Opinion ID: 59477
Heading Depth: 2
Heading Rank: 1

Heading: Amigo's Breach Of Contract Claims.

Text: Amigo asserts that Garza and Bernal breached their Employment Agreements by: (1) resigning prior to the expiration of the Initial Term and (2) allowing SBS to use Garza's and Bernal's names and/or likenesses for business purposes without Amigo's consent. It is undisputed by the parties that Texas law governs Amigo's breach of contract claims. Under Texas law, the court must submit Amigo's breach of contract claims to the jury if Amigo presented legally sufficient evidence of: 1) the existence of a valid contract; 2) performance or tendered performance by the plaintiff; 3) breach of the contract by the defendant; and 4) damages to the plaintiff resulting from the breach. Lewis v. Bank of Am. NA 343 F.3d 540, 544-45 (5th Cir.2003). It is undisputed for the purposes of this appeal that Amigo presented sufficient evidence to establish elements one and two.

Amigo argues that the district court incorrectly interpreted the Employment Agreements to give Garza and Bernal the right to resign at any time without breach. Under Texas law, [d]etermining whether a contract is unambiguous and interpreting an unambiguous contract are questions of law. Cedyco Corp. v. Petro-Quest Energy LLC, 497 F.3d 485, 490 (5th Cir.2007) (citing Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)). In interpreting a written contract, [t]he court's primary concern is to enforce the parties' intent as contractually expressed, and an unambiguous contract will be enforced as written. Interstate Contracting Corp. v. City of Dallas, 407 F.3d 708, 712 (5th Cir.2005). To achieve this objective, courts should examine and consider the entire writing in an effort to harmonize and give effect to all of the provisions of the contract so that none will be rendered meaningless. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). An ambiguity in a contract arises only after the application of established rules of construction leaves an agreement susceptible to more than one [reasonable] meaning. DeWitt County Elec. Coop., Inc. v. Parks, 1 S.W.3d 96,100 (Tex.1999). Amigo contends that it produced sufficient evidence that Garza and Bernal breached their Employment Agreements by resigning [2] before the expiration of the Initial Term set forth in Section 1.3. [3] Under Section 1.3, the Initial Term was subject to earlier termination in accordance with the provisions of Section 1.6. Section 1.6 sets forth the ways in which the Employment Agreements can be terminated without breach. [4] Because Garza and Bernal's termination of employment did not fall under Section 1.6, Amigo contends that such termination constituted sufficient evidence of a breach of the Employment Agreements. Garza and Bernal, on the other hand, contend  and the district court found  that they did not breach the Employment Agreements by resigning because they were employees at will. Garza and Bernal argue that Section 1.7(a) unambiguously acknowledges their right to resign. Section 1.7(a) of the Employment Agreements states in part: In the event Employee's employment hereunder is terminated pursuant to the provisions of Section 1.6 hereof due to the death, disability, for cause or the resignation of Employee, Employer shall have no further obligation to Employee . . . [except to pay accrued but unpaid amounts due], (emphasis added). Garza and Bernal argue that the purported right to resign in Section 1.7(a) is consistent with Section 1.6 because Section 1.6 does not limit the ability of the Employee to resign, but rather only limits the Employer's right to terminate the Agreement. Garza and Bernal's argument, however, is unpersuasive. Under Texas law, employment is at will, terminable at any time by either party, with or without cause, absent an express agreement to the contrary. Fed. Express Corp. v. Dutschmann, 846 S.W.2d 282, 283 (Tex.1993). For the reasons stated by Amigo, the Employment Agreements constitute express agreement[s] to the contrary. The plain, unambiguous language of Section 1.6 limits the ways in which Garza's and Bernal's employment may be terminated without any breach, and there is simply nothing to substantiate Garza and Bernal's claim that Section 1.6 addresses only Amigo's right to terminate the Agreements. [5] Garza and Bernal's argument relies on the idea that the language may be terminated in Section 1.6 can only mean may be terminated by Employer.  