IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-10382

In the Matter of: LATITUDE SOLUTIONS, INCORPORATED,

 Debtor

CAREY D. EBERT, 

 Appellee

v.

JOHN PAUL DEJORIA; HOWARD MILLER APPEL; EARNEST A. 

BARTLETT, III; MATTHEW J. COHEN,

 Appellants

Appeals from the United States District Court

for the Northern District of Texas

Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

This appeal involves two competing versions of the history and purpose 

of Latitude Solutions, Inc. (“LSI”). Howard Appel, Earnest Bartlett, Matthew 

Cohen, and John Paul DeJoria (“Appellants”) characterize LSI as a publicly

traded company which sought to commercialize technology that could

remediate contaminated water but was unsuccessful as a speculative venture. 

On the other hand, LSI’s bankruptcy trustee, Carey Ebert, characterizes LSI 

United States Court of Appeals

Fifth Circuit

FILED

April 30, 2019

Lyle W. Cayce

Clerk

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as a fraud from its inception—used only as a mechanism for Appellants to 

participate in and profit from a securities fraud scheme. Ebert sued several of 

LSI’s corporate officers, directors, and investors for breaches of fiduciary duty. 

By the end of trial, her case focused primarily on a contract LSI entered into 

with Jabil Inc., one of LSI’s bankruptcy creditors. The jury found Appellants

liable and assessed millions of dollars in compensatory and exemplary

damages. Appellants present various arguments for why we should overturn 

the jury verdict and reduce damages, including whether Ebert has Article III 

standing and whether there was legally sufficient evidence for the jury to find

as it did. We AFFIRM in part, REVERSE and RENDER in part, VACATE in 

part, and REMAND for further consideration consistent with this opinion.1

I. Background

This appeal stems from a jury verdict and final judgment adjudicating 

Matthew Cohen and John Paul DeJoria liable for breaches of fiduciary duty to 

LSI and finding Howard Appel and Earnest Bartlett liable for aiding and 

abetting those breaches. The final judgment awards Ebert compensatory 

damages against (i) Appel, Bartlett, Cohen, and DeJoria for $6.9 million, 

jointly and severally, for Cohen’s breach of fiduciary duty; (ii) Appel and 

Bartlett for $2.5 million each for aiding and abetting Cohen’s breach of 

fiduciary duty; (iii) DeJoria for $1.5 million for his breach of fiduciary duty; 

and (iv) Appel for $5 million, Cohen for $2 million, and DeJoria for $1 million 

in exemplary damages. 

 

1 As explained more fully below, we reverse and render judgment in favor of Appel, 

Bartlett, and DeJoria. As for Cohen, we vacate damages awarded under Damage Element 

No. 1, affirm damages awarded under Damage Element No. 2, and remand to the district 

court to consider the legal issues surrounding exemplary damages against Cohen in the first 

instance. 

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A. LSI

The parties disagree on the basic premise of LSI’s formation. Ebert

asserts LSI was a sham company set up to fail from the outset, and a vehicle 

for Appellants to participate in a securities fraud scheme known as “pumpand-dump,” while Appellants claim LSI was legitimately founded to develop 

and commercialize technology capable of remediating contaminated water. 

LSI was a publicly traded company that began operating in 2009 and developed 

patented technology for treatment of wastewater in the oil and gas industry. 

LSI was a speculative venture that eventually filed for bankruptcy in 

November 2012.2 

B. Matthew Cohen 

Cohen was one of the founding members of LSI and served as an officer 

and director of LSI from March 2009 through June 2012. Cohen was the Chief 

Financial Officer of LSI from June 2011 to June 2012. 

