Opinion issued August 5, 2021

In The

Court of Appeals 

For The 

First District of Texas 

————————————

NO. 01-19-00642-CV

———————————

JAMES J. MCKINLEY AND KIN-TEK LABORATORIES, INC., Appellants

V.

KIN-TEK ANALYTICAL, INC., Appellee

On Appeal from the 122nd District Court

Galveston County, Texas

Trial Court Case No. 17-CV-1218

MEMORANDUM OPINION

Appellants, James J. McKinley and Kin-Tek Laboratories, Inc. (“McKinley” 

and “Laboratories” or, collectively, “appellants”), appeal from a final judgment 

entered following a jury verdict in favor of appellee Kin-Tek Analytical, Inc.
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(“Analytical”). In nine issues, appellants challenge the jury’s damages and attorney’s 

fees awards. We affirm.

Background

McKinley founded Laboratories in 1970 and ran the company for decades as 

its sole owner. Laboratories sold, manufactured, and supported chemical calibration 

devices, including permeation tubes and calibration gas standard generators. The 

calibration gas standard generators hold permeation tubes at a certain temperature, 

which allows the permeation tubes to create a gas customers use to calibrate their 

chemical analyzers, detectors, monitors, and other similar instruments. Laboratories 

also made and sold standardized instruments, including calibration devices for about 

600 different chemicals that can be customized to meet the customer’s particular 

need.

Around 2011 or 2012, Laboratories “went into a decline.” McKinley reached 

out to William Botts, whom McKinley had known for over 20 years, for help. Botts 

worked part-time as a consultant to help Laboratories find potential investors. 

Initially, Botts was paid a fee, but he later worked for free when Laboratories was 

no longer able to pay him. 

In 2013, McKinley approached Botts about Botts either buying or investing 

in Laboratories himself. Botts and McKinley signed a Letter of Intent (“LOI”), 

which contemplated the formation of a new company that would “purchase all the 
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assets and assume certain liabilities of [Laboratories],” as opposed to a personal 

investment by Botts. Ultimately, the parties signed an Asset Purchase Agreement 

(the “Agreement”) on February 14, 2014, whereby the new company, Analytical, 

acquired Laboratories’ assets. The parties structured the deal as an asset purchase, 

meaning the purchase price for Laboratories’ assets reflected its working capital. As 

Laboratories’ working capital declined throughout negotiations, so did the purchase 

price. The final purchase price in the Agreement was $50,000, which included 

$36,564.92 in cash that Laboratories was allowed to keep and a cash payment of 

$13,435.08 made by Analytical to Laboratories. 

Botts holds 60 percent of Analytical’s shares, and McKinley holds the

remaining 40 percent. Under the Agreement, Analytical acquired all of Laboratories’ 

assets (except McKinley’s personal effects), but Analytical assumed only certain 

liabilities specifically enumerated in the Agreement. 

In October 2017, McKinley sued Botts and Analytical, alleging that Botts was 

mismanaging Analytical and bringing causes of action for breach of contract, 

conspiracy, tortious interference, and breach of fiduciary duty. Botts and Analytical 

filed counterclaims against McKinley and third-party claims against Laboratories, 

alleging that they breached the Agreement by making inaccurate representations and 

warranties, failed to perform contractual duties, and failed to discharge liabilities 

they retained under the Agreement. Botts and Analytical also alleged that they were 
4

fraudulently induced by McKinley and Laboratories to execute the Agreement.

McKinley and Laboratories filed an amended petition, adding Laboratories as a 

plaintiff, adding a cause of action for fraudulent inducement, and dropping their

cause of action for tortious interference. 

In March 2019, shortly before trial, McKinley and Laboratories nonsuited 

their claims against Botts and Analytical. The trial court realigned the parties to 

designate Botts and Analytical as plaintiffs. At some point before trial, Botts 

nonsuited his personal claims against McKinley and Laboratories, and the case 

proceeded to trial on Analytical’s claims.1

The jury returned a verdict in favor of Analytical, finding that both McKinley 

and Laboratories “fail[ed] to comply with the Agreement.” The jury awarded 

Analytical a total of $274,134.41 in damages and $193,067.82 in attorney’s fees.

Specifically, as damages, the jury awarded:

• $16,437.93 for “[l]osses arising from uncollectable receivables”

• $57,138.12 for “[l]osses arising from obsolete or excess inventory”

• $26,525.34 for “[l]osses arising from liabilities for unused employee 

vacation”

• $25,000 for “[l]osses arising from liabilities for product warranty costs”

1 Though a notice of nonsuit of Botts’s claims is not included in the clerk’s record, 

the trial court’s jury charge and judgment identify Analytical as the only plaintiff 

and only award damages only to Analytical. 
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• $17,550 for “[l]osses arising from product documentation issues”

• $33,439 for “[l]osses arising from product design issues”

• $41,559 for “[l]osses arising from failure to disclose material facts”

• $45,985 for “[l]osses arising from obsolete or malfunctioning 

equipment” 

• $10,500 for “[l]osses arising from failure to remove hazardous 

materials”

McKinley and Laboratories moved for judgment notwithstanding the verdict 

(“JNOV”). The trial court denied the JNOV motion and entered a final judgment in 

Analytical’s favor. This appeal followed.2

Excluded Liabilities

In their first issue, appellants argue that, as a matter of law, Analytical is not 

entitled to recover $125,101.39 in damages for “Excluded Liabilities,” including 

uncollectable receivables, obsolete or excess inventory, unused employee vacation, 

and product warranty costs. In their second related issue, appellants argue that the 

evidence is legally and factually insufficient to support these damages because Botts 

knew or should have known the amount of these items before signing the Agreement. 

2 McKinley timely filed a notice of appeal. The notice of appeal was amended to 

include Laboratories as an additional appellant before the appellants’ brief was filed. 