It is clear, however, that the absence of the language by Employer indicates that Section 1.6 applies to termination by both Employer and Employee. [6] Black's Law Dictionary 1511 (8th ed.2004) defines terminate as [t]o put an end to; to bring to an end and defines termination of employment as [t]he complete severance of an employer-employee relationship. These definitions indicate that termination of employment can be effectuated by either an employer or an employee. Furthermore, and most importantly, where the contract intended to refer to termination of employment by the employer, it unambiguously stated as such. Section 1.7(a) states in a part not cited by Garza and Bernal: In the event Employee's employment hereunder is terminated by Employer . . . . (emphasis added). If the concept of termination necessarily implied termination by the Employer, the use of the language by Employer in Section 1.7(a) would have been wholly unnecessary. Furthermore, Section 1.7(a) does not create or acknowledge a right for Garza and Bernal to resign from Amigo without breaching the Employment Agreements; rather, the purpose of Section 1.7(a) is to determine what compensation Amigo would owe Garza and Bernal upon termination of the employment relationship. [7] Quite simply, reading Section 1.7 to create or acknowledge a right to resign without breach would contradict the plain language of Section 1.6  if resigning or abandoning employment prior to the end of the Initial Term was an option for termination of employment without breach, such would have been set forth in Section 1.6. Finally, the term of the agreement is only subject to earlier termination in accordance with the provisions of Section 1.6 hereof. If the term were subject to earlier termination because of employee resignation, Section 1.3 or 1.6 would have undoubtedly stated as such. Thus, interpreting the Employment Agreements as limiting Garza's and Bernal's right to terminate the agreement at will best gives effect to the entire writing and best harmonizes  all the provisions of the contract. Coker, 650 S.W.2d at 393. The district court, therefore, erred by interpreting the Employment Agreements to the contrary, and Amigo produced sufficient evidence that Garza and Bernal breached their Employment Agreements.
Amigo asserts that it provided sufficient evidence that Garza and Bernal's resignation proximately caused it substantial damages. Specifically, Amigo contends that it produced sufficient evidence of: (1) $721,000 in lost profits and (2) $250,000 in lost investment that Amigo spent to advertise the Show. [8] Garza and Bernal, however, contend that Amigo presented insufficient evidence of both the fact and amount of damages.
Under Texas law, the measure of breach-of-contract damages is just compensation for the loss or damage actually sustained. Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952). A proper measure of damages in a breach of contract case is the loss of contractual profit. Interceramic, Inc. v. S. Orient R.R. Co., 999 S.W.2d 920, 928 (Tex.App. 1999). The ability to recover lost profits does not require that the loss be susceptible to exact calculation. Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex.1994) (per curiam). The injured party must, however, establish the amount of the loss by competent evidence with reasonable certainty. Id. Quite simply, lost profit damages may not be based on evidence that is speculative, uncertain, contingent, or hypothetical. Blase Indus. Corp. v. Anorad Corp., 442 F.3d 235, 238 (5th Cir.2006). At a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits may be ascertained. Szczepanik, 883 S.W.2d at 649. However, [w]hile some uncertainty as to the amount of damages is permissible, uncertainty as to the fact of damages will defeat recovery. Blase Indus. Corp., 442 F.3d at 238 (emphasis added). Having reviewed the record, we find that Amigo presented sufficient evidence of the fact of damages. Brooks, Amigo's then-president, testified at trial: the El Chulo Show was wildly successful . . . in terms of ratings and revenues; advertisers and sellers of advertising use Arbitron ratings to determine the cost of advertising; KHHL received more advertising, charged higher advertising rates, and consequently generated more revenue as a result of the high Arbitron ratings from the El Chulo Show; the show Amigo used to replace the El Chulo Show after its departure was not nearly as successful as the El Chulo Show until the end of 2004; [9] the winter ratings of KHHL for 2004 reflected the loss of the Show and consequently dropped from around 3.9 or a four to a 1.4; and this drop in ratings caused revenues to drop[] like a rock. Specifically, Brooks testified that Amigo's syndicated advertising revenue decreased from around $350,000 in 2003 to $11,000 in 2004 and testified that this decrease was directly due to the loss of the Show. [10] Furthermore, Amigo's damages expert, Robert Rea, testified that ratings equal revenue and that a significant drop in ratings  such as the one sustained by Amigo after the loss of the Show  will inevitably create a very, very large decrease in revenue. Garza and Bernal, however, assert that Amigo did not produce sufficient evidence of the fact of damages because: (1) four months after the loss of the Show  in April and May 2004  KHHL had the two most profitable months in its history; (2) the decrease in revenue Amigo attributes to the loss of the Show did not actually begin until June 2004  six months after the loss of the Show; and (3) the decrease in revenue occurred around the same time that Amigo got a new station manager, moved its tower, and announced it was going to sell its station. Brooks's testimony, however, explains why high