Court Opinion

ID: 3119038
Source: CourtListenerOpinion
Date Created: 2015-10-16 08:13:24.881758+00
Date Added: 2024-06-11T10:20:19.841456
License: Public Domain

Opinion issued March 12, 2013.

                                     In The

                              Court of Appeals
                                     For The

                          First District of Texas
                          ————————————
                              NO. 01-11-00525-CV
                           ———————————
      JAMES J. FLANAGAN SHIPPING CORPORATION, Appellant
                                        V.
           DEL MONTE FRESH PRODUCE N.A., INC., Appellee

                On Appeal from the County Court at Law No. 3
                          Galveston County, Texas
                      Trial Court Case No. CV0060347

                         OPINION ON REHEARING

      Appellant Del Monte Fresh Produce N.A., Inc. has filed a motion for

rehearing of our December 6, 2012 opinion. We grant the motion, withdraw our

opinion and judgment of December 6, 2012, and issue this opinion in its stead.
      James J. Flanagan Shipping Corporation appeals the trial court’s rendition of

a take nothing judgment on its claims against Del Monte. Flanagan sued Del

Monte and other defendants for breach of fiduciary duty, knowing participation in

a breach of fiduciary duty, conspiracy, conversion, unjust enrichment, unfair

competition, and accessing proprietary and confidential business information.

After settling with the other defendants, Flanagan tried its claims against Del

Monte to the bench. The trial court concluded Flanagan’s claims were “well

founded” and its findings were favorable to Flanagan. But, after concluding that

the economic loss rule and a settlement credit applied to bar Flanagan’s recovery,

the trial court rendered a take nothing judgment on all of Flanagan’s claims against

Del Monte. On appeal, Flanagan contends the trial court erred by applying the

economic loss rule and by finding that its award of exemplary damages should be

reduced based on a settlement credit.        We reverse and render judgment for

Flanagan.

                                   Background

      Flanagan operates a stevedoring facility in Galveston, Texas. Del Monte

imports fresh produce, with ships arriving in Galveston throughout the year. In

1997, Flanagan began providing stevedoring services for Del Monte in Galveston.

Between 1997 and 2007, Del Monte sent out requests for proposals, seeking bids

from companies to provide stevedoring services. Flanagan was chosen each time.

                                         2
      In 2006, Del Monte hired a new manager for its Galveston operations, Joe

Wiley. Wiley, the self-described “new sheriff in town,” conducted a review of the

Galveston operations and concluded that Flanagan was not performing adequately.

He recommended against renewing Flanagan’s contract when the current contract

expired at the end of September 2007. In the spring of 2007, Del Monte sent out

requests for proposals for taking over the stevedore operations in Galveston.

Flanagan submitted a proposal, and Tom Flanagan, Flanagan’s president and CEO,

sent Del Monte’s Vice President of Port Operations, Tim Albano, a letter

committing to improve Flanagan’s services if the contract was awarded to

Flanagan. Specifically, he promised Flanagan would have all new equipment by

the time Del Monte completed the planned refurbishing and improvements of its

Galveston facilities.

      After receiving proposals from Flanagan and other companies, Wiley

recommended awarding the new Del Monte contract to his former employer,

Logistec. Albano concurred, but neither Wiley nor Albano had the authority to

make that decision. Only Del Monte’s Vice President of Shipping Operations,

Helmut Lutty, did. Lutty decided to award the contract to Flanagan. He testified

that one reason he did so was because both he and Wiley were new in their

positions, so he did not want to make a change in the Galveston operations. He

also testified that, in deciding to award contracts, he considered cost to be the

                                       3
driving factor, and Flanagan’s bid was better than Logistec’s. Flanagan and Del

Monte thus agreed to a contract for a term of one year, to automatically renew for

two additional years if neither party timely provided notice to terminate.

