Court Opinion

ID: 4702786
Source: CourtListenerOpinion
Date Created: 2021-07-12 07:20:02.730673+00
Date Added: 2024-06-11T08:06:26.631494
License: Public Domain

Affirmed in Part, Reversed and Rendered in Part, and Reversed and
Remanded in Part, and Memorandum Opinion filed July 6, 2021.

                                     In The

                    Fourteenth Court of Appeals

                             NO. 14-19-00732-CV

   HOUSTON METRO ORTHO AND SPINE SURGERY, LLC; ELITE
 AMBULATORY SURGERY CENTERS, LLC; LORI RAMIREZ; JAMES
  ALBRIGHT, M.D.; CARL PALUMBO, M.D.; NAVIN SUBRAMANIAN,
   M.D.; ALAN RECHTER, M.D.; MARK PROVENZANO, M.D.; JUAN
    CARLOS BUSTOS, M.D.; ASIF CHAUDRY, M.D.; AND NEWTON
                   DUNCAN, M.D., Appellants
                                       V.

      JUANSRICH, LTD., AND RICHARD FRANCIS, M.D., Appellees

                   On Appeal from the 215th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2015-24460

                         MEMORANDUM OPINION

      Appellee Richard Francis, M.D., through his business entity, appellee
Juansrich, Ltd. (collectively “Juansrich”), owned an interest in appellant Houston
Metro Ortho and Spine Surgery, LLC (“Metro”), an ambulatory surgical center.
Juansrich shared ownership in Metro with several other surgeons, including
appellants James Albright, M.D., Carl Palumbo, M.D., Navin Subramanian, M.D.,
Alan Rechter, M.D., Mark Provenzano, M.D., Juan Carlos Bustos, M.D., Asif
Chaudry, M.D., and Newton Duncan, M.D. Appellant Elite Ambulatory Surgery
Centers, LLC (“Elite”) also owned an interest in Metro and managed the daily
operations of the surgery center. Appellant Lori Ramirez was an officer of Elite.
As Class A members of Metro, the surgeons agreed, among other things, that each
would conduct a certain percentage of their eligible procedures at Metro.            A
dispute began when appellants believed Dr. Francis had stopped performing
procedures at Metro.

      Metro terminated Juansrich’s ownership interest in Metro. It then filed suit
against Dr. Francis seeking to enforce a noncompetition agreement contained in
the “Company Agreement of Houston Metro Ortho and Spine Surgery Center
LLC” (the “LLC Agreement”). Believing it was owed significant sums as payment
for its ownership interest in Metro, as well as for missed distributions of earnings
made while it was still a member of Metro, Juansrich filed counterclaims alleging
numerous causes of action including breach of contract, conversion, aiding and
abetting, and unjust enrichment. The trial court granted Dr. Francis’s motion for
partial summary judgment asserting that the noncompetition agreement was
unenforceable. It then realigned the parties making Juansrich the plaintiff. The
trial court subsequently granted two Rule 166 motions filed by Juansrich and
conducted a bench trial on the remaining issues. At the conclusion of the bench
trial, the trial court found in favor of Juansrich. Juansrich elected to recover on its
conversion cause of action. The trial court signed a final judgment awarding (1)
Juansrich $9,855,596.85 in damages on Juansrich’s conversion cause of action and
$23,048.50 in attorney’s fees in connection with Juansrich’s efforts to inspect

                                          2
Metro’s records, and (2) Dr. Francis $403,918.15 in attorney’s fees and costs for
defending against Metro’s noncompete claim.

      Because Metro has not challenged the $23,048.50 attorney’s fees award on
appeal, we affirm that part of the trial court’s final judgment. Concluding that
none of Juansrich’s tort claims can support the final judgment, we reverse the trial
court’s final judgment based on conversion and render judgment that Juansrich
take nothing on those claims. In addition, because the primary purpose of the LLC
Agreement was not for the provision of personal services, we reverse and render
judgment that Dr. Francis take nothing on his request for attorney’s fees for
defending against Metro’s suit seeking to enforce the non-compete contained in the
LLC Agreement.        We conclude that the trial court erred when it granted
Juansrich’s first and second Rule 166 motions, which Juansrich relied on to
support its breach of contract cause of action. As a result, Juansrich cannot now
elect to recover on its breach of contract claim seeking payment for its ownership
interest. We therefore remand that cause of action to the trial court for further
proceedings. Finally, we conclude that the evidence is legally sufficient to support
the trial court’s judgment on Juansrich’s claim for missed distribution payments.
We therefore affirm that part of the trial court’s final judgment.