profits in April and May 2004 and a decrease in revenue beginning in June 2004 are consistent with the loss of the Show in late November 2003. Brooks testified that: the high fall 2003 ratings were the result of the success of the El Chulo Show and were released in January 2004; the low 2004 winter ratings were the result of the loss of the Show and were not released until April 2004; Amigo used the high fall 2003 ratings to sell advertising through May 2004 (before the winter ratings were released); [11] and had the Show remained at KHHL, the profits from April and May 2004 would have continued. [12] Garza and Bernal's third argument regarding a new station manager, a tower move, and Amigo's announcement that it intended to sell KHHL is also unpersuasive. First, Garza and Bernal fail to explain how any of these events negatively impacted revenues at KHHL. Second, with respect to the tower move, Brooks testified that the tower move did not cause any loss of profit, and Rea testified that the tower move was a neutral issue. Finally, Garza and Bernal's argument is essentially a claim that Amigo did not produce sufficient evidence that the loss of the Show caused the decrease in revenue beginning in June 2004. To prove causation, Amigo need not negative entirely the possibility that [Garza's and Bernal's] conduct was not a cause [of the revenue loss]; rather, it is enough to introduce evidence from which reasonable persons may conclude that the [loss of revenue] was caused by [Garza and Bernal's departure]. Havner v. E-Z Mart Stores, Inc., 825. S.W.2d 456, 460 (Tex. 1992). Viewed in the light most favorable to Amigo, Brooks's testimony that the decrease in ratings after the departure of the El Chulo Show caused significant decrease in advertising revenues is certainly sufficient  especially given that this causal claim is inherently plausible. See Univ. Computing Go. v. Mgt. Sci Am., Inc., 810 F.2d 1395, 1401 (5th Cir.1987) (If a causal mechanism is inherently plausible  if it comports with customary experience  we can make the inference (that the mechanism in fact caused the harm) on less evidence than if the mechanism is less plausible.). We also find that Amigo produced sufficient evidence of the amount of damages. Amigo's damages expert, Rea, testified that: he arrived at an estimate of $721,000 in lost profit damages by using the yardstick method; the yardstick method was the most appropriate method for a growing business; he considered the historical financial data for KHHL and ABS Services (which syndicated the El Chulo Show); determined that 16 percent was the appropriate growth rate for the revenue of these entities; and calculated an estimate of lost profit based on these numbers and projections. Such an estimate was not merely speculative or conjectural but was based on objective facts, figures, or data. Szczepanik, 883 S.W.2d at 649. Garza and Bernal, however, contend that Rea's $721,000 estimate was not reasonably certain because: (1) Rea's 16 percent growth projection was purely speculative and (2) Rea's estimate was based on the revenues of KHHL and ABS Services as a whole, not the revenues of the El Chulo Show, and Rea simply assumed that any loss in revenues for these entities would have been attributable to the loss of the Show. First, with respect to Rea's 16 percent projected growth estimate, Rea testified that he considered the growth of the Spanish broadcasting industry, the Spanish radio industry, and public companies in the Spanish radio industry. Second, with respect to basing his estimates on the revenues of KHHL and ABS Services, Rea testified that this method was appropriate under the circumstances. [13] Furthermore, Garza and Bernal's argument constitutes a criticism of the bases and sources of Rea's opinion, Rea's testimony already withstood a Daubert challenge, and Garza and Bernal's renewed criticism merely affect[s] the weight to be assigned to that opinion . . . and should be left for the jury's consideration. Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th Cir.1987) (emphasis added). Finally, Garza and Bernal argue that Amigo may not recover lost profit damages because KHHL was a start-up company that was less than 20 months into its business plan, and, as a matter of Texas law, [p]rofits which are largely speculative, as from an activity dependent on uncertain or changing market conditions, or on chancy business opportunities, or on . . . entry into unknown or unviable markets, or on the success of a new and unproven enterprise, cannot be recovered. Tex. Instruments, Inc. v. Teletron Energy Mgmt, Inc., 877 S.W.2d 276, 279 (Tex. 1994). However, [w]hen there are firm[] reasons to expect a business to yield a profit, the enterprise is not prohibited from recovering merely because it is new. Id. at 280. Given Brooks's and Anderson's statements about the success of KHHL and the El Chulo Show, and given that Amigo's financial statements show that KHHL consistently generated profits beginning in July 2002, there were certainly firm[] reasons to expect [KHHL and the El Chulo Show] to yield a profit. Id.
