, the judgment is affirmed.

Formed in 2006, Appellant is an oil development and production corporation that 

operates primarily in Kansas and Missouri. In 2007, Appellant decided to attempt its 

first public stock offering on the American Stock Exchange. Appellant intended to offer 
2

five million new shares of common stock at $5 per share. Thus, Appellant hoped to 

raise $25 million in equity from the public offering. 

A California investment banking firm ("the banking firm") agreed to underwrite the 

$25 million public offering. The banking firm further provided Appellant with a projected 

timeline for the public offering that showed the "road show" presentation for potential 

investors and the public offering occurring in June 2008. 

Appellant originally engaged a Nevada firm to prepare the necessary filings for the 

Securities and Exchange Commission ("SEC"). The banking firm, however, requested 

that Appellant engage a large law firm to handle the offering. Appellant then sought 

counsel from Respondent Husch Blackwell. Appellant's CEO Stephen Cochennet met 

with Respondent Haughey and discussed the timeline projecting the public stock 

offering to occur in June. Following the meeting, Respondents agreed to provide legal 

services to Appellant in relation to the public offering, but their agreement made no 

mention of the timeline. Respondents did provide the services, but Appellant's public 

offering did not occur until September 2008. By that time, the oil market had crashed,

and Appellant's offering failed.

In 2012, Appellant filed suit against Respondents alleging legal malpractice, 

breach of contract, breach of fiduciary duty, and fraud. During discovery, Appellant 

disclosed the damages calculations of its expert, Charles Brettell. Brettell calculated 

consequential damages based on a "market cap" theory, which Appellant describes as 

"the lost market value . . . of the company flowing from the failed securities offering."

Brettell's calculation ultimately valued Appellant's "market cap" or "enterprise value" 

between $202,339,588 and $358,421,781. 
3

In 2013, Respondents filed a motion for partial summary judgment on Appellant's 

consequential damages theory. In their motion, Respondents asserted that Appellant 

could not recover any consequential damages because Appellant's expert calculated 

the damages as to Appellant's shareholders, not to Appellant as a corporation. 

Respondents further averred that Appellant's damages calculation is inherently 

speculative in that it assumes lost profits when Appellant, as a company, has no history 

of prior profitability. 

Appellant opposed the motion. In doing so, Appellant contended that its expert 

calculated the market loss sustained by Appellant as a corporation as a result of the 

failed offering, not any damages suffered by its shareholders. Appellant further 

asserted that, despite its history of "negative cash flow," it was "an established 

business" that was "increasing in value." Thus, Appellant contended that Brettell's 

damages calculations were not inherently speculative. 

On October 3, 2013, the trial court entered partial summary judgment in favor of 

Respondents. In its judgment, the trial court determined that "it is undisputed that 

[Appellant] was never profitable prior to the 2008 proposed stock offering and therefore 

cannot recover lost profits because the projection is inherently speculative." The trial 

court further determined that Brettell "quantified the alleged damages of [Appellant] 

based on the projected value of shares of stock held by EnerJex stockholders who are 

not parties to this case." Thus, the trial court granted Respondents' motion for partial 

summary judgment on Appellant's consequential damages theory. 

Respondents then filed several motions in limine to exclude expert opinion and 

Appellant's "stock sale theory" of damages from trial. The trial court subsequently 
4

granted the motions and excluded "any evidence relating to the loss of $25 million in 

damages because of the cancelled stock offering" from trial. 

On January 2, 2014, Appellant voluntarily dismissed its fraud, fee disgorgement, 

and punitive damages claims after reaching a partial settlement agreement with 

Respondents. Respondents then requested the trial court grant summary judgment in 

their favor on Appellant's remaining claims of legal malpractice, breach of contract, and 

breach of fiduciary duty because, based upon the trial court's previous rulings, Appellant 

could not establish damages. On January 6, 2014, the trial court entered its final 

judgment in which it granted summary judgment in favor of Respondents "based on the 

absence of any recoverable actual damages." 