                                   BACKGROUND

      Dr. Francis is an orthopedic surgeon. Dr. Francis and Dr. Rechter, another
orthopedic surgeon, were the original doctors involved in the formation of Metro.
Ramirez, Elite’s chief executive officer, was the moving force in the formation of
Metro and the recruitment of doctors as investors in Metro.           Metro is an
ambulatory surgery center that specializes in orthopedic, pain management, spine,
and pediatric ear, nose, and throat procedures. As an ambulatory surgery center,
Metro performs only outpatient surgery cases. Metro’s Class A members consist

                                          3
entirely of doctors and some of those doctors’ business organizations. Juansrich is
a Class A member and it eventually owned about 19.50 units of Class A
membership in Metro.1 Juansrich paid a total of $195,000 for those units. The
doctor appellants are all Class A members of Metro. Elite is the sole Class B
member. Elite handles the day-to-day business operations of the surgical center,
such as managing the staff.

      As with all limited liability companies, Metro is governed by a contract, the
LLC Agreement. See Tex. Bus. Orgs. Code Ann. § 101.052. Among the key
provisions in the LLC Agreement are sections 2.3, 4.3, and 10.7.

Section 2.3

      Section 2.3(b)(iv) provides that each Class A member “shall perform at least
one-third of such Class A Member’s procedures that require or can be performed at
an ambulatory surgery center at the [Metro] Center.”

Section 4.3

      Section 4.3 addresses redemption of members’ ownership interests. Section
4.3 divides terminating events with respect to a member’s ownership interest as
either “Adverse Terminating Events” or “Non-Adverse Terminating Events.” It
further provides that the redemption price for a Class A member’s units “shall be
based on whether the Terminating Event is an Adverse Terminating Event or a
Non-Adverse Terminating Event.” An Adverse Terminating Event occurs when,
among other events not at issue here, a Class A Member materially breaches the
LLC Agreement. A Non-Adverse Terminating Event occurs with respect to a
Class A Member if, among other things, the Class A Member is removed “for any
reason or no reason,” by “Supermajority Approval.” The redemption price is also

      1
          The LLC Agreement defines “Unit” as “a unit or share of interest in the Company.”

                                               4
affected by whether Metro has become “Operational” as defined in the LLC
Agreement. Metro becomes “Operational” once it “is Medicare certified as an
ambulatory surgical center.” If Metro is not “Operational,” or the termination is
“Adverse,” then the redemption price for a departing Class A Member’s Units is
limited to the departing Member’s capital contribution. If Metro is “Operational,”
and the termination is “Non-Adverse,” the redemption price is determined by a
formula found in section 4.3(g)(ii) of the LLC Agreement.

Section 10.7

      Section 10.7 of the LLC Agreement contains a non-competition clause. It
provides that

      [d]uring the term of a Class A Member’s membership in [Metro], and
      for a period of one year thereafter, no Class A Member nor any of
      such Class A Member’s Affiliates, except as provided below or
      through [Metro], shall, without prior written Consent of the Class B
      Member, directly or indirectly own, manage, operate, control, or
      participate in any manner in the ownership, management, operation,
      or control of, or serve as a partner, employee, principal, agent,
      consultant, or otherwise contract with, or have any financial interest
      in, or aid or assist any other person or entity that operates a facility
      (including an ambulatory surgical center or office-based or practice-
      based facility or operating site or room that provides any of the
      services offered by [Metro]) to provide outpatient surgical services,
      including a state-licensed, Medicare-certified or accredited surgery
      center or office-based surgical facility, within 10 miles of the location
      of [Metro’s ambulatory surgical center] (the “Restricted Territory”)
      nor may a Class A Member provide Facility Fee Procedures in such
      Class A Member’s office. The preceding sentence shall not be
      construed to prevent a Class A Member or any of a Class A Member’s
      Affiliate’s from (i) maintaining staff privileges at any facility, (ii)
      providing professional surgical services and earning a professional fee
      thereon (but not acting as an owner or having a compensation or
      financial relationship) in any other ambulatory surgical center or
      hospital, (iii) performing any in-office procedures under local
      anesthesia that does not require the presence of an anesthesiologist or
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      a certified registered nurse anesthetist, or (iv) having any financial
      relationship or owning an interest in any hospital within the Restricted
      Territory. For purposes of this Section 10.7, it shall be presumed that
      a person or entity competes with [Metro] and violates this provision if
      such person or entity has any interest in any facility or center of any
      type whatsoever for the conduct of, or compensation relationship
      with, any outpatient surgery center within the Restricted Territory.
The beginning of the Practice