See TEX. R. APP. P. 25.1(g). 
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A. Standard of Review and Applicable Law

In a legal-sufficiency review, we consider the evidence in a light most 

favorable to the jury’s verdict, indulging every reasonable inference that would 

support it, crediting favorable evidence if reasonable jurors could, and disregarding 

contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 

S.W.3d 802, 827 (Tex. 2005); Republic Petroleum LLC v. Dynamic Offshore Res. 

NS LLC, 474 S.W.3d 424, 433 (Tex. App.—Houston [1st Dist.] 2015, pet. denied). 

We sustain a legal-sufficiency challenge only when: (1) the record discloses a 

complete absence of evidence of a vital fact; (2) the court is barred by rules of law 

or evidence from giving weight to the only evidence offered to prove a vital fact; 

(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or 

(4) the evidence establishes conclusively the opposite of the vital fact. Regal Fin. 

Co. v. Tex Star Motors, Inc., 355 S.W.3d 595, 603 (Tex. 2010) (citing Merrell Dow 

Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)). We defer to the jury’s 

determination of the witnesses’ credibility and the weight to accord their testimony. 

City of Keller, 168 S.W.3d at 819; Republic Petroleum, 474 S.W.3d at 433.

In a factual-sufficiency review, we consider all the evidence in a neutral light 

and set aside the jury’s verdict only if it is so contrary to the overwhelming weight 

of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 

176 (Tex. 1986); Republic Petroleum, 474 S.W.3d at 433. Jurors are entitled to 
7

resolve inconsistencies in witness testimony, whether those inconsistencies result 

from the contradictory accounts of multiple witnesses or from internal contradictions 

in the testimony of a single witness. McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 

(Tex. 1986); Republic Petroleum, 474 S.W.3d at 433.

We construe contracts as a matter of law, absent ambiguity. Moayedi v. 

Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex. 2014). Our primary concern 

is to ascertain and give effect to the parties’ true intentions as expressed in the 

agreement. El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 805 

(Tex. 2012). “We consider the entire writing and attempt to harmonize and give 

effect to all the provisions of the contract by analyzing the provisions with reference 

to the whole agreement.” Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 

312 (Tex. 2005) (per curiam). “No single provision taken alone will be given 

controlling effect[.]” J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 

(Tex. 2003). We give contract terms their plain, ordinary, and generally accepted 

meanings unless the contract itself shows them to be used in a technical or different 

sense. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).

Unless the court finds a contract ambiguous, a contract’s meaning and intent 

is determined from the four corners of the document without the aid of extrinsic 

evidence. Chapman v. Hootman, 999 S.W.2d 118, 123 (Tex. App.—Houston [14th 

Dist.] 1999, no pet.). A contract is ambiguous when it is reasonably susceptible to 
8

more than one meaning. See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 

341 S.W.3d 323, 333 (Tex. 2011). A lack of clarity or disagreement over the

interpretation of contract language does not make a contract ambiguous. Universal 

Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 

(Tex. 2003).

B. Analysis

Under Article 4 of the Agreement, Analytical agreed to “assume[,] pay, 

satisfy, discharge, perform and fulfill . . . certain obligations and liabilities of 

[Laboratories] described on the attached Exhibit B.” The Agreement also provided 

that no other liabilities, other than those described in Exhibit B, would be assumed 

by Analytical. It stated that: 

[Analytical] expressly disclaim[ed] responsibility for . . . any and all 

Losses and obligations . . . except those items in Exhibit B and not to 

exceed the amounts set beside each item. All other liabilities not 

identified and/or expressly cited in Exhibit B Assumed Liabilities are 

expressly disclaimed by [Analytical] and [Analytical] shall not be 

responsible for, and shall not assume nor be obligated to pay, perform 

or discharge any liabilities of [Laboratories]. 

(Emphasis added.) Further, McKinley and Laboratories agreed to indemnify 

Analytical for their failure to satisfy any liability or obligation other than those 

Assumed Liabilities described in Exhibit B. 
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Exhibit B to the Agreement set forth the specific liabilities Analytical agreed 

to assume, stating that “[l]iabilities not Included on Seller Financial Statements as 

listed below will be assumed up to the amounts set beside each below:” 

(Emphasis added.) Exhibit B then provided that “[a]ny amounts exceeding the 

estimate set forth above shall be the responsibility of [McKinley] and [Laboratories]

and shall be Excluded Liabilities.” 

Both sides argue that this provision is unambiguous, but they offer a different 

interpretation. According to appellants, although Exhibit B includes provisions for 

“Excluded Liabilities,” those provisions “are only for amounts above Exhibit B’s 

stated amounts.” Appellants argue that any damage award for the four categories 

above—what appellants call the Excluded Liabilities—is contrary to the plain 

language of the Agreement because the parties chose not to include a specific dollar 

amount for these categories. Stated another way, because the contract did not include 

a specific dollar amount for these four categories, Analytical assumed liability for 

any and all amounts related to these four categories. In contrast, Analytical argues 

that it assumed no liability at all because the Agreement states “No estimate 
10

provided” for each of these four categories and because no amount was “set beside 

each below.” 

Reading all parts of the Agreement together and giving effect to each word, 

clause, and sentence, as we must, we agree with Analytical. We conclude that 

although Analytical expressly agreed to assume liability for uncollectable accounts 

receivable, product warranties, unused employee vacation, and obsolete and excess 

inventory, it did so limiting its liability to the amounts expressly stated in Exhibit B. 

Because there was no amount set beside these categories, McKinley and 

Laboratories retained all liability for these four categories as articulated in Exhibit 

B and as found by the jury. 