Appellant now raises two points of error on appeal. Before we can address those 

points, however, we must first take up Respondents' motion to dismiss this appeal. In 

their motion, Respondents contend that Appellant lacks standing to bring this appeal 

because Appellant assigned its claims against Respondents to Appellant's shareholders 

when, as part of a merger deal, Appellant declared a special dividend equal to 

Appellant's "Net Recovery" in this case. Appellant opposes the motion, contending that 

the declaration of the special dividend to pre-merger stockholders does not constitute 

an assignment in that Appellant remains in complete control of the litigation and will 

receive and control all proceeds recovered from the lawsuit. 

In September 2013, Appellant merged with Black Raven, Inc. As part of the 

merger agreement, Appellant created a special stock dividend for its pre-merger 

stockholders. The provision provides: 

[Appellant] may declare a dividend payable to [Pre-merger EnerJex 

stockholders], under which [Appellant] will issue such stockholders shares 
5

of stock . . . entitling such stockholders to receive in the aggregate a 

number of shares of [Appellant] Common Stock equal to the quotient 

determined by dividing (x) [Appellant's] "Net Recovery" in the [Husch] 

litigation, by (y) $0.70.1

The term "Net Recovery" is defined as: 

[T]he gross amount received by [Appellant] in settlement of its claim in the 

[Husch] litigation or in satisfaction of any judgment entered in favor of 

[Appellant] . . . reduced by litigation expenses and the portion of such 

gross amount that [Appellant] is obligated to pay to counsel representing 

[Appellant] in the [Husch] litigation.

Although the merger and declaration of the special dividend occurred prior to the 

trial court's final grant of summary judgment, Respondents did not raise this issue 

before the trial court. 

At the outset, we note that assignment of legal malpractice claims is against 

Missouri public policy. VinStickers, LLC v. Stinson Morrison Hecker, 369 S.W.3d 

764, 767 (Mo. App. W.D. 2012). Moreover, some Missouri courts have found that the 

assignment of the proceeds from a personal injury claim is no different from the 

assignment of a personal injury claim. See Schweiss v. Sisters of Mercy, St. Louis,

Inc., 950 S.W.2d 537, 538 (Mo. App. E.D. 1997); see also Hays v. Mo. Highways & 

Transp. Comm'n, 62 S.W.3d 538, 542 (Mo. App. W.D. 2001) (recognizing the holding 

in Schweiss that the difference between assignment of a claim and assignment of the 

potential proceeds of a personal injury claim is a distinction without a difference). 

However, under the present set of circumstances, we cannot say an assignment of 

Appellant's legal malpractice claim or the proceeds therefrom occurred as a result of 

Appellant's declaration of the special dividend. 

 

1

According to Appellant, the dividend is contingent upon Appellant realizing a recovery from the lawsuit 

prior to December 31, 2014.
6

Respondents contend that Appellant's declaration of this special dividend to its premerger shareholders constitutes an assignment of Appellant's legal malpractice claim 

because any damages Appellant receives from the lawsuit will be given to the premerger shareholders, thus evidencing Appellant's intent to assign its legal malpractice 

claim to the pre-merger shareholders. In doing so, Respondents emphasize that "no 

particular form of words is necessary to accomplish an assignment, so long as there 

appears from the circumstances an intention on the one side to assign and on the other 

side to receive." Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 

125 (Mo. banc 2010). 

However, "assignment occurs only when one party transfers to another all or part 

of one's property, interest, or rights." Hagar v. Wright Tire & Appliance, Inc., 33 

S.W.3d 605, 610 (Mo. App. W.D. 2000) (internal quotation omitted). Assignment 

"divests the assignor of all interest in the thing assigned, and vests the same in the 

assignee." Schaffer v. Bd. of Educ. of City of St. Louis, 869 S.W.2d 163, 168 (Mo. 

App. E.D. 1993) (internal quotations omitted). 

Here, the special dividend does not divest Appellant of its interest in the 

proceeds of the lawsuit. Any damages awarded to Appellant would remain with the

corporation. Furthermore, not all the damages recovered from the lawsuit would be 

converted into stock shares. Rather, based on the definition of "Net Recovery," 

Appellant would first pay off its litigation expenses and attorneys' fees from the 

damages recovered in the lawsuit. Therefore, because the special dividend does not 

divest Appellant of its interest in the lawsuit, no assignment occurred. Accordingly, 

Respondents' motion to dismiss this appeal is denied. 
7

We now address Appellant's points on appeal. In its first point, Appellant 

contends that the trial court erred in granting summary judgment in favor of 

Respondents. We review grants of summary judgment de novo. Cent. Trust & Inv. 