      Wiley testified that by the end of November 2007, the first portion of Del

Monte’s facility upgrade was complete. Room 4, a refurbished and improved

refrigerated warehouse, was put into use around Thanksgiving. Wiley testified that

Flanagan did not have the promised new forklifts to take advantage of the

improvements in Room 4. Wiley complained that no new forklifts were available

and asked Louis Rippol, Flanagan’s clerk in charge, when the new forklifts would

arrive. Rippol told Wiley that Flanagan had never ordered the forklifts. Wiley felt

that Mr. Flanagan had lied to him and became “furious.” He told Rippol that

Flanagan was done with Del Monte. According to Wiley, this conversation took

place around early December.

      Around this same time, Richard Bradford, who was Flanagan’s manager in

Galveston, began talking to Del Monte about Del Monte replacing Flanagan with

Bradford’s former employer, Pacific Stevedoring. Wiley and Bradford testified

that a few days after Wiley had decided Flanagan was done with Del Monte,

Bradford asked if Wiley would consider a bid from Pacific. While Wiley testified

that this happened around December 27, phone records show that Bradford called

Pacific on December 3, and a December 14 email shows Bradford detailed for

                                          4
Pacific what would be required for Pacific to provide stevedoring services for Del

Monte in Galveston. Phone records also show that Bradford called Pacific again

on December 26 and, shortly after that call, placed a ten-minute call to Albano’s

direct line in Florida. Albano denied having any conversation with Bradford about

Pacific taking over Flanagan’s contract.

      Bradford began providing Pacific with Flanagan’s proprietary information,

including information about Flanagan’s business model and price structure, to

enable Pacific to submit the winning bid for the Del Monte contract. Many of the

emails from Bradford to Pacific were from his personal email account, not his

Flanagan account. In one email to Pacific, Bradford wrote, “You should know that

getting all the numbers you need is very difficult without creating suspicion.” At

trial, Bradford unequivocally testified that Wiley knew Bradford was sending

information to Pacific and, in fact, it was Wiley who had told Bradford not to

create any suspicion.

      Wiley and Albano told Bradford that opportunities with Pacific would be

available to Bradford if Pacific replaced Flanagan as Del Monte’s stevedoring

company. Pacific formed a new company, Gulf Stevedoring Services, LLC. In

February 2008, Gulf submitted a bid offering the exact pricing and services as

Flanagan’s bid and indicated that Bradford would be Gulf’s operations manager.

Wiley testified that he was “very surprised and shocked” that the rates were

                                           5
identical and no changes had been made to the bid. Wiley therefore worked with

Bradford to make minor changes to the Gulf bid.

      In May 2008, Wiley and Albano recommended to Lutty that Del Monte

accept Gulf’s bid and terminate Flanagan’s contract. Lutty agreed and signed a

contract with Pacific to begin on October 1, 2008. Despite Lutty having made a

final decision, Albano sent Mr. Flanagan an email falsely stating that Flanagan’s

contract “was under review.”       Wiley was instructed not to tell Flanagan the

contract would not continue beyond the initial one-year term.              In August,

approximately six weeks before the end of the contract’s term, Del Monte gave

notice of termination of the contract to Flanagan and replaced Flanagan with Gulf.

      Flanagan sued Del Monte and other defendants, including Bradford, Pacific,

and Gulf.    All defendants other than Del Monte settled with Flanagan for

$1,500,000, and Flanagan tried its claims against Del Monte to the bench.        After

the trial, the trial court set forth in its judgment a lengthy narrative describing the

events leading up to the lawsuit. The trial court identified conflicting evidence and

explained that the conflicting evidence presented by Del Monte was not credible.

The trial court concluded Bradford had committed a breach of fiduciary duty and

that Del Monte was a joint tortfeasor because it encouraged Bradford knowing that

Bradford was breaching his fiduciary duties to Flanagan. The trial court also

concluded that Del Monte engaged in unfair competition and that Del Monte had

                                          6
conspired with the other defendants to harm Flanagan. The trial court found that

Flanagan suffered lost profits in the amount of $1,348,910 and that exemplary

damages in the amount of $635,928 were justified.

      Although the trial court described Flanagan’s causes of action as “well

founded,” two legal conclusions led it to enter a take nothing judgment. First, it

concluded that the $1,500,000 settlement credit should be applied against both

actual and exemplary damages, reducing Flanagan’s potential recovery from

$1,984,838 to $484,838. Second, it concluded the economic loss rule applied to

bar any recovery whatsoever. Flanagan appealed and contends the trial court erred

in applying the economic loss rule and settlement credit to bar Flanagan’s

recovery.