In Article 4 and Exhibit B of the Agreement, Analytical expressly disclaimed 

any and all liabilities not specifically set forth in Exhibit B and expressly stated that 

it was assuming the liabilities set forth in Exhibit B only up to the amounts stated 

beside each category. The plain meaning of this language indicates that the estimate 

provided would be the upper limit of what Analytical would be responsible for 

paying, i.e., it would assume liability in an amount less than or equal to, but no more 

than, the estimated amount. See Up to, MERRIAM-WEBSTER’S COLLEGIATE

DICTIONARY, (11th ed. 2020) (“used as a function word to indicate a limit or 

boundary”); see also Up to, CAMBRIDGE DICTIONARY, 

https://dictionary.cambridge.org/us/dictionary/english/up-to, last visited July 22, 
11

2021 (“used to say that something is less than or equal to but not more than a stated 

value, number, or level” ). Because “[n]o estimate [was] provided,” however, there 

was no “amount set beside each” category and, therefore, Analytical did not assume 

any amount. This is the only reasonable interpretation because it takes into account 

the language in the Agreement that Analytical was assuming only certain liabilities 

expressly included, and only for certain amounts explicitly stated. Anything else not 

expressly disclosed was to be an Excluded Liability.

In reaching this conclusion, we are unpersuaded by appellants’ contention that 

Analytical should have known the amounts for these four categories because Botts 

“had full access to Laboratories accounting records prior to signing the Agreement” 

and, therefore, Analytical assumed these liabilities in any and all amounts. That 

Botts arguably could have determined the estimated amounts for these four 

categories—an issue we do not decide—does not change the language of the 

Agreement, which explicitly limited the Assumed Liabilities to those “amounts set 

beside each” specific category set forth in Exhibit B. And appellants cite to no 

authority to support their contention that their characterization of Botts as an 

“insider” and “experienced corporate savior” would affect this Court’s interpretation 

of this unambiguous Agreement.

We conclude that for uncollectable receivables, product warranty costs, 

unused employee vacation, or obsolete or excess inventory, the amount that 
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Analytical assumed liability for was zero, and that any amounts above zero for these 

liabilities were Excluded Liabilities under the Agreement. 

Furthermore, to the extent that appellants’ second issue can be construed as 

challenging the sufficiency of the evidence supporting the jury’s findings awarding 

Analytical $16,437 for uncollectable accounts receivable, $57,138.12 for product 

warranties, $26,525.34 for unused employee vacation, and $25,000 for obsolete and 

excess inventory, we conclude there is legally and factually sufficient evidence to 

support these findings. Botts testified that the amounts for these items should have 

been included in Laboratories’ financial statements but were not. 

After the Agreement was executed, Analytical filed an IRS Form 8594, which 

is a form that must be filed after the sale or purchase of a business. This form must

be filed by both parties to the transaction, as it is “a reflection of their agreement for 

the transaction involved.” Analytical introduced the Form 8594, as Plaintiff’s 

Exhibit 12, that it filed after executing the Agreement based on information provided 

by its accountant Doug Dickie, and Botts testified that McKinley agreed to the 

amounts reflected in Exhibit 12. Analytical’s Form 8594 reflected a total amount of 

assets purchased (or purchase price) of $284,552, the same amount of liabilities 

assumed. Included in that total amount of liabilities was $16,437 for uncollectable 

accounts receivable, $57,138.12 for product warranties, $26,525.34 for unused 

employee vacation, and $25,000 for obsolete and excess inventory. 
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Considering the evidence in a light most favorable to the jury’s findings and 

indulging every reasonable inference to support them, we conclude there is legally 

sufficient evidence to support the jury’s total award of $125,101.39 in damages for 

uncollectable accounts receivable, product warranties, unused employee vacation, 

and obsolete and excess inventory. See City of Keller, 168 S.W.3d at 827. Likewise, 

we conclude that the jury’s findings are not so contrary to the overwhelming weight 

of the evidence as to be clearly wrong and unjust and, therefore, there is factually 

sufficient evidence to support the jury’s damages. See Cain, 709 S.W.2d at 176. 

We overrule appellants’ first and second issues.

Sufficiency of the Evidence of Other Damages

In their third, fourth, fifth, sixth, and seventh issues, appellants challenge the 

legal and factual sufficiency of the evidence supporting the jury’s findings awarding 

damages for product documentation issues, product design issues, failure to disclose 

material facts, obsolete equipment, and failure to remove hazardous materials. 

Applying the legal- and factual-sufficiency standards set out above, we address each 

issue in turn.

A. Product Documentation Issues

In their third issue, appellants contend there was legally and factually 

insufficient evidence to support the jury’s finding that $17,550 would fairly and 

reasonably compensate Analytical for its damages that resulted from product 
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documentation issues. They argue that Botts never testified why “Laboratories could 

somehow make these products or use these systems, but Analytical could not do so.” 

And they contend that there was no evidence that a product documentation issue 

existed at the time of the Agreement. Therefore, appellants urge this Court to strike 

the $17,550 damages for product documentation issues.

McKinley and Laboratories represented and warranted in Article 5(AC) of the 

Agreement that:

each product has adequate manufacturing documentation, including 

drawings, specifications, manufacturing process descriptions, bill of 

material, assembly instruction and test procedure so that a worker of 

average skill in manufacturing will be able to assemble and test such 

product to conform with published specifications.

Botts explained that having proper product documentation was important because 

Analytical makes “technical products” that “people use to calibrate their devices.” 

Many of these products have a number of different component parts that must “fit 

[and] function together,” which makes it “critically important that documentation is 

available to make all of these products.” Botts further testified that he would not 

have been able to discover all the issues related to product documentation during the 

due-diligence process because “[y]ou really find out when you make the product.” 

Botts testified that although it was “certainly possible” to hire a consultant during 

the due-diligence process to ensure that everything was correct, it would have been 

“cost prohibitive” due to the number of products made and chemicals used by 
15

Laboratories. “It would have cost more to do the due diligence than it did to buy the 

company.” Instead, he spoke to McKinley to confirm there was adequate product 

documentation and relied on McKinley’s representations that there was. 