C. Howard Appel

Appel was a business consultant to and raised capital for LSI. In 2004, 

before LSI existed, Appel pled guilty to conspiracy to commit securities fraud 

as well as conspiracy to commit money laundering and served twenty-one

months in prison. The parties vehemently disagree whether this is relevant to 

LSI. The trustee uses Appel’s conviction as evidence of a pattern of nefarious 

behavior, while Appellants argue Appel’s past is the only reason for the 

trustee’s lawsuit, despite no evidence that Appel engaged in any criminal 

conduct related to LSI. An LSI board member introduced Appel to the 

 

2 Aside from the allegations regarding each Appellant’s conduct, which are discussed 

below, LSI experienced internal control and accounting issues. For example, its financial 

team used accounting software that was inadequate for a publicly traded company and 

eventually self-reported to the Department of Justice on suspicions of fraud and stock 

manipulation. 

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company in 2010, which eventually led to Appel’s family and friends investing 

in LSI beginning in February 2011. Appel was responsible for raising at least 

$12 million in capital for LSI through outside investors. Appel did not 

purchase or sell any shares of LSI stock. 

D. Earnest Bartlett

Bartlett is a friend and business associate of Appel. Appel introduced 

Bartlett to LSI. A company affiliated with Bartlett, FEQ Realty, invested in 

LSI beginning in December 2010. In April 2011, FEQ Realty entered into a 

consulting agreement with LSI. Appel provided his consulting services to LSI 

as an outside consultant under FEQ Realty’s consulting agreement. Bartlett 

never purchased or sold any LSI stock. 

E. John Paul DeJoria

DeJoria is an entrepreneur and philanthropist with an interest in 

developing clean-water solutions. He invested and lost over $11 million in LSI 

beginning in March 2011. For most of 2012, DeJoria was LSI’s primary source 

of funding. DeJoria served on LSI’s board of directors from October 2011 to 

September 2012. 

F. Jabil, Inc.

Jabil, Inc., is not a party to the case but plays a crucial role here. In May 

2011, Jabil entered into an agreement with LSI to manufacture remediation 

equipment. The parties dispute whether the deal was done for legitimate 

purposes. Jabil is a creditor in LSI’s bankruptcy, with a claim for $9.55 million. 

By the end of evidence at trial, the trustee conceded the only damages the 

estate could recover were 1) the amount of the Jabil debt and 2) the amount of 

any gains to the defendants that the trustee could specifically link to fiduciary 

breaches. 

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G. LSI’s Bankruptcy and the District Court Proceedings

Carey Ebert was appointed as LSI’s Chapter 7 bankruptcy trustee, and 

the matter was eventually converted into a Chapter 11 proceeding. As the 

Chapter 11 trustee, she attempted to find investors to invest in LSI and lease 

equipment to keep LSI operating. Ebert, however, was unable to generate 

enough revenue to allow the company to resume business. Ebert filed the 

operative complaint in November 2015, raising various claims against over 

twenty defendants. With respect to the Appellants, Ebert alleged that Appel 

gained practical control of LSI and used it to perpetrate securities fraud and 

engage in insider trading; that LSI was a fraud formed for an illegitimate 

purpose; that Appel and Bartlett made substantial profit through 

manipulative conduct; and that Cohen and DeJoria joined in the conspiracy to 

profit from stock manipulation. 

By the close of evidence at trial, the lawsuit had narrowed significantly—

numerous counts and more than a dozen defendants were dismissed. The 

claims that went to the jury were one count each of a breach of fiduciary duty 

owed to LSI against Cohen and DeJoria, and one count of aiding and abetting 

Cohen’s breach of fiduciary duty against DeJoria, Appel, and Bartlett. As 

noted above, based upon the evidence presented, the only damages remaining 

at issue were 1) the amount of the Jabil debt and 2) the amount of any gains 

to the defendants that the trustee could specifically link to fiduciary breaches. 

Appellants moved for judgment as a matter of law under Federal Rule of 

Civil Procedure 50(a) and the district court carried the motions. The district 

court then held a charge conference, at which the parties agreed to the 

following: Question 1 would determine whether Cohen and DeJoria breached 

their fiduciary duties with a “yes” or “no” answer. Question 2 would determine 

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whether Appel, Bartlett, and DeJoria aided and abetted3 Cohen’s breach of 

fiduciary duty. Question 3 limited the trustee’s damages to the following:

Damage Element No. 1: The reasonable cash market value of 

liabilities incurred by LSI as a proximate cause of that defendant’s 

breach of fiduciary duty, which liabilities are still owed and have 

not yet been paid, if any. 