      In a “Confidential Private Offering Memorandum for Accredited Investors
Only,” dated May 6, 2011, Metro notified potential investors that

      THERE    IS   NO   CURRENT     SURGERY     CENTER.
      CONSEQUENTLY, THE SURGERY CENTER HAS NO
      OPERATIONAL HISTORY AND CURRENTLY CONDUCTS NO
      BUSINESS. IT IS CONTEMPLATED THAT THE SURGERY
      CENTER WILL NOT CONDUCT ANY OPERATIONS OR
      BUSINESS UNLESS AND UNTIL SUFFICIENT SUBSCRIPTIONS
      ARE RECEIVED AND ACCEPTED PURSUANT TO THIS
      OFFERING (THE MINIMUM AMOUNT OF WHICH IS YET TO
      BE DETERMINED BY THE COMPANY).
That same offering memorandum further warned potential investors that Metro did
“not intend to service Medicare or Medicaid patients.” Metro repeated those same
warnings in a second confidential memorandum for potential investors dated
January 1, 2012. Metro’s business model was to operate as an out-of-network
facility unaffiliated with managed care providers. Under this model, Metro did not
contract with insurance companies on the rates that would be charged for
procedures, instead the doctors would submit their normal charges and wait on
reimbursement.     By choosing this model, the doctors expected “to have
reimbursement, in most cases, that is significantly higher than what they might be
able to receive on a contracted basis.”

      Metro opened its doors to patients in April 2012. Metro was initially very
successful.   Dr. Francis was one of the main reasons for that success.          He

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performed the most procedures at the Metro surgery center and as a result, he was
consistently responsible for more than twenty percent of Metro’s revenues. Dr.
Francis also served as chairman of Metro’s board.

The Change in the Practice and the Board vote

       Problems began to arise in 2014 when two large insurance companies
stopped paying Metro for services rendered to their insureds. As a result, Dr.
Francis began performing more of his procedures at other facilities. Concerned,
his fellow surgeons and Ramirez attempted to communicate with Dr. Francis.
Those efforts were generally unsuccessful. Dr. Francis did, however, talk with Dr.
Rechter. Dr. Francis told Dr. Rechter that while he was committed to Metro, he
was not going to continue performing surgeries at the center if payment would not
be received. In addition, Dr. Francis’s appearances at the surgery center noticeably
declined and he stopped attending board meetings.               The Metro board voted
unanimously on October 31, 2014, to remove Juansrich as a member. Ramirez
notified Juansrich of the board’s decision.            Several days later, Dr. Francis
responded that he acknowledged and accepted the board’s decision. Juansrich’s
membership units went back into Metro’s treasury.               Metro placed $195,000,
Juansrich’s capital contribution to obtain its membership units, in escrow. Metro
eventually tendered the $195,000 payment to Juansrich, but it was rejected.
Several of the remaining Class A members acquired those former Juansrich
membership units out of the Metro treasury in 2015.                  Each purchase was
authorized by a vote of the Metro board. Metro made no distributions for earnings
in September or October 2014.2 Distributions resumed in December 2014 when
Metro distributed $1,043,600.37. In late 2017, the Metro members sold 50.1
       2
         Metro had historically made distributions of a month’s earnings in the middle of the
following month. September and October 2014 were the first months where no distributions
occurred.

                                             7
percent of their interest in Metro to Nobilis Health Corporation for $21,446,364.

