### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-10-00474- CV

C. Michael Lucas, Appellant

v. Jam es Jolly Clark & Eonic Creat ions, In c., Appellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 200 TH JUDICI AL DISTRICT NO. D-1 -GN-1 0-0 0106 8, H ONO RAB LE LO RA J. LI VINGSTO N, JUDGE P RESIDING

O P I N I O N

E o n i c Creations, I nc. and its founder , J ames J olly Clark, (collec tively , th e “Appe llees”) sued investor C. Michae l L ucas f or brea ch of contra ct and va rious claims of tortious conduct. When L ucas failed to respond to th e Ap p el l ees’ petition, the trial court issued a defa ult judgme nt in favor of the Appellee s and awa rded unliquidated damag es of $75,000 to J ames J olly Clark and $9,925,000 to E onic Creations. Lucas appea ls, claiming that the absenc e of a repor ter’s

rec ord from t h e d efault judgme nt hear ing deprive d Lucas of the ability to revie w the trial court’s

awa rds, that the trial court’s unliquidated damag es awa rds are not supported by sufficie nt evidenc e, and that the use of reque sts for admissions embedde d within a petition to s u p p o rt t h e n o-answe r defa ult judgme nt awa

rds of unliquidated damag es was “inappr opriate” and undermined Texas Rule of Civil Procedur e 243. We aff irm the issuance of the defa ult judgme nt, reve rse that portion of thedefa

ult judgme nt awa

rding unliquidated damag es, and rema nd the case to the trial court for further proce eding s consistent with this opi nion. 1

BACK GR OUND On April 2, 2010, the Appellee s sued Lucas for brea ch of contra ct, misappropriation of trade secr ets, unjust enric hment, conver sion, and aiding a n d a b e tt ing Eonic Creations’ office rs and employ ees in violating their fiduciar y duties to the company . I n their petition, the Appellee s claimed that L ucas enter ed into a contra ct with Clark and promised to pay $60,000 to Clark for persona l debts and $15,000 to Eonic C reations for certa in patent rig hts to Eonic C reations’ products. Acc ording
to the Appellee s’ peti t i o n, L ucas also contra cted to make a g ood faith eff ort to obtain a $600,000 small-business loan to f

urther the business interests of Eonic Creations. The Appellee s alleg e that L ucas failed to pay either sum of money and did not make a g ood faith eff ort to obtain the promised loan. I n addition, the Appellee s contend that Lucas enticed Robert Clark, CEO and acting president of Eonic Creations, and Paul Mor g anstern, eng ineer for Eonic Creations, to l eave Eonic Creations and form a new company wi t h L u ca s u s i n g Eonic Creations’ products and trade secr ets. I n their petition, the Appellees s o u gh t injunctive relief and damag es, including specific perf ormanc e of L ucas’ s contra ctual obliga tions, compensa tory damag es, conseque ntial damag es of over $10 milli on in lost profits and loss of reputation, punitive damag es, and attorney ’s fe es and e x penses.

The Appellee s incorpora

ted two reque sts for admissions into their orig inal petition. The re quests for a dmissions wer e as f ollows:

We also g rant L

ucas’ s pending motion to wit hdrawand substitute counsel. 1 2Request for Admission 1: The contra ct attache d to this petition as Ex hibit A is a true

and ac curate copy of the contra ct that y ou signe d and ente red into on or a bout May 22, 2009. 2

[ ] Request for Admission 2: As a proxi mate result of y our brea ching the contra ct made the basis of this suit, the Plaintiffs have suffe red conseque ntial damag es in an amount not less than ten million dol lars.

L ucas did not file a

n answe r to the petition nor did he re spond to the reque sts for admissions. 3 On J une 23, 2010, the Appellee s filed a motion for defa ult judgment, cla iming that L ucas’ s failure to respond to Request for Admission 2 constituted a deeme d admission that Lucas’ s contra ctual brea ch cause d the Appellee s damag es in the amount of $10 mi l l i o n . Appellees also
att ache d an aff

idavit by their trial counsel aver ring that Lucas never serve d an answer o n t h e Appellee s and identify ing rea sonable and nece ssary attorney ’s fee s. After “re viewing the Offic ers Return filed May 25, 2010 and considering the pleading s and officia l rec ords on file incl uding P l aint iff’s Motion for Def ault J udg ment as well as any evidenc e and arguments,” the trial court i ssued a defa

ult judgme nt g ranting a perma nent injunction and order ing Lucas to pay $75,00 0 i n “ac tual damag es” plus court costs, attorney ’s fee s, and pre- and post-judgme nt interest to Clark and $9,925,000 in “ac tual damag es” plus pre- and post-judgme nt interest to Eonic Creations. Lucas did not file a motion for ne w trial, but filed a notice of appe al.