Damage Element No. 2: The reasonable market value of any gains 

to that defendant (including salaries, consulting fees, net proceeds 

from stock issuances to directors and/or officers of LSI, and other 

expenses) proximately caused by that defendant’s breach of 

fiduciary duty. 

Questions 4 and 5 would determine eligibility for and quantify exemplary 

damages. The jury found Cohen and DeJoria each committed a breach of 

fiduciary duty and Appel, Bartlett, and DeJoria aided and abetted Cohen’s

breach. The jury assessed damages as follows:

Defendant Damage Element No. 1 Damage Element No. 2

Appel $0 $2.5 million

Bartlett $0 $2.5 million

Cohen $6.5 million $400,000

DeJoria $1.5 million $0

The jury also assessed exemplary damages of $5 million against Appel, $2 

million against Cohen, and $1 million against DeJoria. Following the jury 

verdict, all four Appellants renewed their motions for judgment as a matter of 

law. The district court denied their motions, granted Ebert’s motion for 

 

3 Because of our conclusions below, we do not reach the issues surrounding whether 

“aiding and abetting” a breach of fiduciary duty was a proper jury submission in this case.

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judgment, and later denied motions for reconsideration. This timely appeal 

followed.

II. Discussion

A. Ebert Lacks Article III Standing to Recover Jabil’s Damages

Appellants argue that Ebert lacks Article III standing to recover Jabil’s 

damages under Damage Element No. 1 of the jury charge. Article III standing 

requires a plaintiff to have “suffered an ‘injury in fact,’” show “a causal 

connection” between the injury and the conduct at issue, and the injury must 

be redressable by the court. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 

(1992). “[A] plaintiff must demonstrate standing for each claim [s]he seeks to 

press” and have “standing separately for each form of relief sought.” 

DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006) (citation omitted).

Ebert’s liability theory with respect to Cohen and DeJoria’s breaches of 

fiduciary duty focused on Jabil.4 In her closing argument, she claimed “the 

fraud, the improper conduct, was entering into the Jabil contract in May 2011 

. . . that’s what caused the damages.” Ebert argued Jabil was misled because 

they “weren’t given access to [LSI’s] books,” and were unaware of Appel’s 

involvement or prior criminal history. As for damages, Ebert consistently 

asserted that she was seeking the amount of the Jabil debt, stating that “we 

know Jabil lost 9.5 million” and asked the jury to “forget about the other 

hundred and something creditors . . . focus on Jabil.” 

Under Damage Element No. 1, the jury was asked to assess “the 

reasonable cash market value of liabilities incurred by LSI as a proximate 

 

4 We note one additional point relevant only to DeJoria: DeJoria did not become a 

director at LSI until October 2011, some five months after LSI entered into the Jabil contract. 

Ebert provided no evidence that DeJoria should be liable for the damages incurred by action 

that predated his time as an LSI director. 

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cause of that defendant’s breach of fiduciary duty, which liabilities are still 

owed and have not yet been paid, if any.” But the millions of dollars awarded 

under Damage Element No. 1 represent Jabil’s injury, not LSI’s. Jabil 

manufactured and delivered the contractually agreed upon equipment to LSI. 

LSI benefitted from the equipment, and Ebert even leased and sold the 

equipment in Chapter 11 proceedings. Moreover, LSI did not pay the invoices 

on the equipment. Therefore, LSI benefitted and even had cash available for 

other needs. 

Although we have not squarely addressed Article III standing under the 

circumstances presented in this case, Appellants note several persuasive 

authorities holding there was no Article III standing in factually analogous 

scenarios. In In re Waterford Wedgwood USA, Inc., 529 B.R. 599 (Bankr. 