Co. v. Signalpoint Asset Mgmt., LLC, 422 S.W.3d 312, 319 (Mo. banc 2014) (citing 

ITT commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 

(Mo. banc 1993)). We view the evidence and all reasonable inferences therefrom in the 

light most favorable to the party against whom summary judgment was entered. Id. at 

320. "However, facts contained in affidavits or otherwise in support of the party's 

motion are accepted as true unless contradicted by the non-moving party's response to 

the summary judgment motion." Id. (internal quotation omitted). 

"Summary judgment is only proper if the moving party established that there is no 

genuine issue as to the material facts and that the movant is entitled to judgment as a 

matter of law." Id. at 319 (internal quotation omitted). A defending party is entitled to 

summary judgment upon establishing one of the following: 

(1) facts negating any one of the elements of the non-movant's claim; (2) 

that the non-movant, after an adequate period for discovery, has not been 

able and will not be able to produce sufficient evidence to allow the trier of 

fact to find the existence of any one of the elements of the non-movant's 

claim; or (3) that there is no genuine dispute as to the existence of the 

facts necessary to support movant's properly pleaded affirmative 

defense." 

Id. at 319-20 (internal quotation omitted). "Summary judgment . . . can be affirmed on 

appeal by any appropriate theory supported by the record." Roberts v. BJC Health 

Sys., 391 S.W.3d 433, 437 (Mo. banc 2013). 

Appellant asserts that the trial court erred in granting summary judgment on the 

basis that Appellant could not recover under its consequential damages theory because 
8

Appellant had no history of profitability. The trial court determined that all of Brettell's 

damages calculations necessarily include a lost profits component. It further concluded 

that, because Appellant had reported net losses every year since Appellant's inception, 

Appellant failed to establish a history of prior profitability and, thus, could not recover 

damages that included lost profits. 

Under Missouri law, lost or anticipated profits of a commercial business are 

generally deemed "too remote, speculative, and too dependent upon changing 

circumstances to warrant a judgment for their recovery." Anderson v. Abernathy, 339 

S.W.2d 817, 824 (Mo. 1960) (internal quotation omitted). Lost profits "may be 

recovered only when they are made reasonably certain by proof of actual facts, with 

present data for a rational estimate of their amount." Id. "[P]roof of the income and 

expenses of the business for a reasonable time anterior to its interruption, with a 

consequent establishing of the net profits during the previous period, is indispensable." 

Coonis v. Rogers, 429 S.W.2d 709, 714 (Mo. 1968). Thus, "[w]ith no history of 

profitability, [a p]laintiff cannot present sufficient evidence to prove lost profits from an 

existing commercial business." Midwest Coal, LLC ex rel. Stanton v. Cabanas, 378 

S.W.3d 367, 370 (Mo. App. E.D. 2013). 

Appellant does not contest that Brettell's calculations include a lost profits 

component. Instead, Appellant contends that it does not need to establish prior 

profitability in order to recover under its damages theory because it is alleging damages 

flowing directly from a specific transaction – namely the failed public stock offering. As 

explained in BMK Corp. v. Clayton Corp., 226 S.W.3d 179, 195 (Mo. App. E.D. 2007), 

the general rule that a plaintiff must establish a history of profitability to recover lost 
9

profit damages "applies in cases where the loss of expected profits flows from the 

destruction or injury to a business." However, "[w]hen a plaintiff sues for damages 

arising directly out of a breach of contract, he or she need not prove past profits or 

expenses." Id. Thus, a plaintiff may seek lost profits arising from a breach of contract 

without proof of prior profitability "where loss is ascertainable with reasonable certainty 

from the breach and the profits claimed are not speculative or conjectural and were 

within the contemplation of the parties when the contract was made." Id. (internal 

quotation omitted). 