Botts testified, however, that the representation related to adequate product 

documentation contained in the Agreement was not true, and that Analytical incurred 

$17,550 in costs “relating to information that was not available regarding 

equipment . . ., how to operate the equipment, and product information 

documentation.” Specifically, Botts testified to product documentation issues related 

to six systems or pieces of equipment—the permeation cylinder, the quote system, 

the gauge system, solenoid brackets, Span Pac/H20 Silk Screen, and the heater oven. 

Contrary to appellants’ assertion, Botts did testify as to why Analytical could 

not make these products or use these systems. With respect to these items, Botts 

testified that the product documentation and information was either incorrect (for 

the permeation cylinder and quote system), missing entirely (for the gauge system, 

solenoid brackets, and Span Pac/H20 Silk Screen), or incomplete (for the heater 

oven). Finally, and despite appellants’ assertion to the contrary, Botts testified that 

these issues did not arise in the years after the Agreement but were present at the 

time the parties entered into the Agreement. 

Considering the evidence in a light most favorable to the jury’s finding and 

indulging every reasonable inference to support it, we conclude there is legally 
16

sufficient evidence to support the award of $17,550 for product documentation 

issues. See City of Keller, 168 S.W.3d at 827. Likewise, we conclude that the jury’s 

finding is not so contrary to the overwhelming weight of the evidence as to be clearly 

wrong and unjust and, therefore, there is factually sufficient evidence to support the 

award of $17,550 for product documentation issues. See Cain, 709 S.W.2d at 176. 

We overrule appellants’ third issue.

B. Product Design Issues

In their fourth issue, appellants contend there was legally and factually 

insufficient evidence to support the jury’s finding that $33,439 would fairly and 

reasonably compensate Analytical for its damages that resulted from product design 

issues related to the HG10 Liter Humidification Module. Appellants argue that the 

evidence does not establish that any product design issues existed at the time of the 

Agreement, nor does the evidence establish that there was a “HG10 product line 

wide flaw,” only that one customer had a problem with its product. 

McKinley and Laboratories represented and warranted in Article 5(AC) of the 

Agreement that:

all product designs are free of defects which would prevent products 

manufactured therefrom from properly performing, functioning, and 

complying with published specifications and representations as to such 

products made in any publication by [Laboratories], including sales 

brochures and other marketing materials, etc.
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Two witnesses testified for Analytical on the design issues associated with the HG10 

Liter Humidification Module (“HG10”): Botts and Danet Vrazel, vice president and 

general manager of Analytical. Botts testified that McKinley’s and Laboratories’ 

representation that all product designs were free from defects was important because 

a “product will not work if it has defects in it. And if it works some, it may not have 

long-term reliability.” He admitted that he was neither a chemist nor a design 

engineer and that he would not have been able to tell if a defect existed in a product 

during the due-diligence process because “[y]ou really only find out when you make 

the product.” Botts testified that appellants’ representations that the products were 

free from design defects was not true because the product design for the HG10 was 

defective. He explained that the HG10, in layman’s terms, was designed to “create 

a humidity that will have a calibration standard,” or stated another way, to create an 

“air sample that has a certain amount of humidity in it.” He testified that an issue 

arose when Analytical sold the HG10 to a customer and that customer reported back 

that the product was not working properly. As a result, and at McKinley’s direction, 

Analytical engaged Martin Company to remedy the issue. Botts testified that

Analytical suffered losses in the amount of $33,439 because of this product design 

issue, which included costs related to Martin Company’s invoices, in-house costs 

(including time spent by McKinley working with Martin Company), materials, and 

warranty. 
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Vrazel testified in more detail about the HG10 and design issues. She testified 

that the HG module “will add humidified gas to a calibration gas stream in order to 

create a variable level of humidity” and “can calibrate monitors that . . . would 

require or be out in an atmosphere where there’s humidity.” Vrazel further testified 

that Analytical’s standard HG module is the 5-liter system, and that the 10-liter 

system includes “an option to allow a higher dilution gas to go into the gas-stream.” 

She explained that the HG module’s design was completed in 2012 or 2013, before 

the execution of the Agreement. 

She testified, however, that after the parties entered the Agreement, Analytical 

was contacted by one of its representatives who sold the HG10 to a customer in the 

United Kingdom (“UK”). The representative informed Analytical of an issue the 

customer was having with the instrument. As Vrazel explained, the HG10 “was 

designed to be automated and allow relative humidity [to be calibrated] on an 

automated basis.” In this instance, Analytical discovered that the automation part of 

the instrument was not working properly. Vrazel testified that the issue was thought 

to be related to a software problem. 

Vrazel also testified that, shortly after discovering the issue with the HG10, 

Analytical discovered that four of the 5-liter modules, which had been sold to the 

United States Air Force, were also not stabilizing well and having the same 

automation issue. At that point, Analytical “realized that something needed to be 
19

done.” Analytical engaged Jim McCabe and Martin Company. McCabe was a 

former employee of Laboratories who was involved with the development of the 

software and design of the HG modules. He worked for Laboratories from about 

2006 until 2011 or 2012, when he went to Martin Company. McCabe helped resolve 

some of the issues with the HG10, as he “knew all about the instrumentation.” 

According to the invoices submitted by Martin, McCabe completed his work in

2016. 

Vrazel admitted during cross-examination that McKinley informed the 

customer that they should be able to use the HG10 in non-automated mode—“simply 

flip it from automated to nonautomated”—and “get the requirements that they 

wanted.” She also testified that she did not know if the customer was using the HG10 

as designed. Finally, Vrazel testified that the 5-liter system used by the Air Force 

was different than the HG10 liter module. 