                    Findings of Fact Recited in the Judgment

      Before turning to the trial court’s application of the economic loss rule and

settlement credit, we address a threshold issue in dispute: whether the trial court’s

findings of fact should be accorded probative value, given that they are recited in

the judgment. Del Monte contends we should affirm the judgment because the

trial court’s placement of its findings of fact in the judgment—as opposed to a

separate document—violates Texas Rule of Civil Procedure 299a and renders the

findings null. Therefore, Del Monte argues, we must ignore the trial court’s

findings and apply the well-settled rule that, in the absence of findings, all findings

                                          7
in favor of the take-nothing judgment are implied. Flanagan responds that the

findings are valid because they do not conflict with any other findings in the

record.

      Texas Rule of Civil Procedure 299a provides:

      Findings of fact shall not be recited in a judgment. If there is a
      conflict between findings of fact recited in a judgment in violation of
      this rule and findings of fact made pursuant to Rules 297 and 298, the
      latter findings will control for appellate purposes. Findings of fact
      shall be filed with the clerk of the court as a document or documents
      separate and apart from the judgment.

TEX. R. CIV. P. 299a. The trial court erred by reciting its findings of fact in the

judgment. However, the record contains no other findings of fact. Therefore, there

is nothing with which the trial court’s findings could conflict. Accordingly, the

trial court’s findings are accorded probative value. See Gonzalez v. Razi, 338
S.W.3d 167, 175 (Tex. App.—Houston [1st Dist.] 2011, pet. denied) (quoting In re

Sigmar, 270 S.W.3d 289, 295 n.2 (Tex. App.—Waco 2008, orig. proceeding)

(“[F]indings of fact recited in an order or judgment will be accorded probative

value so long as they are not in conflict with findings recited in a separate

document.”)); In re C.A.B., 289 S.W.3d 874, 881 (Tex. App.—Houston [14th

Dist.] 2009, no pet.) (“[t]he mere inclusion of findings in a judgment does not

mean the findings have no effect” and “findings improperly included in a judgment

still have probative value and are valid as findings”); Hill v. Hill, 971 S.W.2d 153,

157 (Tex. App.—Amarillo 1998, no pet.) (recognizing that “findings contained in a
                                         8
judgment (contrary to Rule 299a) are not shorn of all authority” but “only to the

extent they conflict” with findings made in a separate document (emphasis in

original)).

       Relying on Frommer v. Frommer, 981 S.W.2d 811 (Tex. App.—Houston

[1st Dist.] 1998, pet. dism’d), Del Monte argues we should ignore the findings

altogether. In Frommer, a divorce case, a jury determined that the husband had not

committed a fraud on the community estate. 981 S.W.2d at 812. However, the

final judgment awarded the wife a sum of money and stated the reason for the

award was the husband’s fraud. Id. at 812–13. Neither party requested findings of

fact. On appeal, the husband contended that the trial court’s “finding” in the

judgment supporting the additional award to the wife conflicted with the jury

finding that he had not committed fraud. Id. at 812–13. This court concluded that

the findings contained in the judgment could not be used to support a claim on

appeal. Id. at 813–14.

        We find Frommer distinguishable. The basis of the appeal in Frommer

was that the trial court’s finding arguably conflicted with a prior jury finding.

Frommer, 981 S.W.2d at 812–13. Here, there are no findings other than the ones

the trial court set forth in the judgment. There is no possible conflict, and Del

Monte does not contend otherwise.

                                        9
                               Economic Loss Rule

      In its first issue, Flanagan contends that the trial court erred by concluding

the economic loss rule applied to bar recovery. Citing Jim Walter Homes, Inc. v.

Reed, 711 S.W.2d 617 (Tex. 1986), Del Monte argues the economic loss rule does

apply because the damages Flanagan sought were exactly what it would have

earned under the contract had it not been terminated. We review this issue of law

de novo. Miranda v. Byles, No. 01-10-01022-CV, 2012 WL 5285666, at *7 (Tex.