Amigo also asserts that it produced sufficient evidence of its loss of $250,000, which constitutes the lost investment that Amigo spent to advertise and promote the El Chulo Show. With respect to such investment, Amigo is seeking reliance damages which reimburse one for expenditures made towards the execution of the contract in order to restore the status quo before the contract: Hart v. Moore, 952 S.W.2d 90, 97 (Tex.App.1997). Although not stated by Amigo's briefs, Amigo's evidence of lost investment presents an alternative theory of recovery  that is, Amigo can ultimately recover for its lost profits or its lost investment but not both. See Restatement (Second) of Contracts § 349 (1981) (As an alternative to [expectation damages], the injured party has a right to damages based on his reliance interest. . . . ). [14] Amigo presented sufficient evidence of its reliance damages. Brooks testified that Amigo spent approximately $250,000 in advertising the El Chulo Show. Further, Brooks's December 10, 2003, e-mail to Garza stated that Amigo's investment in the Show has been wasted since you [Garza] elected, with no warning, to stop showing up for work. Finally, Anderson testified that building an audience for a radio show requires a significant investment, and this investment is lost if the show and its performers can simply leave at will. [15] This evidence is sufficient for a reasonable jury to conclude that Amigo's promotional investment in the Show was approximately $250,000, was spent in reliance on Garza and Bernal performing the Show for Amigo during the term of their contractual agreements, and that promotional investment was in effect lost because of Garza and Bernal's early departure. Garza and Bernal, however, argue that Amigo's evidence was legally insufficient because Amigo did not present evidence that it was unable to recoup its promotional investment. Specifically, Garza and Bernal assert that the evidence shows that the El Chulo Show generated profits substantially in excess of $250,000, such that Amigo recouped its advertising investment. First, as explained above, Amigo introduced some evidence  albeit somewhat conclusory  that the promotional investment was wasted or lost as a result of Garza and Bernal's early departure. Second, it is the burden of Garza and Bernal, not Amigo, to show that Amigo received a benefit from its expenditures that reduce or offset the amount of reliance damages to which Amigo claims it is entitled. 22 Am.Jur.2d Damages § 51 (2003) (Recovery of reliance damages may be reduced to the extent that a breaching party can prove that a `deduction' is appropriate for any benefit that the claimant received for salvage or otherwise.) (emphasis added) (citing DPJ Co. Ltd. P'ship v. FDIC, 30 F.3d 247, 250 (1st Cir.1994)); cf. Restatement (Second) of Contracts § 349 ([T]he injured party has a right to damages based on his reliance interest . . . less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.) (emphasis added). Even if it is undisputed that the El Chulo Show generated profits greater than $250,000, there is no evidence regarding what portion of those profits are attributable to Amigo's promotional investment. Thus, Amigo produced sufficient evidence of its reliance damages, and Garza and Bernal can introduce evidence at trial establishing that Amigo's promotional investment in the El Chulo Show generated substantial profits that reduce or completely offset the amount Amigo seeks in reliance. In conclusion, Amigo presented sufficient evidence that Garza and Bernal breached their Employment Agreements by resigning in November 2003. Further, Amigo produced sufficient evidence to allow it to pursue its lost profits or, in the alternative, its lost investment to compensate it for Garza and Bernal's breach. Thus, with respect to this claim for breach of contract, we REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion.

Amigo argues that Garza and Bernal also breached their Employment Agreements by allowing SBS to use their names and likenesses for commercial purposes without Amigo's consent. Amigo contends that this was a breach of the License set forth in Section 1.1, which states: Employee hereby grants Employer a nonexclusive [16] royalty free license to use Employee's name and/or likeness to promote [KHHL] and its programming, including any program hosted by Employee or syndicated by Employer, during the term of this Agreement and any period thereafter during which Employee is prohibited from competing with Employer as set forth in Section 1.8(b) hereof. [17] During [this period], employee shall not permit any other party to use Employee's name and/or likeness for commercial or other business purposes without first obtaining the written consent of Employer. . . . In response, Garza and Bernal contend  and the district court found  that the License in Section 1.1 was only enforceable during Garza's and Bernal's employment at Amigo. Specifically, Garza and Bernal argue that, because Section 1.1 grants Amigo a licence that remains in effect for 12 months after termination of the Employment Agreements, it constitutes a restraint on trade unrestricted in scope or geographic area and is unenforceable under Texas law. Even if Garza and Bernal are correct that the License is unenforceable for the 12 months after the term of the Employment Agreements expires, the License was still in effect under Section 1.1 during the term of this Agreement, and the term of the Employment Agreements was at least three years  until April 2005. Under Section 1.3, the term of the Employment Agreements could only be cut short in accordance with the provisions of Section 1.6. Because we already determined that Garza's and Bernal's resignations were not in accordance with Section 1.6, their resignations did not cut the Initial Term  and accordingly the term of the License  short. Furthermore, even if the License acts as a restraint on trade during the term of the Employment Agreements, such a restraint is not impermissible and does not violate public policy. 