Appellants claim that this evidence fails to demonstrate that any alleged defect 

existed at the time of the Agreement or that the design defect was product wide. We 

disagree. As noted above, Vrazel testified that the design for the HG10 module was 

completed in about 2012, before the Agreement was executed. She also testified that

Analytical brought in McCabe and Martin Company to resolve the issues with the 

HG10 once the issues were discovered because McCabe knew the instrumentation 

and was involved in the development of the software and overall design. Further, 
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she testified that the problem with the HG10 was believed to be a “software issue.” 

Because the HG10’s design was completed around 2012, and because Analytical (at 

the recommendation of McKinley) chose to bring in a person who was familiar with 

the overall design and software used in the HG10 to remedy what was believed to 

be a software issue, the jury reasonably could have inferred that the problem with 

the HG10 was in fact a flaw in the original design that existed prior to the time of 

the Agreement in 2014.

Considering the evidence in a light most favorable to the jury’s finding and 

indulging every reasonable inference to support it, we conclude there is legally 

sufficient evidence to support the award of $33,439 for product design issues. See 

City of Keller, 168 S.W.3d at 827. Likewise, we conclude that the jury’s finding is 

not so contrary to the overwhelming weight of the evidence as to be clearly wrong 

and unjust and, therefore, there is factually sufficient evidence to support the award 

of $33,439 for product design issues. See Cain, 709 S.W.2d at 176.

We overrule appellants’ fourth issue.

C. Failure to Disclose Material Facts

In their fifth issue, appellants contend there was legally and factually 

insufficient evidence to support the jury’s finding that $41,559 would fairly and 

reasonably compensate Analytical for its damages that resulted from the failure to 

disclose material facts. Appellants argue that these damages were awarded for 
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“post-Agreement product issues” related to component parts used in manufacturing 

two Analytical products—Model No. 491 and FlexStream—even though there was 

insufficient evidence that appellants failed to disclose that these issues existed prior 

to the Agreement.

McKinley and Laboratories represented and warranted in Article 5(AE) of the 

Agreement that:

Full Disclosure. Neither this Agreement nor any certificate, report, 

statement or other document delivered or to be delivered to [Analytical] 

by [Laboratories] in connection with the negotiation of this Agreement 

or consummation of the transactions contemplated hereby contains or 

will contain any untrue statement of a material fact or omits or will omit 

to state a material fact necessary to make the statements contained 

herein or therein not misleading.

Botts testified that, despite this representation, significant issues were not disclosed

by appellants. First, Botts testified that there was an issue with the touch screen for 

the FlexStream, which was the “No. 1 selling product” for Analytical. A few months 

after the Agreement was executed, Analytical discovered that the manufacturer of 

the touch screen had discontinued the touch screen. Botts testified that he 

investigated this issue personally, “trying to understand how in the world can [a] 

supplier discontinue a part they know their customers are using in their 

products . . . as a surprise.” But when Botts contacted the manufacturer, he 

discovered that the manufacturer had in fact notified their customers. Botts further 

testified that this was a “known situation” before the parties entered the Agreement, 
22

and ultimately required a redesign of the FlexStream product at an increased cost of 

$200 per unit. Finally, in total, Analytical presented evidence that it cost $24,946 to 

resolve the issue related to the FlexStream, which included consultant fees, higher 

unit costs, and fees related to Analytical employees’ time spent addressing this issue. 

Appellants point to Botts’s testimony that the manufacturer did not 

discontinue the touch screen until after the Agreement was entered into in February 

2014 in support of their argument that there is no evidence they failed to disclose an 

issue that existed at the time of the Agreement. While it is true that Botts testified 

that Analytical became aware of the issue with the touch screen “a few months after 

the Asset Purchase Agreement,” he also testified that the manufacturer had notified 

its customers that it was discontinuing the touch screen before doing so. Viewing 

this testimony in conjunction with Botts’s other testimony that the issue with the 

FlexStream touch screen was a “known situation before the transaction,” the jury 

could have reasonably inferred that the manufacturer informed Laboratories that it 

was discontinuing the touch screen before the parties entered into the Agreement in 

February 2014, even though the touch screen was not actually discontinued until 

after the Agreement. Accordingly, despite appellants’ assertion to the contrary, there 

was evidence presented that this issue related to the FlexStream touch screen existed 

before the execution of the Agreement and should have been disclosed.
23

Botts also testified to an issue with a second product—Kin-Tek Product 

Model No. 491—that was not disclosed. He testified that Model No. 491 was a heater 

controller and Analytical’s “second most important product in the company at the 

time.” Analytical learned after the Agreement that this product contained obsolete 

parts, meaning “the supplier of the part[] had already discontinued it.” Laboratories 

had been using replacement parts from “a secondary market source [for] these 

obsolete parts, [and] had them on a shelf and were using them.” Botts testified that 

Analytical was not informed at the time of the Agreement that the Model No. 491 

was “being built with parts that were no longer being produced,” but that information 

“absolutely would have been” important to know. Botts further testified that 

Analytical incurred $16,613 in costs related to this product, which included 

consultant fees, material and inventory costs, and costs related to Analytical 

employees’ time spent to resolve this issue. The Model No. 491 was ultimately 

discontinued because of the discontinued component part, and, because of the part 

change, it would have required a redesign of the Model No. 491 with new parts for 

it to continue to be manufactured. 

From this evidence—particularly Botts’s testimony that Laboratories was 

obtaining substitute parts for Model No. 491 from a secondary market source—the 

jury could have reasonably inferred that Laboratories knew at the time of the 

Agreement that the Model No. 491 was being made with obsolete parts. 
24

Accordingly, despite appellants’ assertion to the contrary, there was evidence 

presented that this issue related to the Model No. 491 existed before the execution 

of the Agreement and should have been disclosed.