App.—Houston [1st Dist.] Oct. 25, 2012, pet. filed) (citing BMC Software Belg.,

N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002)).

      Although the Texas Supreme Court described the term as “something of a

misnomer,” one general formulation of the economic loss rule, as applicable to this

case, is that a party may not recover in tort for purely economic losses suffered to

the subject matter of a contract. Sharyland Water Supply Corp. v. City of Alton,

354 S.W.3d 407, 415, 418 (Tex. 2011). In determining whether the economic loss

rule applies, courts must consider “both the source of the defendant’s duty to act

(whether it arose solely out of the contract or from some common-law duty) and

the nature of the remedy sought by the plaintiff.” Formosa Plastics Corp. USA v.

Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 45 (Tex. 1998) (quoting

Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 12 (Tex. 1996)).

                                        10
      Del Monte asserts that the Supreme Court’s opinion in Jim Walter Homes

bars Flanagan’s recovery in this case. The claim in Jim Walter Homes was that the

builder of a home had “breached the warranty of good workmanship and . . . was

grossly negligent in the supervision of the construction of the house.” 711 S.W.2d

at 617. The Supreme Court noted that the plaintiffs’ sole injury “was that the

house they were promised and paid for was not the house they received” and that

that claim could “only be characterized as a breach of contract.” Id. at 618.

      More recently, the Texas Supreme Court explained that the economic loss

rule has been applied more narrowly than Del Monte argues. In Sharyland Water

Supply Corporation, the Supreme Court said “[W]e have applied the economic loss

rule only in cases involving defective products or failure to perform a contract.”
354 S.W.3d at 418. The Supreme Court also explained that the fact that a party

seeks economic damages does not necessarily bar a tort cause of action. Id. at

418–19 (noting that economic losses may be recovered in tort for “negligent

misrepresentation, legal or accounting malpractice, breach of fiduciary duty, fraud,

fraudulent inducement, tortious interference with contract, nuisance, wrongful

death claims related to loss of support from the decedent, business disparagement,

and some statutory causes of action” (emphasis added) (footnotes omitted)).

      Here, Flanagan does not assert that Del Monte caused Flanagan’s damages

by performing its duties under the contract in a negligent or grossly negligent

                                         11
manner. Cf. Jim Walter Homes, Inc., 711 S.W.2d at 617 (holding economic loss

rule applied where plaintiff attempted to cast breach of contract claim as tort

claim). Del Monte’s duty under the contract was, essentially, to pay Flanagan for

stevedoring services. Flanagan does not complain about any failure on the part of

Del Monte to perform this contractual obligation. Rather Flanagan’s claim is

based on Del Monte’s involvement in Bradford’s breach of fiduciary duty. In

other words, Flanagan seeks to recover the lost profits it would have earned under

the contract if Del Monte had not encouraged and participated in Bradford’s

disclosure of Flanagan’s business model and pricing structure to a competing

company, causing Del Monte to terminate the contract with Flanagan after the

initial one-year term. The duty breached in this case—the fiduciary duty owed by

an agent, Bradford, to his principal, Flanagan—did not arise from the contract.

Rather, as Flanagan notes in its brief, the duty breached existed independent of

Flanagan’s contract with Del Monte. Accordingly, the economic loss rule does not

apply. See Formosa Plastics, 960 S.W.2d at 47 (holding that “tort damages are

recoverable for a fraudulent inducement claim irrespective of . . . whether the

plaintiff only suffers an economic loss related to the subject matter of the

contract”); see also Sharyland Water Supply Corp., 354 S.W.3d at 418 (noting

economic losses are recoverable for breach of fiduciary duty).      We therefore

                                       12
conclude that Jim Walter Homes and the economic loss rule do not apply to this

case.

                                Settlement Credit

        In its second issue, Flanagan contends the trial court erred by applying a

settlement credit against the exemplary damages award. Del Monte does not

disagree.

        Chapter 33 of the Texas Civil Practice and Remedies Code provides for a

credit in the case of a settling defendant. TEX. CIV. PRAC. & REM. CODE ANN.