Thoug h the reque st for admission indicates that a copy of the contra ct was attache d to the 2 orig inal petition, no copy of the c ontrac t exi sts in the appellate r ecor d. The Appellee s also included reque sts for disclos ure, interrog atories, and reque sts for 3 production in their petition. L ucas did not re spond to any of these disc overy

reque sts. 3L ucas does not appea l the t rial court’s finding of liability , nor does he appea l the

injunction ag ainst him or the attorney ’s fee s and court costs awa rded. Lucas’ s only arguments on 4 appea l involve the trial court’s awa rds of unliquidated “ac tual damag es,” totaling $75,000 to Clark and $9,925,000 to Eonic Cre ations.

I n three issues on appea l, Lucas argues that (1) the absenc e of a repor ter’s rec ord from the defa ult judg ment hear ing deprive d L ucas and this Court of the a bility to adequa tely

revie w the trial court’s damag es awa rds, (2) the trial court’s damag es awa rds are not supported by leg ally and fac tually sufficie nt evidenc e, and (3) support i n g a no-answe r defa ult judgme nt’s unliquidated dam age s aw ard with reque sts for admissions embedde d in a petition is “inappr opriate” and undermines Te x as Rule of Civil Procedure 243.

DISCUSSIO N When a no-answe r defa

ult judgme nt is rende red, the defe ndant’s liability for all

cause s of action pleade d is conclusively established an d all alleg ations of fac t set forth in the p et i t i o n are deeme d admitted, except the amount of unliquidated damag es. Dolgencorp of Tex., Inc. v. Lerma , 288 S.W .3d 922, 930 (Tex. 2009) (per curiam); Texas Commerce Bank, N.A. v. New , 3 S.W .3d 515, 516 (Tex. 1999) (per curiam). After a defa ult judgme nt occur s, unliquidated damag es, i.e., damag es not expressly provided for within a written instrument, must be proven to the trial court. See Tex. R. Civ. P. 243. Recove ry for unliquidated damag es in the form of lost profits, 4

L ucas repr esente d in his brief that a bill of revie w is pending in the district court alleg ing 4 that L ucas w as neve r ser

ved with citation. “I f the cause of action is unliquidated or be not proved by an instrument in writin g, t h e 4 court shall hear ev i dence as t o damag es and shall rende r j udg ment there for .

. . .” Tex. R. Civ. P. 243. 4as the Appellee s have reque sted here , req u i re s t h at t he injured party do more than show that it

suffe red some lost profits. The amount of t h e l o s s must be shown by competent evidenc e with

rea sonable cer

tainty

. Holt Atherton Indus., Inc. v. Heine , 835 S.W .2d 80, 84 (Tex. 1992). To meet this rea sonably -ce rtain-e vidence standard, opinions or estimates of lost prof i t s m u s t, at a minimum , be based on objective fac ts, fig ures, or data from which the amount of lost profits can be

asce rtained. Id.

The Appellee s rely solely on Request for Admission 2, which was embedde d in their petition, to prove that they suffe red $10 milli on dollars of unliquidated damag es in the form of lost profits. Request for Admission 2 stated: “As a proxi mate result of y our brea ching the contra ct made the basis of this suit, the Plaintiffs have suffe red conseque ntial damag es in an amount not less than ten million dol lars.” G ener ally , when a party fails to respond to a r equest for admission, either by timely answe r, written objection, or motion to file late answe rs, the fac ts contained in the reque st are deeme d admitted. Oliphant Fin., LLC v. Galaviz , 299 S.W .3d 829, 838 (Tex. App.—Dallas 2009, no pet.); Sherman Ac quisiti on II LP v. G arcia , 229 S.W .3d 802, 812 (Tex. App.—Waco 2007, no pet.). Admissions, o n ce d ee m ed admitted, are judicial admissions and may not be contra dicted. Oliphant Fin. , 299 S.W .3d at 837; Sherman Acquisition , 229 S.W .3d at 812-13. As all of Lucas’ s points on appea l are impacted by whether or not Request for Admission 2, standing alone , can support the trial court’s $10 milli on defa ult judgme nt, we wil l b egin by addre ssing the purpose behind re quests for a dmissions

.