Considering the evidence in a light most favorable to the jury’s finding and 

indulging every reasonable inference to support it, we conclude there is legally 

sufficient evidence to support the award of $41,559 for the failure to disclose 

material facts. See City of Keller, 168 S.W.3d at 827. Likewise, we conclude that the 

jury’s finding is not so contrary to the overwhelming weight of the evidence as to be 

clearly wrong and unjust and, therefore, there is factually sufficient evidence to 

support the award of $41,559 for the failure to disclose material facts. See Cain, 709 

S.W.2d at 176. 

We overrule appellants’ fifth issue.

D. Obsolete and Malfunctioning Equipment

In their sixth issue, appellants argue that there was legally and factually 

insufficient evidence to support the jury’s finding that $45,985.02 would fairly and 

reasonably compensate Analytical for its damages that resulted from obsolete or 

malfunctioning equipment, including a 57-gauge, a dry calibration device, a welder, 

ground fault testing equipment, and an eyewash station. According to appellants, the 

evidence does not establish that any of this equipment was obsolete or 

malfunctioning on the date of the Agreement. 
25

McKinley and Laboratories represented and warranted in Article 5(E) of the 

Agreement that the assets were sufficient to carry on the business:

Sufficiency of the Assets: The Assets to be sold to [Analytical]

hereunder constitute all of the assets used in the Business except for the 

Excluded Assets, and are sufficient to carry on such Business as carried 

on by [Laboratories] on or prior to the Closing Date. With the exception 

of Inventory and Inventory Supplies in transit and [Laboratories’]

mobile equipment located at or traveling to or from sites in connection 

with the performance by [Laboratories] of on-going Contracts, all the 

tangible assets are situated at [Laboratories’] business address.

Botts testified that there were five pieces of equipment that were malfunctioning or 

not working at all and that Analytical sought damages for a 57-gauge, a dry 

calibration device, a welder, ground fault testing equipment, and an eyewash station. 

1. 57-gauge

With respect to the 57-gauge, Botts testified that there were certain parts on 

the gauge system that did not work, and that Analytical had to purchase replacement 

parts for those that were not working. Botts testified that the total cost for these parts 

was $8,154. Botts stated it was his understanding that the 57-gauge was not working 

at the time of the Agreement, and that this piece of equipment was necessary for 

Analytical’s business. 

He admitted on cross-examination that he did not know exactly when the 

component part of the equipment failed, but that “no one [at Analytical] was made 

aware of it until after we had done the deal.” He explained that he discovered it was 

not working when he saw an order for a certain product, but the product had not been 
26

made or shipped yet. Botts was informed by Mike McKinley, McKinley’s son, that 

the 57-gauge was broken and that they did not have the money to buy a replacement 

part. Botts disagreed that the 57-gauge broke after the Agreement, testifying that he 

was informed by “people in the lab” that “it had been broken for a while.” In light 

of this evidence, we disagree with appellants’ assertion that there was insufficient 

evidence that the 57-gauge was not working at the time of the Agreement.

2. Dry Calibration Device

The next piece of equipment Botts testified about was the dry calibration 

device, which is a piece of equipment that is required as a part of the manufacturing 

process for other Analytical products. Specifically, the dry calibration device is 

“required to perform the final test of a product confirming that it meets its 

specifications.” Botts testified that, at the time of the Agreement, the dry calibration 

device “apparently . . . did not work.” Further, Botts testified that he was “told [the 

dry calibration device] had not been working.” Analytical introduced an exhibit, 

dated five days after the Agreement, for a replacement dry calibration device, the 

cost of which was $7,800. Botts testified that this was not a cost that Analytical 

anticipated incurring at the time of the Agreement. Despite appellants’ assertion to 

the contrary, there was evidence introduced that the dry calibration device was not 

working at the time of the Agreement.
27

3. Welder

The third piece of malfunctioning equipment about which Botts testified was 

a welder, which is a “welding machine that is used to weld certain parts in the KinTek [Analytical] product line.” But the welder that Analytical had “did not work.” 

Botts testified that Analytical incurred costs of $27,394 to rent a welder on two 

different occasions (once in 2016 and once in 2018) and then purchase a new welder

(in 2019). These costs were not anticipated by Analytical at the time it entered into 

the Agreement. 

On cross-examination, Botts testified that Analytical discovered the welder 

did not work “several months after the [Agreement].” He admitted he did not know 

whether the welder was working on the day of the Agreement. He explained, “The 

welder was only used when we had a certain piece of equipment on order . . . from 

customers,” and there had not been “a piece of that equipment purchased for a

while.” He also testified that “the historical trend of the sales of the product that’s 

welded . . . [was] only a few a year,” which was “one of the reasons it was not 

evident that this welder did not work” until 2016, after the Agreement.

Appellants argue that this testimony shows that “the welder must have been 

working at least through November 2016 to handle those few times a year welding 

needs to which Botts testified.” We disagree. Botts did not testify that the product 

that required the welder had in fact been purchased in 2014 or 2015, only that there 
28

had not been “a piece of that equipment purchased for awhile.” He further explained 

that because this piece of equipment was not purchased often, this was one of the 

reasons Analytical did not discover that the welder was not working until 2016. From 

this, the jury reasonably could have inferred that the welder was not working at the 

time of the Agreement. 

4. Ground Fault Test Equipment

The next piece of equipment about which Botts testified was the ground fault 

test equipment. Botts testified that this device “tests an electrical property of a piece 

of equipment[ ] and . . . ensures that the equipment is grounded.” He explained that 

an electrical test is required for products with a “CE certification,” which is an 

“European certification mark that has to be put on equipment when you sell into 

Europe.” “[S]ome time after the [Agreement,]” Analytical discovered that the test 

was not being performed because “the piece of equipment . . . doing the test . . . had 

failed and had been put on the shelf and been sitting there and everybody ignored 

it.” Botts testified that he believed the ground fault testing device had been broken 

for “over a year and had been put on the shelf and unused.” 