§ 33.012(b) (West 2008) (“If the claimant has settled with one or more persons, the

court shall further reduce the amount of damages to be recovered by the claimant

with respect to a cause of action by the sum of the dollar amounts of all

settlements.”). However, Chapter 33 expressly states that it “does not apply to . . .

a claim for exemplary damages included in an action to which this chapter

otherwise applies . . . .” TEX. CIV. PRAC. & REM. CODE ANN. § 33.002(c)(2) (West

2008). We therefore conclude that the trial court erred by applying a settlement

credit to the exemplary damages assessed against Del Monte. See Crown Life Ins.

Co. v. Casteel, 22 S.W.3d 378, 391 (Tex. 2000) (non-settling defendant may only

claim credit based on damages for which all joint tortfeasors jointly liable);

Gilcrease v. Garlock, Inc., 211 S.W.3d 448, 457 (Tex. App.—El Paso 2006, no

                                         13
pet.) (exemplary damages assessed against non-settling defendant may not be

offset by amount of common damages paid by settling defendants).

                                      Causation

      Del Monte contends the judgment should be affirmed because there is no

evidence of causation. Specifically, Del Monte contends the evidence shows Del

Monte had decided to replace Flanagan in December 2007 and, because all of

Bradford’s alleged wrongdoing occurred after that decision had been made, the

wrongdoing did not cause Flanagan’s loss.

      Evidence is legally insufficient when (1) the record discloses a complete

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

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 a vital fact. City of Keller

v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In determining whether there is

legally sufficient evidence, we must consider evidence favorable to the finding if a

reasonable fact-finder could and disregard evidence contrary to the finding unless a

reasonable fact-finder could not. Id. at 807, 827. “If the evidence at trial would

enable reasonable and fair-minded people to differ in their conclusions, then [the

fact-finder] must be allowed to do so.” Id. at 822; see also King Ranch, Inc. v.

Chapman, 118 S.W.3d 742, 751 (Tex. 2003). “A reviewing court cannot substitute

                                          14
its judgment for that of the trier-of-fact, so long as the evidence falls within this

zone of reasonable disagreement.” City of Keller, 168 S.W.3d at 822. When, as

here, a party who does not have the burden of proof at trial challenges the legal

sufficiency of the evidence, we consider the evidence in the light most favorable to

the prevailing party, indulging every reasonable inference in that party’s favor.

City of Houston v. Hildebrandt, 265 S.W.3d 22, 27 (Tex. App.—Houston [1st

Dist.] 2008, pet. denied) (citing Assoc. Indem. Corp. v. CAT Contracting, Inc., 964
S.W.2d 276, 285–86 (Tex. 1998)). Additionally, we may “not invade the fact-

finding role of the trial court, who alone determines the credibility of the witnesses,

the weight to give their testimony, and whether to accept or reject all or any part of

that testimony.” Volume Millwork, Inc. v. W. Hous. Airport Corp., 218 S.W.3d
722, 730 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).

      Del Monte contends that “uncontradicted” evidence shows that Del Monte

decided not to continue its contractual relationship with Flanagan in December

2007, before Bradford began feeding Flanagan’s information to Pacific. Wiley

testified that he made the decision to replace Flanagan in December 2007. He also

testified that Albano agreed with him. Albano’s testimony was consistent with

this, and Albano added that Lutty also agreed in December 2007 to terminate the

relationship with Flanagan.

                                          15
      But there is also evidence from which a rational fact-finder could conclude

that Lutty, the only person with the authority to make the decision on behalf of Del

Monte, did not decide to terminate Flanagan’s contract until May 2008, well after

Bradford and Del Monte conspired to help Gulf win the contract. Both Wiley and

Albano testified that neither of them had the authority to decide who would receive

the contract, only Lutty did. Lutty himself never testified about when he made the

decision, and Wiley testified that he did not know what Lutty’s decision was until

May of 2008. A reasonable fact-finder could conclude that, although Wiley and

Albano testified they had made a decision to terminate Flanagan as of December

2007, Lutty’s decision was not made until May 2008, after—and because—

Bradford’s and Del Monte’s misconduct allowed Gulf to match Flanagan’s bid.