The Lawsuit

      Metro filed suit against Dr. Francis in 2015 alleging that he had violated the
noncompete contained in the LLC Agreement. Juansrich intervened. Juansrich
alleged a breach of contract cause of action seeking payment for the redemption of
its units and its proportionate share of the December 2014 distribution. Juansrich
also alleged conversion, aiding and abetting, and unjust enrichment claims based
on the same facts. Dr. Francis moved for summary judgment arguing that the
noncompete found in the LLC Agreement was unenforceable. The trial court
granted Dr. Francis’s motion. In additional rulings, the trial court (1) awarded Dr.
Francis $403,918.15 in attorney’s fees and costs pursuant to the noncompete
statute; (2) awarded Juansrich $23,048.50 in attorney’s fees in connection with
Juansrich’s efforts to inspect Metro’s company records; and (3) granted Juansrich’s
no-evidence motion on all of Metro’s remaining affirmative claims for relief. In
addition, the trial court realigned the parties making Juansrich the plaintiff.

      As the trial date approached, Juansrich filed two motions pursuant to Rule
166 of the Texas Rules of Civil Procedure. See Tex. R. Civ. P. 166 (authorizing
trial court to schedule a pre-trial conference during which it may consider, among
other things, “contested issues of fact and simplification of the issues,”
“identification of legal matters to be ruled on or decided by the court,” and “such
other matters as may aid in the disposition of the action.”).

The first 166 motion

      The first motion argued that Metro’s termination of Juansrich was non-
adverse. Juansrich then argued that the undisputed facts showed that it had not
violated the LLC Agreement. The motion relied on Metro’s corporate deposition

                                           8
which identified two alleged breaches, violating the one-third procedures rule and
violations of the non-compete in the LLC Agreement. Juansrich argued that there
was no violation of the one-third of procedures rule because the period for
measuring compliance with the rule was Metro’s prior fiscal year, and Metro had
admitted Francis had complied with the rule for that year. Juansrich then argued
there could be no breach of the non-compete because the trial court had granted Dr.
Francis’s motion for summary judgment arguing the non-compete was
unenforceable. The trial court granted Juansrich’s first Rule 166 motion.

The second 166 motion

      In the second Rule 166 motion, Juansrich argued that the trial court could
rule as a matter of law that at the time of Juansrich’s termination, Metro was
“Operational” as defined in the Metro Agreement. In other words, Metro had been
Medicare certified as an ambulatory surgical center. Juansrich based this argument
on alleged judicial admissions by Metro admitting that Metro became
“Operational” on May 22, 2011. According to Juansrich, this occurred three
separate times, all in relation to Metro’s summary judgment motion arguing that
Juansrich’s termination was adverse: (1) a sentence in a supplemental motion for
summary judgment on the subject filed by Metro stating that “Here, Metro became
operational on May 22, 2011;” (2) a Metro lawyer stating during the summary
judgment hearing that Juansrich “withdrew within five years after Metro became
operational;” and (3) a Power Point slide stating that “Metro became operational
on May 22, 2011.” The trial court granted this Rule 166 motion as well.

The Bench Trial

      The case proceeded to a contentious trial before the bench.           At the
conclusion of the evidence, the trial court found in favor of Juansrich.         It
subsequently signed findings of fact and conclusions of law supporting recovery on
                                         9
theories of conversion, aiding and abetting, unjust enrichment, and breach of
contract. Juansrich elected to recover for conversion. The trial court’s final
judgment awarded Juansrich $9,855,596.85 on Juansrich’s conversion cause of
action, plus attorney’s fees and costs for defending against Metro’s noncompete
claim. The judgment also ordered that Juansrich recover $23.048.50 in attorney’s
fees awarded pursuant to section 3.152(c) of the Texas Business Organizations
Code. See Tex. Bus. Orgs. Code Ann. § 3.152(c) (authorizing award of attorneys’
fees “in a suit to require a filing entity to open its books and records”). This appeal
followed.

                                      ANALYSIS

      Metro raises numerous issues on appeal challenging most of the trial court’s
judgment. It does not challenge the trial court’s award of attorney’s fees awarded
pursuant to the statute regulating access to a company’s financial records. See id.
Metro also does not dispute that it owes Juansrich something; it argues the
recovery is limited to the return of Juansrich’s capital contribution. With that
introduction, we turn to Metro’s issues.

