Opinion ID: 1229135
Heading Depth: 2
Heading Rank: 1

Heading: standard of review

Text: We generally apply a two-part test in considering a challenge to the district court's jury instructions. The party challenging the instructions must first `demonstrate that the charge as a whole creates substantial and ineradicable doubt whether the jury has been properly guided in its deliberations.' Russell v. Plano Bank & Trust, 130 F.3d 715, 719 (5th Cir.1997) (quoting Bender v. Brumley, 1 F.3d 271, 276 (5th Cir.1993)). Second, even where a jury instruction was erroneous, `we will not reverse if we determine, based upon the entire record, that the challenged instruction could not have affected the outcome of the case.' Id. (quoting Bender, 1 F.3d at 276). A prerequisite to our review of the instructions in this manner, however, is that the objection must have been brought to the attention of the district court at trial. Id. (citing 9A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 2553 (2d ed.1995)). Rule 51 of the Federal Rules of Civil Procedure requires that a party objecting to jury instructions must do so on the record, stating distinctly the matter objected to and the grounds of the objection. FED.R.CIV.P. 51(c). At oral argument, we questioned whether Wilkinson and Taulman's objection at trial was sufficient to preserve error on the issue of the burden of persuasion. After further review of the record, we conclude that it was not. The district court gave the parties two opportunities to object to the jury instructions on the record. At the close of evidence, the court provided the parties with a preliminary version of the jury instructions and invited objections, additions, and suggestions. The following day, the court gave the parties the final version of the instructions, asked for the parties' final objections and comments, and made clear rulings on the objections. During the preliminary charge conference, Wilkinson and Taulman's attorney made the following objections to the breach of fiduciary duty jury charge (emphasis added): Counsel: On the instructions for breach of fiduciary duty, on page 1 we object to the five numbered items. We believe that they run a severe risk of misleading the jury and that they do not correctly reflect the Defendants' rights under the Abetter decision that we discussed. The Court: And they do come straight from the patterns. Counsel: Yes, Your Honor. But we believe that the Abetter case raises implications that these could unfairly influence the jury to disregard the proper standard, which is set out in the Abetter case, and, we believe, in the remainder of the charge. The final paragraph on page 13, . . . those duties are the employees' right to properly plan, we believe that properly plan is dangerously misleading and could be construed as a comment on the evidence. The Abetter case does not offer that clarification, properly.    The Court: . . . What else? Counsel: We object to the burden on Question Number 6. And also, we would request that the Plaintiff be required to specify the transactions that are at issue. As the instructions previously note, the fiduciary duties all related to certain specified transactions. Yet we don't know which transactions the Plaintiffs are pleading. Wilkinson and Taulman's attorney continued on with several more objections relating to the instructions for damages and the misappropriation of trade secrets claim, and the court did not respond to the objection to the burden. The italicized sentence above was the only reference to the issue of the burden. When the final version of the instructions was given to the parties the following day, Wilkinson and Taulman's attorney objected to a number of aspects of the instruction on breach of fiduciary duty, but not the burden. It has long been the rule that an objection must be sufficiently specific to bring into focus the precise nature of the alleged error. Delancey v. Motichek Towing Serv., Inc., 427 F.2d 897, 900 (5th Cir.1970) (citing Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645 (1943)). The grounds must be stated with sufficient clarity so that the trial court may follow and understand them if well taken. 