See Hildebrandt, 265 S.W.3d at 27.

                                      Malice

      Del Monte also contends no evidence supports a finding of malice, which is

required to support an award of exemplary damages against Del Monte.

Exemplary damages may be awarded only when there is clear and convincing

evidence of fraud, malice, or gross negligence. TEX. CIV. PRAC. & REM. CODE

ANN. § 41.003 (West Supp. 2012). In this case, Flanagan alleged malice as the

basis for an award of exemplary damages. Malice is defined as “specific intent by

the defendant to cause substantial injury or harm to the claimant.” Id. § 41.001(7)

                                        16
(West 2008). “‘Clear and convincing’ means the measure or degree of proof that

will produce in the mind of the trier of fact a firm belief or conviction as to the

truth of the allegations sought to be established.”         Id. § 41.001(2).    When

reviewing the legal sufficiency of the evidence to support a finding required under

the “clear and convincing” standard, courts must consider all the evidence “in the

light most favorable to the finding to determine whether a reasonable trier of fact

could have formed a firm belief or conviction that its finding was true.” Romero v.

KPH Consol., Inc., 166 S.W.3d 212, 220 (Tex. 2005).

      The evidence in this case would allow a rational fact-finder to form a firm

belief or conviction that Del Monte specifically intended to cause Flanagan

substantial injury or harm. “When a third party knowingly participates in the

breach of a fiduciary duty, the third party becomes a joint tortfeasor and is liable as

such.” JSC Neftegas-Impex v. Citibank, N.A., 365 S.W.3d 387, 411 (Tex. App.—

Houston [1st Dist.] 2011, pet. denied) (quoting Kastner v. Jenkens & Gilchrist,

P.C., 231 S.W.3d 571, 580 (Tex. App.—Dallas 2007, no pet.)). “[P]articipation in

a breach of fiduciary duty can be the basis of an award of exemplary damages

where the jury finds the defendant acted with fraud or malice.” Fid. Nat’l Title Ins.

Co. v. Heart of Tex. Title Co., No. 03-98-00473-CV, 2000 WL 13037, at *8 (Tex.

App.—Austin Jan. 6, 2000, pet. denied) (not designated for publication). Here,

Wiley, Del Monte’s Galveston port manager, knew that Bradford was providing

                                          17
information about Flanagan’s operation to Pacific to allow Pacific to match

Flanagan’s bid.    Indeed, Wiley encouraged Bradford to do so.          Bradford

unequivocally testified that Wiley knew what Bradford was doing and that it was

Wiley who instructed Bradford to gather the information without creating

suspicion. Bradford also testified that a Del Monte employee, probably Wiley,

provided him a copy of Flanagan’s contract and rate sheet to forward to Pacific.

This was significant because one reason that Flanagan continued to be chosen by

Del Monte is that no other stevedore could match Flanagan’s bid. Albano testified

that Del Monte should not provide a company’s rate sheet to another company

because it contains confidential information. However, Albano also testified that

he, on behalf of Del Monte, had approved and ratified everything Wiley had done

in connection with bringing Pacific into Galveston.

      Wiley admitted he was complicit in the scheme. Wiley testified that when

he received Pacific’s bid in February 2008 he was “very surprised and shocked”

that the rates were identical to Flanagan’s. And Bradford testified that he and

Wiley altered the proposed rate sheet, making “cuts here, increases there.” A

reasonable inference from these facts is that Wiley made the adjustments to keep

total costs on Pacific’s bid the same as Flanagan’s, while making the scheme less

obvious.    After receiving Pacific’s bid based on Flanagan’s confidential

information, Del Monte did not follow its normal procedure of soliciting

                                        18
competitive bids. Rather, Wiley informally contacted two other stevedores—his

former employer and his roommate’s employer—to solicit bids to make the

bidding process appear normal. Finally, in May 2008, Lutty—the Del Monte

employee ultimately in charge of making the decision—decided to award the

contract to Pacific, but told Albano to not tell Flanagan, and Albano falsely

informed Flanagan that the contract renewal was still under review.