S.D.N.Y. 2015), the debtor “failed to contribute the full amount it owed” to a 

retirement plan it sponsored. Id. at 601. The debtor hired an accounting firm 

to audit the retirement plan, but the firm failed to notify the debtor about the 

underfunding. Id. at 601. The bankruptcy trustee for the debtor sued the firm 

for unpaid liabilities to the retirement plan. Waterford held that the 

bankruptcy trustee lacked Article III standing because the debtor had not 

suffered an injury. Id. at 604–05. The court reasoned that “the trustee alleges 

damages to the debtors, to the extent of the unpaid obligations of the debtors 

to the creditors . . . [but] the Debtor appears to have benefitted from not paying 

the required Retirement Plan contributions by gaining the use of funds that 

should have been in the Retirement Plan’s possession.” Id. at 605 (citing In re 

Am. Tissue, Inc., 351 F. Supp.2d 79, 93–94 (S.D.N.Y. 2004) (holding that a 

debtor could not characterize its monetary gain as injury)). The Waterford 

Court went on to state that the trustee could “allege a constitutional injury. . . 

if the bankruptcy estate paid any of the shortfall.” Id. at 605. Waterford shares

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the factual circumstances of this case—a bankruptcy trustee sued and argued 

a debt it owes constitutes an injury, despite having made no payments. In fact, 

LSI gained even more than the debtor in Waterford because it benefitted from 

not paying Jabil’s invoice and retained and then sold the manufacturing 

equipment.

In Reneker v. Offill, 2009 WL 804134 (N.D. Tex. Mar. 26, 2009), a 

receiver for various entities sued the entities’ attorneys for negligence, 

violations of securities laws, and the consequent $36.5 million liability owed to 

investors. Id. at *5. Citing In re American Tissue, the Reneker Court held the 

receiver lacked Article III standing because “the only harm alleged is the 

Receivership Estate’s inability to satisfy its liabilities.” Id. at *6. The court 

held the receiver did not have Article III standing to sue for damages his clients 

did not suffer, stating “[t]he Receivership Estate’s financial inability to satisfy 

liabilities owed to investors as a result of securities-laws violations harm[ed] 

the investors,” not the receiver. Id. Reneker is also analogous to LSI’s case; 

the receiver and bankruptcy trustee are similarly situated, while Appellants

are similarly situated to the attorneys accused of negligence. Jabil and the 

investors in Reneker are both creditors. In addition, the securities laws 

violations are analogous to the Jabil contract as the event the receiver and 

trustee argue caused damages. Based on the triggering events, Ebert and the 

receiver attempted to recover damages owed because of fraudulent or negligent 

conduct. 

Ebert responds that LSI suffered harm by taking on millions of dollars 

in debt. She analogizes to Norris v. Causey, 869 F.3d 360 (5th Cir. 2017), to 

argue for standing. We held in Norris that “[t]he Norrises’ injury is clear: they 

lost thousands of dollars.” Id. at 366. However, Norris is distinguishable; the 

Norrises wrote checks for $48,000, $45,000, and $1,000, but the Causeys never 

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moved forward with their end of the bargain. Id. at 364. Here, LSI did not pay 

Jabil’s invoice but still retained Jabil’s end of the bargain, the manufacturing 

equipment. Ebert also cites Norris for the proposition that “this litigation can 

redress the loss through damages, as the judgment demonstrates.” Id. at 366. 

But this argument refers to redressability, not LSI’s injury in fact, and is thus 

inapposite.5 Accordingly, all damages awarded under Damage Element No. 1

against any defendant must be reversed for lack of Article III standing (thus 

leaving no actual damages against DeJoria).6 

B. A Reasonable Jury Could Find Cohen Liable for Breach of Fiduciary 

Duty Owed to LSI

Cohen argues7 that he is entitled to judgment as a matter of law because 

there is not legally sufficient evidence to prove he breached his fiduciary duty 

to LSI. “We review a district court’s ruling on a motion for judgment as a 

matter of law de novo.” Nobach v. Woodland Vill. Nursing Ctr., Inc., 799 F.3d 

374, 377 (5th Cir. 2015) (footnote and citation omitted). When reviewing a 

district court’s denial of a post-verdict Rule 50(b) motion, we assess “whether 

a reasonable jury would not have a legally sufficient evidentiary basis to find 

for the party on that issue.” Id. (quoting FED. R. CIV. P. 50(a)(1)). Despite our 