I.    Because an express contract covers the dispute, Juansrich cannot
      recover under tort theories.

      A.     Conversion

      Metro argues in its first issue that the trial court erred when it found that
Metro and several of its members had converted Juansrich’s Metro membership
units because the dispute is governed by a contract, the LLC Agreement. Metro
then asserts that a case from this court, Exxon Mobil Corporation v. Kinder
Morgan Operating, L.P., controls the outcome here. 192 S.W.3d 120, 126–27
(Tex. App.—Houston [14th Dist.] 2006, no pet.).

      In Exxon Mobil, we explained that the independent injury rule provides that
                                           10
“when the only loss or damage is to the subject matter of the contract, the
plaintiff’s action is ordinarily on the contract.” Id. at 127. We further explained
that “when the contract spells out the parties’ respective rights about a subject
matter, the contract–not common law tort theories–governs any dispute about the
subject matter.” Id. We then rejected Exxon Mobil’s conversion claim because
“(1) the only loss Exxon Mobil complains of is the propane, which is the subject of
the contract, and (2) the contract spells out the parties’ respective rights regarding
the processing of the propane.” Id. at 128 (internal citations omitted). This rule
was recognized by the Supreme Court of Texas in Chapman Custom Homes, Inc.
v. Dallas Plumbing Company, 445 S.W.3d 716, 718 (Tex. 2014). There, the Court
stated that “the economic loss rule generally precludes recovery in tort for
economic losses resulting from a party’s failure to perform under a contract when
the harm consists only of the economic loss of a contractual expectancy.” Id. It
went on to explain that the economic loss rule does not bar all tort claims arising
out of a contractual setting. Id. The court observed that “a party states a tort claim
when the duty allegedly breached is independent of the contractual undertaking
and the harm suffered is not merely the economic loss of a contractual benefit.” Id.

      Here, we are presented with the former situation rather than the latter. The
LLC Agreement covers the field of this dispute. It created Juansrich’s ownership
interest, defined the parties’ rights and duties under the agreement, and established
the remedies available when a party failed to perform those duties. In addition,
Juansrich’s alleged loss is the receipt of a contractual benefit, reimbursement for
the loss of its ownership interest in Metro. As a result, Juansrich’s conversion
claim fails as a matter of law. See Exxon Mobil, 192 S.W.3d at 128 (“The very
nature of the dispute between the parties was whether appellees legally performed
their contractual obligations under the GPA. Appellees have conclusively

                                         11
demonstrated that Exxon Mobil’s conversion claims were barred by application of
the independent injury rule.”).

      Because Juansrich cannot recover on a conversion theory, its aiding and
abetting theory of imposing joint and several liability also fails. See Jessen v.
Duvall, No. 14-16-00869-CV, 2018 WL 1004659, at *7 (Tex. App.—Houston
[14th Dist.] Feb. 22, 2018, no pet.) (mem. op.) (“Therefore, if the underlying tort
fails, an aiding and abetting claim related to the failed tort likewise fails.”). In
addition, to the extent Juansrich asserts aiding and abetting as an independent tort
supporting recovery against certain appellants, we have previously rejected aiding
and abetting as a valid legal theory. Solis v. S.V.Z., 566 S.W.3d 82, 102–03 (Tex.
App.—Houston [14th Dist.] 2018, pet. denied) (refusing to recognize aiding and
abetting as a valid theory of recovery in Texas). We once again do so here.

      We sustain Metro’s first issue and reverse the trial court’s judgment based
on conversion and render judgment that Juansrich take nothing on either its
conversion or its aiding and abetting causes of action.

      B.     Unjust enrichment

      The trial court also made findings supporting a recovery by Juansrich for
unjust enrichment. Metro argues in its second issue that there can be no recovery
for unjust enrichment because a contract covers all aspects of the claim. We agree.
Here, as pointed out above, the LLC Agreement covers all aspects of Juansrich’s
unjust enrichment claim. In addition, there was a legitimate dispute regarding the
amount owed under the LLC Agreement, which forecloses an unjust enrichment
recovery.   See Industrial III, Inc. v. Burns, No. 14-13-00386-CV, 2014 WL
4202495, at *6 (Tex. App.—Houston [14th Dist.] Aug. 26, 2014, pet. denied)
(mem. op.) (“Generally speaking, a party may not recover under quantum meruit or
unjust enrichment if an express contract covers the services or materials
                                         12
furnished.”). As a result, we hold that Juansrich cannot recover under an unjust
enrichment cause of action. Id.