42 Am.Jur.2d Injunctions § 130 (2003) (Covenants not to accept employment with anyone but the employer during the term of the contract are not opposed to public policy and have been held to be valid.) (emphasis added); cf. Mission Indep. School Dist. v. Diserens, 144 Tex. 107, 188 S.W.2d 568, 569-70 (1945) (granting an injunction preventing a former employee from performing services for another employer during the term of her employment agreement where performance of such services constituted a breach of contract and the employee's services were special, unique, or extraordinary). [18] Thus, the License was enforceable until at least April 2005, and it is undisputed that SBS used Garza's and Bernal's radio names and likenesses for business purposes without Amigo's permission prior to April 2005. Garza and Bernal, however, further contend  and the district court found  that the names referred to in the License are unambiguously their legal names, not their radio names, and, thus, they were not in breach of the License by allowing SBS to use their radio names. Amigo, on the other hand, argues that the term names in Section 1.1 creates a latent ambiguity  as Garza and Bernal had legal names and radio names  and this latent ambiguity precluded the district court from granting judgment as a matter of law. Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Coker, 650 S.W.2d at 394. A latent ambiguity exists if the meaning of language used in a written agreement becomes uncertain when applied to the subject matter of the contract. Loaiza v. Loaiza, 130 S.W.3d 894, 905 (Tex.App.2004), cited in Dell Computer Corp. v. Rodriguez, 390 F.3d 377, 389 n. 24 (5th Cir.2004) (emphasis added). The latent ambiguity, however, must become evident when the contract is read in the context of the surrounding circumstances, not after parol evidence of intent is admitted to create an ambiguity. Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex.1995) (emphasis added). Thus, in determining whether a latent ambiguity exists, courts may examine surrounding circumstances and the subject matter of the contract. Loaiza, 130 S.W.3d at 905. Examining the surrounding circumstances and the subject matter of the contract, the License in Section 1.1 creates a latent ambiguity. Although only Garza's and Bernal's legal names were used in the text of the contract, the Employment Agreements concerned the employment of two radio personalities to perform their radio show entitled El Chulo y La Bola, [19] and the License concerned the promotion of KHHL and its programming, including the Show. Garza and Bernal have two sets of names  their legal names and their radio names  and their radio names were the names used to promote the Show. [20] Thus, when applying the word name in Section 1.1 to Garza and Bernal, it is uncertain whether name refers to Garza's and Bernal's legal or radio name, and a latent ambiguity exists. Because of this latent ambiguity and because SBS used Garza's and Bernal's radio names and likenesses while the License was in effect, the district court erred in determining that Amigo failed to produce sufficient evidence of breach of the License. See Dell Computer Corp., 390 F.3d at 388-89 & n. 25 (holding that where a latent ambiguity exists, interpretation of the contract becomes a question of fact).
Although Amigo presented sufficient evidence that Garza and Bernal breached the License, the district court was correct in dismissing this claim because Amigo failed to provide sufficient evidence that breach of the License caused Amigo any damages. On appeal, Amigo asserts that its damages from Garza and Bernal's breach of the License are exactly the same as its damages from Garza and Bernal's untimely resignation  that is, lost profits and, in the alternative, lost investment. These asserted damages, however, were caused solely by the loss of the El Chulo Show, which resulted from Garza and Bernal's resignation, not from any subsequent breach of the License. [21] Accordingly, Amigo cannot recover its asserted lost profits for breach of the License because its alleged lost profits stem solely from the untimely loss of the Show. Amigo does not assert that it lost any profits due to Garza and Bernal's subsequent breach of the License. For instance, Amigo does not assert that Garza and Bernal's breach of the License allowed SBS to compete with KHHL, thereby further diminishing KHHL's profits. Furthermore, Amigo cannot recover its lost investment in the Show on the basis of the License because it did not produce any evidence that it made this investment in reliance on the License agreement. Instead, Amigo's evidence  specifically, Anderson's testimony quoted in footnote 15 supra  indicates that Amigo made its investment in the Show in reliance on the three-year contract term and the covenant not to compete contained in the Employment Agreements. Thus, with respect to Amigo's claim for breach of the License, we AFFIRM the judgment of the district court.