 

5 In its order denying Appellants’ post-verdict motions, the district court held there 

was sufficient evidence to support a jury finding that Appellants’ breaches of fiduciary duty 

caused the damages the jury awarded, citing Jabil’s proof of claim filed in bankruptcy court 

and the trial testimony of Jabil representatives. But this rationale only addresses what 

Jabil’s injury and damages were; it does not explain how LSI was injured. 

6 We need not address and therefore do not hold that there could not possibly be an

Article III injury in fact stemming from Cohen and DeJoria’s breaches of fiduciary duty. 

Instead, we hold there is no Article III injury stemming from the claims Ebert asserted and 

Damage Element No. 1 of the jury instruction. 

7 Ebert argues Cohen has waived this argument but is mistaken; Cohen raised this 

issue during Rule 50(a) arguments and in his Rule 50(b) motion, as the district court noted. 

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holding in Section II.A, we address this issue because it concerns damages 

awarded under Damage Element No. 2. 

Texas law required Ebert to prove: 1) that a fiduciary relationship

existed; 2) that Cohen breached his fiduciary duty to LSI; and 3) that Cohen’s

breach resulted in injury to LSI or benefitted him. Navigant Consulting, Inc. 

v. Wilkinson, 508 F.3d 277, 283 (5th Cir. 2007). The first element is not in 

dispute. Cohen’s fiduciary duty required a duty of loyalty and duty of care to 

LSI. 

As noted above, Ebert’s case began by alleging an elaborate pump-anddump scheme of LSI’s stock and widescale fraud, but by the time the case was 

submitted to the jury, Ebert’s argument was based entirely on the Jabil 

contract:

the fraud, the improper conduct, was entering into the Jabil 

contract in May 2011. That’s what inevitably caused this company 

to collapse, that’s what caused the damages, and that was the 

impetus of why or purpose of this fraudulent scheme was to enter 

into that Jabil contract, make a big splash, make it seem like this 

was a legitimate business when it had no hope for survival.

Ebert provided the following evidence to support her claim: Cohen took on 

Appel as an advisor and spoke to him daily; Cohen sent Appel non-public 

information, including lists of shareholders and stock sales on a weekly basis;

Cohen dealt personally with Jabil; prior to the Jabil contract, Cohen had not 

told anyone at Jabil about Appel’s conviction for securities fraud manipulation;

LSI had no idea whether the machinery from the Jabil contract would work;

LSI had no business plan, or leads to monetize the equipment from the 

contract, but Cohen and Appel drafted LSI press releases together to generate 

good news and publicize it; and while still a director, Cohen sold his stock in 

LSI for $400,000 because he “needed to have some money in the bank.” 

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Cohen contends that his conduct is protected by the business judgment 

rule. In Texas, the “rule . . . protects corporate officers and directors, who owe 

fiduciary duties to [a] corporation[] from liability for acts that are within the 

honest exercise of their business judgment and decision.” Sneed v. Webre, 465 

S.W.3d 169, 173 (Tex. 2015) (citation omitted). Negligent, unwise, inexpedient, 

or imprudent actions are protected so long as “the actions [are] ‘within the 

exercise of their discretion and judgment in the development or prosecution of 

the enterprise in which their interests are involved.’” Id. at 178 (quoting Cates 

v. Sparkman, 11 S.W. 846, 849 (Tex. 1889)) (footnote omitted). The jury 

charge, however, instructed the jury on both what is required to show a breach 

of fiduciary duty, along with the parameters of the business judgment rule. 