Although Appellant avers that the "lost proceeds" in its damages calculation are 

tied to a specific transaction, Brettell's damages model includes lost profits resulting 

from transactions far removed from the public offering. In determining Appellant's 

"market cap," Brettell's model assumes that Appellant would have used the $25 million 

(less $3 million to pay preexisting debt) to acquire new oil field leases and drill new 

wells to expand its oil production. Brettell then assumes that those expansions and 

acquisitions would have generated a profit that would then allow Appellant to receive 

additional financing from lenders. Appellant would then use those additional loans 

combined with the assumed profits from the expansions and acquisitions to make 

further acquisitions and expansions that would, in turn, generate further profit. Thus, 

the lost profits component of Brettell's calculations did not flow directly from any specific 

contract or transaction. Rather, they flowed from projected loans, expansions, and 

acquisitions that Brettell assumed Appellant would be successful in obtaining and 

securing over the course of the two-year period following the public offering. Without 
0

10

any evidence of a prior history of profitability of engaging in similar business dealings, 

Brettell's assumed lost profit figures are inherently speculative. 

Likewise, Appellant cannot rely upon the "specific transaction" standard or 

exception to claim $25 million in lost profits from the failed public offering.2 As 

explained by the Eastern District, recovery of lost profits without evidence of prior 

profitability has been permitted where a plaintiff "recovered its loss of profits flowing 

directly from a breach of or interference with a specific contract." Midwest Coal,, 378 

S.W.3d at 371. Proof of income and expenses for a reasonable anterior period has not 

been required in such cases only because "(1) the evidence clearly established the fact 

of damages; and (2) the amount of damages was readily ascertainable since [the] cases 

involved products for which profits were calculable based on past and future sales of the 

same items." Id. The cases permitting recovery of lost profits without evidence of prior 

profitability all "involved known commodities with demonstrable market prices." Id. at 

372. 

Here, the contract allegedly breached was one in which Respondents agreed to 

provide Appellant with legal services. Thus, the contract at issue does not involve a 

product for which profits were readily calculable based on past and future sales of an 

item. Therefore, while a breach of contract is alleged in this case, Appellant is not 

seeking lost profits on the contract itself. Instead, Appellant is seeking the $25 million it 

believed it would receive in stock sale proceeds as the injury to its business after 

 

2

To the extent Appellant is claiming direct damages from the failed public stock offering, we note that 

"[u]nissued stock has no value to the corporation, because stock only represents portions of equity in the 

corporation itself." 18 C.J.S. Corporations § 203 (2007); see also I.R.C. § 1032(a) ("No gain or loss shall 

be recognized to a corporation on the receipt of money or other property in exchange for stock (including 

treasury stock) of such corporation.").
1

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Respondents' alleged malpractice and breach of fiduciary duties. See Harvey v. 

Timber Res., Inc., 37 S.W.3d 814, 818 (Mo. App. E.D. 2001) (explaining that proof of 

prior income and expenses was necessary in a case where a business alleged lost 

profits as a result of a breach of a noncompete clause). Under such circumstances, 

proof of prior profitability is necessary as Appellant is not seeking lost profits directly 

flowing from a breach of or interference with a specific contract. 

Thus, as found by the trial court, Appellant's alleged damages include lost profit 

components even though Appellant failed to establish a history of profitability prior to the 

public offering.3 Therefore, the trial court did not err in granting summary judgment on 

the basis that Appellant could not establish damages because its alleged damages 

based on lost profits are inherently speculative. 

Judgment affirmed.4

________________________________

Joseph M. Ellis, Judge

All concur.

 

3

Appellant also contends that whether it was profitable prior to the public stock offering constitutes an 

issue of material fact improperly decided by the trial court. However, in their motion for summary 

judgment, Respondents offered Appellant's SEC filings to establish that Appellant had reported net losses 

since its inception in 2006. Appellant offered no evidence in its opposition to the summary judgment 

motion to contradict that fact. Rather, Appellant alleged only that it had been "successful." Now on 

appeal, Appellant contends that whether it was profitable is a factual issue because there was evidence in 

the record that its stock has been actively traded in a public market since 2006, a Husch attorney 

considered its stock a good investment, it was able to obtain the $25 million financing necessary for the 

public offering, and all parties associated with the public offering were confident the stock would sell 

easily. Such facts, however, do nothing to contradict the fact that, prior to the public offering, Appellant 

had never reported a net profit. Thus, Appellant's contention that a factual dispute exists as to its history 

of profitability is without merit. 

4 Due to our disposition of Appellant's first point, we need not address Appellant's remaining points and 

contentions on appeal.