II.   The trial court erred when it granted Juansrich’s first and second Rule
      166 motions requiring a new trial on Juansrich’s breach of contract
      claims seeking payment for its ownership interest in Metro.

      As previously stated, Juansrich elected to recover under its conversion cause
of action. The trial court, however, also found that Metro breached the LLC
Agreement. It determined that Juansrich’s breach of contract damages totaled (1)
$7,844,676 for Metro’s breach of its obligation to pay Juansrich for its membership
units, and (2) $191,764.21 for member distributions for September and October of
2014. The first amount was initially based on the trial court granting the two Rule
166 motions and thereby determining that Juansrich’s termination was non-adverse
and that Metro was “Operational” as defined in the LLC Agreement when the
termination occurred. Both are requirements that must be met before Juansrich can
recover anything more than its initial capital contribution. The second amount was
based on (1) undisputed evidence that Juansrich was still a member of Metro in
September and October of 2014 and was entitled to a proportionate share of any
distributions that occurred for those months, and (2) evidence admitted during the
bench trial allegedly establishing the amount of those distributions. Metro argues
in its third issue that neither amount can stand.

      A.     The trial court could use Rule 166 in appropriate circumstances
             to resolve legal issues.

      We turn first to Metro’s argument that Juansrich’s use of Rule 166 here was
improper. We conclude that the trial court had the authority under Rule 166, in
appropriate circumstances, to resolve legal issues that could streamline a trial. See
Tex. R. Civ. P. 166(g) (p); JP Morgan Chase Bank v. Orca Assets G.P., LLC., 546
S.W.3d 648, 653 (Tex. 2018) (stating that Rule 166(g) authorizes trial courts to

                                          13
decide matters that, though ordinarily fact questions, have become questions of law
“because reasonable minds cannot differ on the outcome.”).             Therefore, the
question before us is not whether the procedure was authorized, but whether the
circumstances were appropriate for such a ruling. We review a trial court’s Rule
166 order de novo. JP Morgan Chase Bank, 546 S.W.3d at 653.

      B.     The trial court erred when it granted Juansrich’s first Rule 166
             motion.

      To be entitled to a return of anything more than its initial capital
contribution, Juansrich initially had to establish that Juansrich’s termination by
Metro was non-adverse as defined in the LLC Agreement. An adverse termination
occurs if the member materially breached the LLC Agreement. If the termination
was “adverse,” then Juansrich would only be entitled to a return of its initial capital
contribution of $195,000. If the termination was non-adverse, then the redemption
price for Juansrich’s ownership interest would be determined by whether the
termination occurred before or after Metro became “Operational” as defined in the
LLC Agreement. If the termination occurs before Metro becomes “Operational,”
Juansrich would only be entitled to a return of its initial capital contribution,
$195,000.    If after, then the payment would be determined by performing a
calculation laid out in article 4.3(g)(ii)(B) of the LLC Agreement.

      Metro had alleged that Juansrich’s termination was adverse because it had
materially breached the LLC Agreement by violating (1) the non-compete, and (2)
the one-third procedures rule. Juansrich argued that the trial court should grant its
first Rule 166 motion because (1) the undisputed facts showed that it had complied
with the one-third procedures rule, and (2) its prior summary judgment order had
determined that the non-compete agreement was unenforceable. Juansrich argued
compliance with the one-third procedures requirement was measured by the prior

                                          14
fiscal year and Metro had admitted that Juansrich had complied with that
requirement for 2013. Juansrich based this argument on the fact that the LLC
Agreement required that compliance with the one-third of medical-income rule be
measured “for the previous fiscal year or previous 12-month period.” The trial
court agreed and granted Juansrich’s first Rule 166 motion.

      On appeal, Metro argues, in part, that the trial court erred when it granted
Juansrich’s first Rule 166 motion because the LLC Agreement did not specify that,
unlike the one-third of medical-income rule, compliance with the one-third
procedures rule was measured by the prior fiscal year. Metro asserts this omission
was intentional and the trial court erred when it added the annual compliance
language into the number of procedures rule. We agree.