9A WRIGHT & MILLER, supra, § 2554. Here, the objection to the instruction's burden of persuasion was not specific enough to bring into focus the precise nature of the alleged error that Wilkinson and Taulman now complain of, which we explain in further detail below. It therefore failed to satisfy the requirements of Rule 51. The jury instruction used by the district court was based on Texas pattern jury charge 104.2 (PJC 104.2), which places the burden of persuasion on the fiduciary to prove that he complied with his fiduciary duty. See Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: Business, Consumer, Insurance, Employment PJC 104.2. Under Texas law, where a fiduciary engages in a transaction with a party to whom the fiduciary owes duties, a presumption of unfairness arises, and the burden is placed on the fiduciary to establish that the transaction was fair. Miller v. Miller, 700 S.W.2d 941, 947 (Tex.App. Dallas 1985, writ ref'd n.r.e.). The comment to PJC 104.2 explains that it submits the question of breach of fiduciary duty, whether that duty is based on a formal or informal relationship, where it is alleged that the fiduciary has profited or benefited from a transaction with the beneficiary. Texas Pattern Jury Charges, supra, PJC 104.2 cmt. However, where there is no transaction between the fiduciary and principal, there is no presumption of unfairness, and the burden of proof does not shift to the fiduciary. See Amwest Sav. Ass'n v. Statewide Capital, Inc., 144 F.3d 885, 891 (5th Cir.1998). Recognizing this point, the comment to PJC 104.2 instructs that in those cases where the presumption of unfairness does not arise and the burden of persuasion does not shift to the fiduciary, the question and instruction should be modified to place the burden of persuasion on the plaintiff. Texas Pattern Jury Charges, supra, PJC 104.2 cmt. In their brief on appeal, Wilkinson and Taulman argue that because they did not buy from or sell anything to Navigant, or obtain commissions from both sides in a deal, they did not engage in a transaction with Navigant. Therefore, they argue, the presumption of unfairness did not arise in this case, and the pattern jury charge should have been modified to place the burden of persuasion on Navigant. The purpose of [Rule 51] is to enable the trial court to correct any error it may have made before the jury begins its deliberations and thus avoid the necessity of a new trial. Pierce v. Ramsey Winch Co., 753 F.2d 416, 424 (5th Cir. 1985) (citation omitted). Because Wilkinson and Taulman failed to state the grounds for their objection to the burden, their position was never made clear to the district court. [13] They failed to explain that for the burden to be placed on the fiduciary, the fiduciary must have engaged in a transaction with his principal that gives rise to the presumption of unfairness. Had this been brought to the attention of the district court, it could have invited argument from the parties on the question of whether Wilkinson and Taulman's activities could be considered transactions giving rise to the presumption of unfairness. As it was, the district court was never given a chance to address this issue, and the purpose of Rule 51 was not satisfied. Because Wilkinson and Taulman did not preserve error on this issue, we review it for plain error only. To prevail under the plain error standard, a party must show that the instructions made an obviously incorrect statement of law that was probably responsible for an incorrect verdict, leading to substantial injustice. Positive Black Talk, Inc. v. Cash Money Records, Inc., 394 F.3d 357, 369 (5th Cir.2004) (quoting Hernandez v. Crawford Bldg. Material, 321 F.3d 528, 531 (5th Cir.2003)). Under this standard, we are exceedingly deferential to the trial court. Id. B. Application of the Plain Error Standard to the Challenge to the Placement of the Burden of Persuasion on Wilkinson and Taulman On plain error review, Wilkinson and Taulman first must show that the instruction placing the burden of persuasion upon them was an obviously incorrect statement of law. See id. at 369. They argue that it was error to place the burden on them because there was no predicate transaction that could give rise to the presumption of unfairness. In response, Navigant argues that various aspects of Wilkinson and Taulman's conduct justify imposing the presumption of unfairness, including their recommendation of the Thanksgiving Tower lease, Wilkinson's negotiations with Navigant's corporate office, and the de facto delivery of the Claims Practice to LECG. Johnson v. Peckham, the leading case in this area, concerned the fiduciary duties of a partner who was purchasing his co-partner's interest in their partnership. 132 Tex. 148, 120 S.W.2d 786 (1938). The Texas Supreme Court held that [s]uch a sale will be sustained only when it is made in good faith, for a fair consideration and on a full and complete disclosure of all important information as to value. Id. at 787. Following this decision, Texas courts have applied a presumption of unfairness to transactions between a fiduciary and a party to whom he owes a duty of disclosure, thus casting on the fiduciary the burden of fairness. Miller, 700 S.W.2d at 946. The presumption of unfairness has been applied in a variety of circumstances. Paradigmatic cases might be said to include, in addition to the partner who purchases his co-partner's interest, the attorney who takes a deed from his client, or the agent who obtains a gift from his principal. See Tex. Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507-08 (Tex.1980); Archer v. Griffith, 390 S.W.2d 735, 739 (Tex.1965). However, the presumption of unfairness has also arisen in situations where a transaction between the fiduciary and the one to whom duties are owed is less readily identifiable. See Stephens County Museum, Inc. v. Swenson, 517 S.W.2d 257, 260 (Tex.1975) (placing the burden on a museum to show the fairness of gifts made by two sisters, where their brother handled their affairs and was also an officer of the museum). Additionally, the Texas Supreme Court has stated that when examining transactions involving a corporate fiduciary who derives personal profit through dealings with the corporation or its property, the form of the transaction will give way to the substance of what actually has been brought about. Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 577 (Tex.1963). This maxim applies equally to employees with fiduciary duties. See Herider Farms-El Paso, Inc. v. Criswell, 519 S.W.2d 473, 477 (Tex. App.El Paso 1975, writ ref'd n.r.e.). Wilkinson and Taulman's activities do not easily fit into the classical mold of a transaction between an agent and principal or attorney and client. However, Texas law clearly contemplates that the presumption of unfairness can arise in a variety of situations, and counsels us to look past form to the substance of what was actually brought about. Wilkinson and Taulman caused Navigant to enter into an expensive lease that they then tried to use against Navigant as leverage in negotiations. We are admittedly uncertain about whether the substance of this transaction can justify placing the burden on Wilkinson and Taulman, rather than Navigant. However, that is not the question we must answer; we need only decide whether the placement of the burden on Wilkinson and Taulman was obviously incorrect. Based on the record before us, we cannot say that it was. Second, even if we were to assume that the instruction was obviously incorrect, Wilkinson and Taulman's argument would still fail, because they cannot show that the instruction was probably responsible for an incorrect verdict, leading to substantial injustice. Positive Black Talk, 394 F.3d at 369. In addition to breach of fiduciary duty, the jury found Wilkinson and Taulman liable for breach of contract and misappropriation of trade secrets. These claims were based on much of the same conduct underlying the breach of fiduciary duty claim, and Navigant bore the burden of persuasion on both. Moreover, the jury awarded exemplary damages against both Wilkinson and Taulman, which required findings by clear and convincing evidence that the harm from breach of fiduciary duty or misappropriation of trade secrets resulted from malice or fraud. In the face of these findings, Wilkinson and Taulman have not shown plain error. C. The Objection to the Instruction as Internally Inconsistent Wilkinson and Taulman also argue that the breach of fiduciary duty instruction was internally inconsistent, confusing, and contrary to Texas law because the instruction required them to show that they fully and fairly disclosed all important information to Navigant concerning the transaction, but also stated that an employee has no general duty to disclose his plans [to compete] with his employer. Essentially, Wilkinson and Taulman complain that the jury instruction did not accurately set forth the law as articulated in Abetter Trucking. This error was preserved at trial, so our standard of review is the two-part test whereby Wilkinson and Taulman must first show that the charge creates substantial doubt as to whether the jury was properly guided. See Russell, 130 F.3d at 719. Even if the charge was erroneous, we will not reverse if the instruction could not have affected the outcome of the case. Id. In Abetter Trucking, the court stated that an employee has a duty to deal openly with his employer and to fully disclose to the employer information about matters affecting the company's business. 113 S.W.3d at 510. However, the court also stated that an employee who plans to compete with his employer has no general duty to disclose his plans. Id. These statements are not fundamentally inconsistent, as Wilkinson and Taulman claim, but rather reflect the tension between the obligations of a fiduciary and his rights as a potential competitor. Id. The jury was properly instructed on this claim.