P urpose of Requ ests for Adm ission s

The primary purpose of reque sts for admissions is to “simplify trials by eliminating
matters about which there is no rea l controve rsy .” St el l y v. P a p ania , 927 S.W .2d 620, 622 5(Tex. 1996) (citing S anders v. Harder , 227 S.W .2d 206, 208 (Tex. 1950)). They wer e never intended to be used as a demand upon a plaintiff or defe ndant to admit that he had no cause of action

or g round of defe nse. Id

. Courts have cautioned that litigants should not be allowed to use reque sts for admissions as a tool to trap their opposition. See Birdo v. Hamme rs , 842 S.W .2d 700, 701 (Tex. App.—Ty ler 1992, no wr it).

The rule reg arding reque sts for admissions “wa s desig ned, not as a trap to preve nt the prese ntation of the truth in a full hear ing but as a tool for the fair dispositi o n o f l i t i gat i on with a minimum of delay .” Taylor v. Lewis , 553 S.W .2d 153, 160 (Tex. Civ. App.—Amar illo 1977, writ ref ’d n.r.e.)

. When a party uses deeme d admissions to try to pr eclude prese ntation of the merits of

a ca s e, howeve r, due proce ss conce rns may arise. W heele r v. Gree n , 157 S.W .3d 439, 443 (Tex. 2005) ; In re Rozelle , 229 S.W .3d 757, 764 (Tex. A pp.—San Antonio 2007) (“[Due proce ss] is the g uiding rule and principle that applies when reque sts for admissions are not used as intended, and when a p ar t y uses deemed admis sions to try to prec lude presentation of t he merits of a case .” (interna l quotation marks a n d c it ation omitted)). There fore , overly broad, merits-pre clusive reque sts for admissions are improper and may not result in deeme d admissions. See In re Estate of Herring , 970 S.W .2d 583, 589 (Tex. App.—Corpus Christi 1998, no pet.) (holding that admissions reque sting party to “admit [wife] did not transfe r community proper ty

. . . without y our knowledg e and consent” and “admit y ou have not been injured in any m an n er as a direc t result of the alleg ed acts” wer e

s wee pingly broad and not deeme d admitted); Birdo , 842 S.W .2d at 701 (holding that re q u es t i s improper and will not be deeme d admitted wher e party reque sts that opposing party admit or deny

ever y alleg ation made in petition); Powell v. City of McKinney , 711 S.W .2d 6 9 , 7 1 (T ex .

6App.—Dallas 1986, no writ) (holding that reque st asking plaintiffs to “admit [t hey ] no longe r wish

to pursue their cause of action in the above sty led and numbere d cause ” was swee pingly broad and should not be deeme d admitted); see also LRT Rec ord Servs., Inc. v. Archer , No. 05-00-00324- CV, 200 1 T ex . Ap p. L EXI S 1447, at *2-3 (Tex. App.—Dallas Mar. 7, 2001, no pet.) (mem. op.) (“[S] wee pingly

broad r equests for

admission may

not result in deemed a dmissions .”).

Ef fect of Request for Adm ission 2

The Appellee s argue that the conclusory statement contained in Request for Admission 2 may , as the sole ev i d ence on the matter, proper ly support a $10 milli on defa ult judgme nt for lost profits, a damag es component ty pically requiring an extensive and fac t-intensive inquiry

. This reque st for admission, howeve r, is the ty pe of overly broad, merits-pre clusive reque st that other c ourts have cautioned ag ainst. Request for A dmission 2, asking L ucas to a dmit that the Appellee s have suffe red $10 milli on in damag es, aimed to eliminate Lucas’ s ab i l i t y t o prese nt a defe nse to the only element at issue, proof of unliquidated damag es. This reque st is akin to a reque st that L ucas admit all alleg ations made in the Appellee s’ petition, including those reg arding damag es, as true. Such sw eeping reque sts for admissions cannot be deeme d judicial admissions, see Birdo , 842 S.W .2d at 701, nor c an they provide a ny evidenc e to support a tria l court’s da mag es aw ard. I n making this deter

mination, we must also consider Texas Rule of Civil Procedur e 243, requiring that, in unliquidated cause s of action, the court “shall hear evidenc e as to damag es and shall rende r judgme nt there for.” Tex. R. Civ. P. 243. Relying on an embedde d reque st for admission that prec ludes any prese ntation of evidenc e on unliquidated damag es undermines the spirit of R u l e 243 and is not consistent with its purpose. Requests for admission wer e si mply not
7meant to be used in the way that th e Appellee s have used them here , i.e., to wholly prec lude a

defe ndant from prese nting his def en s e. T h is is particula

rly true in the context of the heig htened evidentiar y standard require d to prove l o st profits. The rea sonably -ce rtain-e vidence standard require s that estimates of lost profits be based on fa ct s , fig ures, or data. Such estimates must be founded in objective fac ts and cannot be g ener ic or conclusory in nature

. See Holt Atherton Indus., Inc. , 835 S.W .2d at 84. Considering this incre ased e videntiary standard, c oupled with Rule 243’s require ment that the court hear evidenc e on unliquidated damag es, this swee pingly broad reque st for admission is not sufficie nt to constitut e conc lusive evidenc e of the statement that it contains.