On cross-examination, Botts further testified that he learned there was a 

problem with the ground fault test equipment two years after the Agreement. Botts 

testified that he was told that this piece of equipment was left by a UK sales 

representative, but that it had never worked and, therefore, Laboratories had never 
29

performed the required electrical test. Botts confirmed that Laboratories was not 

performing the electrical test at the time of the Agreement. He further stated that 

Laboratories was not in compliance with the CE Certification because it was not 

performing the electrical test, despite putting the certification mark on the 

equipment. He knew that Laboratories was not in compliance because they were not 

performing the electrical test because the ground fault testing equipment did not 

work, and Botts was told by Laboratories employees that the electrical test was not 

being performed. 

Appellants contend that because the issue with the ground fault test equipment 

did not come to light until two years after the Agreement, and because Botts testified 

he did not ask questions about the equipment until after the Agreement, “one can 

only assume that Analytical never bothered checking to see if [the] equipment was 

functional . . . at the time of the Agreement.” We disagree. The above evidence 

shows that: (1) though Laboratories had this testing equipment, it never worked; 

(2) Laboratories never performed the ground fault test; and (3) Laboratories was not 

performing this required test at the time of the Agreement. From this evidence, the 

jury could have reasonably concluded that the ground fault testing equipment was 

not working at the time of the Agreement.
30

5. Eyewash Station

The final piece of equipment about which Botts testified was the eyewash 

station. Botts testified that a chemical laboratory is required to have certain safety 

devices, one of which is an eyewash station where employees can wash their eyes in 

the event chemical vapor is released into the air. Botts testified that although 

Laboratories had an eyewash station, it did not work. Botts testified that the eyewash 

station was “necessary for safety” and that, in his mind, he “wouldn’t run a business 

without it.” The eyewash station cost $837.50 to replace in September 2015. Botts 

testified that Analytical was not aware that the eyewash station was broken when it 

purchased Laboratories’ assets. 

Appellants argue that this evidence “does not mean that the eyewash station 

was in fact broken at all.” They argue again that “one can only assume that 

Analytical never bothered checking to see if [the] equipment was functional . . . at 

the time of the Agreement.” We disagree. Botts explicitly testified that the eyewash 

station did not work. The jury could have reasonably inferred from this testimony, 

combined with his testimony that Analytical did not know it was broken at the time 

of purchase (i.e., the Agreement), that the eyewash station was in fact broken at the 

time of the Agreement. 

Considering the evidence in a light most favorable to the jury’s finding and 

indulging every reasonable inference to support it, we conclude there is legally 
31

sufficient evidence to support the award of $45,985.02 for obsolete or 

malfunctioning equipment. See City of Keller, 168 S.W.3d at 827. Likewise, we 

conclude that the jury’s finding is not so contrary to the overwhelming weight of the 

evidence as to be clearly wrong and unjust and, therefore, there is factually sufficient 

evidence to support the award of $45,985.02 for obsolete or malfunctioning 

equipment. See Cain, 709 S.W.2d at 176. 

We overrule appellants’ sixth issue.

E. Failure to Remove Hazardous Materials

In their seventh issue, appellants argue that there is legally and factually 

insufficient evidence to support the jury’s finding that $10,500 would fairly and 

reasonably compensate Analytical for its damages that resulted from the failure to 

remove hazardous materials. 

Laboratories represented in Article 8(E) of the Agreement that it would 

dispose of certain chemicals and other materials:

Sublease. Pursuant to the Sublease Agreement in Exhibit I, 

[Laboratories] who is the Sublessor in such agreement, agrees to make 

disposition of certain chemicals, expired permeation tubes, canisters, 

and other materials identified by a label marked “Waste” and for safety 

reasons located in designated places on Leased Premises as follows: 

expired permeation tubes and one (1) chlorine gas canister having a 

corroded valve on the gated patio outside the lab area; expired chemical 

raw materials, generally in glass bottles, in the chemical storage room 

atop the chemical storage cabinets; and 3 empty gas canisters on the 

floor of the chemical room. Such obligations of Sublessor are 

specifically not assumed by Sublessee. Such Disposal will be 

completed within 90 days from the effective date of the sublease.
32

Question 3 of the trial court’s charge to the jury asked the jury to consider 

whether to award damages to Analytical as a result of its “[l]osses arising from 

failure to remove hazardous materials, if any.” Appellants contend that the evidence 

presented “does not establish that the subject materials were hazardous needing 

some outside company’s expertise to handle the disposal” and, therefore, there is 

insufficient evidence supporting the jury’s damage award. 

The jury charge did not define “hazardous materials,” and appellants did not

object to the lack of a definition. Thus, here, we must measure the sufficiency of the 

charge against the commonly understood meaning of “hazardous materials.” See

Nowlin v. Keaton, No. 01-17-00523-CV, 2019 WL 1996483, at *25 (Tex. App.—

Houston [1st Dist.] May 7, 2019, no pet.) (mem. op.) (considering sufficiency of 

evidence in light of commonly understood meaning of “keyless dead bolt” because 

jury charge did not define the term and parties did not object to lack of definition); 

Fenner v. Samson Res. Co., No. 01-03-00049-CV, 2005 WL 2123043, at *3 (Tex. 

App.—Houston [1st Dist.] Aug. 31, 2005, pet. denied) (construing “surface” 

according to its plain and ordinary meaning where neither parties’ agreement nor 

jury charge defined the term); see also Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 

2000) (holding, when no objection is made to jury charge, sufficiency of evidence is 

measured against charge given rather than some other unidentified law).

“Hazardous” is defined in Merriam-Webster’s Collegiate Dictionary as “involving 
33

or exposing one to risk (as of loss or harm).” Hazardous, MERRIAM-WEBSTER’S 

COLLEGIATE DICTIONARY, (11th ed. 2020).