      From this evidence, a rational fact-finder could determine that Del Monte

conspired with Bradford to misappropriate Flanagan’s business information with

the specific intent to keep for itself the benefit of Flanagan’s low rate structure—

one no other company had ever matched—and the benefit of the experience of

Flanagan’s manager, Bradford, but also to oust Flanagan as Del Monte’s stevedore

in Galveston. Accordingly, we hold that the evidence is sufficient to support the

trial court’s finding that Del Monte acted with malice. See Fid. Nat’l Title Ins.

Co., 2000 WL 13037, at *6 (holding some evidence supported implied finding of

fraud to support exemplary damages where defendant conspired with plaintiff’s

employee for employee to breach her fiduciary duties by recruiting co-workers to

staff competing office defendant planned to open); see also Qwest Int’l Commc’ns,

Inc. v. AT & T Corp., 167 S.W.3d 324, 326 (Tex. 2005) (stating that corporation is

liable for exemplary damages if it authorizes or ratifies an agent’s malice); Bright

v. Addison, 171 S.W.3d 588, 598 (Tex. App.—Dallas 2005, pet. denied) (evidence

                                        19
sufficient to support finding of malice in breach of fiduciary duty case where

fiduciary (an attorney) failed to disclose business opportunity to his clients and

instead usurped it for himself).

      In its motion for rehearing, Del Monte also argues that it presented

“uncontradicted” evidence that it acted without malice. Specifically, Del Monte

argues there can be no malice finding when Wiley and Albano each testified they

had no intent to injure Flanagan, and Flanagan offered no direct evidence of

malice. But it is well-established that a plaintiff required to prove the state of mind

of a defendant need not adduce direct evidence; it may instead rely upon

circumstantial evidence. See Bentley v. Bunton, 94 S.W.3d 561, 596 (Tex. 2002)

(discussing “malice” in a defamation case: “The defendant’s state of mind can—

indeed, must usually—be proved by circumstantial evidence.”); Transp. Ins. Co. v.

Moriel, 879 S.W.2d 10, 22–23 (Tex. 1994) (discussing evidence of gross

negligence as predicate for exemplary damages and stating, “We hereby reaffirm

our holding that the defendant’s subjective mental state can be proven by direct or

circumstantial evidence.”); Behee v. Mo. Pac. Ry. Co., 71 Tex. 424, 429 (1888)

(“Malice is rarely ever shown by direct evidence. It is commonly a state of mind

indicated and inferable from other facts proved,—from language used, or acts, or

both together. We infer a bad motive when an injurious act is intentionally done

without legal excuse. The motive is not a bare fact of itself, susceptible of proof

                                          20
like any other fact; it is a conclusion deduced from acts or words.”); Turner v.

Franklin, 325 S.W.3d 771, 783 (Tex. App.—Dallas 2010, pet. denied) (noting

issues of state of mind “are not susceptible to being readily controverted and are

best left to the determination of the trier of fact”); French v. French, 385 S.W.3d
61, 69 (Tex. App.—Waco 2012, pet. denied) (citing Digby v. Texas Bank, 943
S.W.2d 914, 922 (Tex. App.—El Paso 1997, writ denied) (“[Malice] is proved by

direct or (usually) circumstantial evidence.”). The trial court stated that both

Wiley and Albano lacked credibility; this determination is left to the trial court as

the fact-finder. See Volume Millwork, Inc., 218 S.W.3d at 730. Combining the

trial court’s determination that Wiley and Albano lacked credibility with the

circumstantial evidence detailed throughout this opinion, we conclude the record

contradicts Wiley’s and Albano’s self-serving denials of ill intent. Viewing the

evidence in favor of the trial court’s findings and indulging reasonable inferences

from the evidence, we conclude the record supports the trial court’s determination

that Del Monte acted with malice.

                                         21
                                    Conclusion

      We conclude the trial court erred in applying the economic loss rule. We

also conclude the trial court erred in applying the settlement credit to the award of

exemplary damages.      We reverse the judgment of the trial court and render

judgment for Flanagan in the amount of $635,928.

                                              Rebeca Huddle
                                              Justice

Panel consists of Justices Jennings, Massengale, and Huddle.

                                         22