P rese rvation of Iss ue on App eal

The Appe l l ees argue that Lucas waived any objection to the reque st for admission when he failed to file a timely written objection to the response , as require d by Rule 193.1. See Tex. R. Civ. P. 193.1 (“A party must make an objection to written discovery in writing—either in the response or in a separ ate document—within the time for response .”). Whil e it is true that ty pically any challeng e to a r equest for admission must be in c ompliance with Rule 193.1, the fac ts at issue here prese nt a unique situation. The question of a deeme d admission’s overbr eadth only arises when

a reque st for ad m i ssion has been deeme d admitted, which, by definition, occur s afte r a party has fail ed t o timely respond or object to the reque st. No reque st for admission would be deeme d admitted if the responding par t y h ad o b j ecte d in writing within the para meters of Rule 193.1. There fore , wer e we to require a par ty to object in writing to a re quest for a dmission’s overbrea dth in order to prese rve the issue on appea l, no appellate court would ever fac e the issue. Severa l other
courts of appea ls have, howe v er , s q u are ly addre ssed whether a “swe eping ly broad” reque st for

8admission may become a deeme d admission when a party fails to respond. See In r e E s t a t e of Herring , 970 S.W .2d at 589 (addr essing “swe eping ly broad” reque st f or admission de spite lack of Rule 193.1 objection); Birdo , 842 S.W .2d at 701 (same) ; Powell , 711 S.W .2d at 71 (same) ; see also LRT Rec ord Servs., Inc. , 2001 Tex. App. L EXI S 1447, at *2-3 (same)

. I n addre ssing this issue, none of these c ourts conclude d that a Rule 193.1 objec tion was requir ed.

We ag ree with our sister cour ts that no objection was nece ssary to rea ch the mer its of the issue in this Court. This is true b ecause the question befor e us is one of evidentiar y sufficie ncy rathe r than proce dural err or. I n viewing the eff ect of an overly broad reque st for ad m i s s i o n , our analy sis cente rs on whether a trial court is permitted to find that the reque st for admission irref

utably established the f

acts ther ein such that no a dditional evidence is require d. I n other wo rds, t he is sue before us conce rns whether an overly broad request for admission, deeme d
t ru e b y the trial court, would be leg ally sufficie nt evidenc e to support a trial court’s judgme nt for unliquidated damag es. A sufficie ncy of the evidenc e question does not r equire an objec tion at the trial court to be hear d on appea l. See Tex. R. App. P. 33.1( d) (insuff iciency of evide nce c omplaint may be made for f

irst time on appeal)

. As no evidenc e other than this reque st for admission exis ts supporting the Appellee s’ claims for unliquidated damag es or proving the fore seea bility of such damag es, see Mood v. Kronos , 245 S.W .3d 8, 12 (Tex. App.—Dallas 2007, pet. denied) (“[ C ] o nsequential damag es may not be

rec overe d unless they are fore seea ble and trac eable to the wrong ful act and result from it.”) (citing Stuart v. Bayless , 964 S.W .2d 920, 921 (Tex. 1998 )) , the evidenc e is neither leg ally nor fac tually sufficie nt to support the defa ult judgme nt’s u n l i q uidated damag es awa rd. See City of

9Keller v. W ilson , 168 S.W .3d 802, 810 (Tex. 2005); Cain v. Bain , 709 S.W .2d 175, 176 (Tex. 1986). We sustain L ucas’ s second point on appe al.

Be cause we ag ree with Lucas that the evidenc e is insufficient to support the trial court’s unliquidated damag es awa rd, we need not c onsider L ucas’ s first and third issues. See Tex. R. App. P. 47.1 (stating that court of appea ls mu st only addre ss issues nece ssary to final dispositi on of appe al).

CONCLUSION

Be cause we hold that the evidenc e is leg ally and fac tually insufficient to support the trial court’s damag es awa rd, we aff irm the issuance of the defa ult judgme nt, reve rse that portion of the defa ult judgme nt awa

rding the Appellee s unliquidated damag es, and rema nd the case for further proce eding s consistent with this opi nion.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Diane M. H enson, Jus tice Be fore Chief J ustice Jones, J ustices Henson a nd Goodwin Affir med in Part; Reverse d and Remande d in Part Filed: June 15, 2011

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