Botts testified that as part of the Agreement, Laboratories agreed to remove 

certain chemicals from the property and did remove some of those chemicals. After 

the Agreement was signed, however, as new employees came in to work for 

Analytical, they discovered additional chemicals needing disposal. These chemicals 

were present on the property at the time of the Agreement and were manufactured 

or purchased well before the Agreement. Botts testified that Analytical received a 

bid to dispose of these chemicals from Clean Harbor for $10,500, and this amount 

was reflected on Analytical’s exhibit detailing its damages for “Hazardous chemicals 

disposal.” 

Vrazel, whose education and background is in chemistry and who had worked 

for Laboratories since 2001, testified in detail about the specific chemicals for which 

Analytical sought damages. She testified that there were a handful of chemicals that 

need to be disposed of that remain at Analytical, which are kept in a chemical storage 

room, and that were present at the time of the Agreement. The chemicals included 

“an actual gas cylinder of pure arsine,” which was a “very old cylinder,” as well as 

cylinders of phosphine, chlorine, and hexafluorine. Vrazel testified that the

hexaflourine cylinder expired in April of 1995. 
34

Vrazel also testified that, in addition to the cylinders, there were a number of 

permeation tubes stored in the chemical room that were “very old, contaminated, 

particulates inside, corroded, or degraded, obsolete and defective[.]” A number of 

these permeation tubes had calibration dates of 2004. Vrazel testified that there were 

around 245 to 250 permeation tubes that have not been disposed of but cannot simply 

be thrown away with chemicals still inside because “the different type of chemicals 

would require a different type of neutralization or disposal process.” 

Vrazel stated that although an Analytical technician could probably neutralize 

and dispose of some of the permeation tubes, disposing of others would require that 

certain disposal procedures be followed, and it would take time and effort to research 

the requirements for each different chemical. Vrazel contacted a vendor, Clean 

Harbor, whose business is to “dispose of chemicals and clean up the environment, 

[and] do different things with environmental hazards.” Vrazel testified that 

Analytical received a quote from Clean Harbor for $10,000 or $10,500 to pick up 

and properly dispose of the chemicals and tubes. 

On cross-examination, Vrazel admitted that one of the chemicals—

hexafluorine—was classified as nonhazardous on the safety data sheet and presented 

“no danger to the environment.” She explained, however, that these statements were 

referred to the transportation of hexafluorine, and not the disposal. And although the 

safety data sheet indicated that there were “[n]o specific disposal measures for the 
35

nonhazardous aqueous solution,” Vrazel did not believe that Analytical’s employees 

“know how to dispose of an actual cylinder,” but that Clean Harbor likely does, as 

“[t]hat’s what their business is.” 

Based on the testimony and evidence presented that it was not just the 

chemicals but the cylinders and permeation tubes that needed to be properly disposed

of—items which were described as “very old, contaminated, . . . corroded, or 

degraded, . . . and defective”—and that these chemicals and their containers cannot 

simply be thrown away, but must be neutralized first, the jury reasonably could have 

determined that the chemicals and their respective containers were “hazardous

materials,” i.e., posed some risk of loss or harm.

Considering the evidence in a light most favorable to the jury’s finding and 

indulging every reasonable inference to support it, we conclude there is legally 

sufficient evidence to support the award of $10,500 for failure to remove hazardous 

materials. See City of Keller, 168 S.W.3d at 827. Likewise, we conclude that the 

jury’s finding is not so contrary to the overwhelming weight of the evidence as to be 

clearly wrong and unjust and, therefore, there is factually sufficient evidence to 

support the award of $10,500 for failure to remove hazardous materials. See Cain, 

709 S.W.2d at 176. 

We overrule appellants’ seventh issue.
36

Fraud Claims

In their eighth and ninth issues, appellants argue that Analytical’s fraudulent 

inducement claim is barred as a matter of law and, if the only remaining claim is the 

fraudulent inducement claim, the attorney’s-fee award is unsupportable. Analytical 

responds that these issues are moot because it “chose not to pursue its fraudulent 

inducement claim, the jury was not asked about it, and it was not incorporated into 

the final judgment.” We agree with Analytical that these issues on appeal identify 

no error in the trial court’s judgment and, thus, present nothing for our review.

In the trial court’s jury charge, the jury was asked only two liability questions. 

Question 1 asked: “Did McKinley fail to comply with the Agreement?” And 

Question 2 asked: “Did Laboratories fail to comply with the Agreement?” These 

liability questions are taken directly from the Texas Pattern Jury Charge (“PJC”) for 

Breach of Contract. See TEXAS PATTERN JURY CHARGES: BUSINESS, CONSUMER,

INSURANCE & EMPLOYMENT § 101.2. Question 3 then asked the jury “[w]hat sum of 

money, if any, if paid now in cash, would fairly and reasonably compensate 

Analytical for its damages, if any, that resulted from such failure to comply?” This 

too is identical to the PJC Question on Contract Damages. Id. § 115.3. The only 

other question related to the amount of attorney’s fees to be awarded; there was no 

question in the charge related to Analytical’s fraudulent inducement claim. See, e.g., 

id. §§ 105.1, 105.2. Furthermore, the trial court’s judgment awards Analytical 
37

“$274,134.41 in actual damages for the amounts awarded by the jury in its answers 

to Question No. 3.” 

Because Analytical’s fraudulent inducement claim was not submitted to the 

jury and, therefore, the jury returned no findings and the trial court rendered no 

judgment on this claim, appellants eighth and ninth issues relating to this claim 

present nothing for our review. We overrule appellants’ eighth and ninth issues.

Conclusion

We affirm the judgment of the trial court.

Amparo Guerra

Justice

Panel consists of Justices Countiss, Rivas-Molloy, and Guerra.