Given Cohen’s actions, a reasonable jury could weigh the evidence, consider 

the business judgment rule, but conclude that Cohen breached his fiduciary 

duty to LSI. 

Cohen also argues that because the existence of an attempted pump-anddump securities fraud scheme would not be clear to a jury, Ebert was required 

to offer expert testimony supporting her claim. However, the case he cites, 

Fener v. Operating Engineers Construction Industry & Miscellaneous Pension 

Fund (LOCAL 66), 579 F.3d 401, 409 (5th Cir. 2009), stands for a different 

proposition: that proving a loss causation claim under § 10(b) of the Securities 

Exchange Act of 1934 requires “the testimony of an expert—along with some 

kind of analytical research or event study.” Id. No such claim exists here. 

Even if we were to apply Cohen’s standard, Ebert did put on an expert who 

testified extensively about red flags of a pump-and-dump scheme in the 

securities industry and how LSI demonstrated a number of those traits. We

therefore reject this argument. 

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The jury assessed damages of $400,000 against Cohen under Damage 

Element No. 2. Cohen argues there is no evidentiary support for this monetary 

amount. But Cohen himself testified that he made $557,109 in salary for his 

time at LSI and sold about $400,000 of LSI stock because he “needed to have 

some money in the bank.” None of Appellants’ lawyers objected during this 

testimony. Damage Element No. 2 allowed for damages from “the reasonable 

market value of any gains to that defendant (including salaries, consulting 

fees, net proceeds from stock issuances to directors and/or officers of LSI . . . )

proximately caused by that defendant’s breach of fiduciary duty.” 

Considering the jury found Cohen liable for a breach of fiduciary duty 

based on an alleged pump-and-dump scheme and improperly propping up LSI 

by entering the Jabil contract for nefarious purposes, there is legally sufficient 

evidence for a reasonable jury to award $400,000 in damages.

C. Ebert Did Not Provide Legally Sufficient Evidence to Show Appel and 

Bartlett Personally Received Gains from Stock Sales 

Appel and Bartlett were not liable for damages under Damage Element 

No. 1. On the other hand, the jury found Appel and Bartlett liable for $2.5 

million each under Damage Element No. 2 for aiding and abetting Cohen’s 

breach of fiduciary duty, which allowed the jury to award damages for the 

“reasonable market value of any gains to that defendant (including salaries, 

consulting fees, net proceeds from stock issuances to directors and/or officers 

of LSI, and other expenses) proximately caused by that defendant’s breach of 

fiduciary duty.” 

Appel and Bartlett argue that Ebert presented no evidence they received 

gains from stock sales in their individual capacity and that any evidence 

instead relates to entities affiliated with them. Ebert cites the expert 

testimony of Robert Manz as the “critical evidence” to support Appel and 

Bartlett’s damages calculation. Manz testified that a “nominee company” is 

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one that “stands in the place of a person or another company,” and is often used 

to “hide the identity of a person or another entity.” Manz also testified that 

Appel owned more than 5% of LSI’s outstanding stock through nominee 

companies, that Bartlett owned another 1.5% of LSI through nominee 

companies, that Appel, Bartlett, and their associates earned a total of $5.1 

million of profit from LSI stock, and that FEQ Realty made $2.3 million in 

profit from LSI stock. In its denial of Appellants’ post-verdict motions, the 

district court cited Manz’s testimony to uphold the jury’s verdict. 

Through Manz’s testimony, however, Ebert tacitly admits that she 

provided evidence only for the nominee companies’ gains, not for Appel and 

Bartlett in their individual capacity. Manz’s calculations were based primarily 

on two documents: Schedule 7.B, which showed market sales of LSI stock, and 

a list of nominee companies with how many shares of LSI each owned as of 

September 9, 2011. Yet these documents only list companies and provide no 

proof of or insight into Appel and Bartlett as individuals. Ebert originally 

named a number of these entities as defendants in her lawsuit, including FEQ 

Realty, LLC, DIT Equity Holdings, Capital Growth Realty, and Wiltomo 

Redemption Foundation. But she eventually dismissed them with prejudice. 

Perhaps most significantly, Manz testified that “I don’t know exactly what you 

define as the Appel Group” and acknowledged that he had no insight on 

whether or how a company was related to Appel. Instead, Ebert’s counsel 

simply informed Manz “what constituted Appel-related companies” for the 

document. Manz was also unable to answer questions about the various 

entities in his documents and testified that he had not tracked down the 

alleged gains to Appel and Bartlett individually. 

Because Ebert did not provide evidence against Appel and Bartlett in 

their individual capacities and the entities and companies in question were 

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dismissed with prejudice, the only way Appel and Bartlett could be liable is 

under an alter ego theory. Ebert, however, made no attempt to make such a 

showing. On appeal, she argues that a jury could impose damages based on 

Appel and Bartlett’s nominee companies because “a party cannot invoke the 

corporate form ‘as a cloak for fraud or illegality or to work an injustice,’” citing 

Matthews Construction Company, Inc. v. Rosen, 796 S.W.2d 692, 693 (Tex. 

1990). However, even if we assumed the most generous reading of her 

corporate form arguments under Texas law, cf. Texas Business Organizations 

Code § 21.223, she provided no evidence to support piercing the corporate veil 

or any alter ego theory. Thus, Ebert did not provide legally sufficient evidence 

for a reasonable jury to find Appel and Bartlett liable in their individual 

capacities. We therefore REVERSE the damages against Appel and Bartlett 

under Damage Element No. 2, leaving no actual damages against them.

D. Exemplary Damages 

No exemplary damages were awarded against Bartlett. In light of our 

holding leaving no actual damages against Appel and DeJoria, the judgment 

awarding exemplary damages against them must be vacated. TEX. CIV. PRAC.

& REM. CODE 41.004(a) (requiring more than nominal damages to be awarded 

before exemplary damages can be awarded). Therefore, the only remaining 

actual damages are the $400,000 awarded against Cohen under Damage 

Element No. 2. In addition to the damages cap under Texas law (TEX. BUS. &

COMM. CODE § 41.008(b)), the jury was instructed to consider “the character of 

the conduct involved” and “the nature of the wrong” before assessing 

exemplary damages.8 But because portions of the “conduct” and “wrong” are 

 

8 Texas law requires that the trier of fact “consider the definition and purpose of 

exemplary damages as provided by Section 41.001” in making an award of exemplary 

damages. TEX. CIV. PRAC. & REM. CODE § 41.010. It further requires that the trier of fact 

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no longer viable as a matter of law, the jury may have awarded a different 

amount of exemplary damage against Cohen than the $2 million it awarded. 

Neither party has briefed the effect of this potential outcome on the exemplary

damages awarded against Cohen. We conclude that this issue should be 

addressed in the first instance by the district court following full briefing. We 

therefore VACATE the exemplary damages award and REMAND to the 

district court to consider the legal issues surrounding exemplary damages 

against Cohen in the first instance. 

III. Conclusion

In light of the foregoing decision, Appel, Bartlett, and DeJoria are 

entitled to judgment rendered in their favor: (1) DeJoria, because of the lack of 

proof of a recoverable injury, see Lindley v. McKnight, 349 S.W.3d 113, 124 

(Tex. App.—Fort Worth 2011, no pet.) and the corresponding vacatur of 

exemplary damages; (2) Appel, because there was no evidence of individual 

liability and the corresponding vacatur of exemplary damages; and (3) Bartlett, 

because there was no evidence of individual liability. Thus, we REVERSE and 

RENDER judgment in favor of Appel, Bartlett, and DeJoria. As for Cohen, we 

VACATE damages awarded under Damage Element No. 1, AFFIRM damages 

awarded under Damage Element No. 2, and REMAND to the district court to 

consider how our opinion impacts the award of exemplary damages.

 

consider evidence relating to, among other things, the “nature of the wrong” and the 

“character of the conduct involved.” Id. at § 41.011.

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