      Courts are not authorized to rewrite agreements to insert provisions that the
parties could have included or to imply terms for which they have not bargained.
Tenneco, Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 646 (Tex. 1996); Bennett
v. Comm’n for Lawyer Discipline, 489 S.W.3d 58, 68 (Tex. App.—Houston [14th
Dist.] 2016, no pet.).   Here, because the parties chose to include an annual
measurement period for determining compliance with the one-third of medical-
income rule, we must accept that the parties’ omission of that language from the
one-third of procedures rule was intentional. See George Joseph Assets, LLC v.
Chenevert, 557 S.W.3d 755, 771 (Tex. App.—Houston [14th Dist.] 2018, pet.
denied) (“We will not read language into the agreement that the parties did not
include.”); Bennett, 489 S.W.3d at 70 (“We are not authorized to rewrite the
parties’ contract under the guise of interpreting it, even if one of the parties has
come to dislike one of its provisions.”). Therefore, because the parties did not
include an annual time-period for measuring compliance with the one-third
procedures rule, we construe the contract to require the measurement to occur over

                                        15
a reasonable time period. See Hewlett-Packard Co. v. Benchmark Electronics,
Inc., 142 S.W.3d 554, 563 (Tex. App.—Houston [14th Dist.] 2004, pet. denied)
(“[W]hen a contract is silent regarding the date for an action to be taken, the courts
will construe the contract as requiring such action be taken within a reasonable
time.”). “The question of reasonableness is usually one for the trier of fact.” Id.
We therefore hold that there was a fact question on whether Juansrich complied
with the one-third procedures rule to be resolved by the trier of fact. Accordingly,
the trial court erred when it ruled as a matter of law that Juansrich’s termination
was non-adverse and it granted Juansrich’s first Rule 166 motion.

      Metro also argues that the trial court erred when it partially based its first
Rule 166 order on its previous summary judgment order declaring the covenant not
to compete found in the LLC Agreement unenforceable. The trial court had
previously determined that the covenant not to compete in the LLC Agreement was
unenforceable because it failed to comply with the requirements set forth in
subsection 15.50(b) of the Business and Commerce Code. See Tex. Bus. & Com.
Code Ann. § 15.50(b) (establishing requirements that a covenant not to compete
relating to the practice of medicine must comply with to be enforceable). Metro
did not deny that the covenant not to compete found in the LLC Agreement did not
include those restrictions. Metro instead argued that the LLC Agreement did not
need to comply with the subsection 15.50(b) requirements because the legislature
had amended the statute by adding subsection (c), which provides that “subsection
(b) does not apply to a physician’s business ownership interest in a licensed
hospital or licensed ambulatory surgical center.” Id. at § 15.50(c). As a result of
this addition to the statute, Metro argued the covenant not to compete did not need
to comply with subsection 15.50(b) and was otherwise enforceable against Dr.
Francis. We agree with Metro.

                                         16
      This issue presents a question of statutory construction, which we review de
novo. Texas Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex. 2002).
When construing statutes, our primary objective is to give effect to the legislature’s
intent. Willacy Cty. Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d
29, 38 (Tex. 2018). We rely on the plain meaning of the text as expressing
legislative intent unless a different meaning is supplied by legislative definition or
is apparent from the context, or the plain meaning leads to absurd results. Id.

      Here, it is undisputed that the covenant not to compete at issue here was
contained in the LLC Agreement forming Metro, the entity owning and operating
an ambulatory surgical center. As a result, pursuant to the plain language of the
statute, the covenant not to compete in the LLC Agreement was not required to
comply with the limitations found in subsection (b) of the statute. See Tex. Bus. &
Com. Code Ann. § 15.50(c) (providing that subsection 15.50(b) of the Business
and Commerce Code “does not apply to a physician’s business ownership interest
in a licensed hospital or licensed ambulatory surgical center”); Novamed Surgery
Ctr. of Tyler, L.P. v. Bochow, No. 12-12-00159-CV, 2013 WL 2725544, at *4
(Tex. App.—Tyler June 12, 2013, no pet.) (mem. op.) (“Before the [2009]
amendment, a noncompetition covenant involving a physician’s ownership interest
in an [ambulatory surgical center] required a buyout provision. Following the
amendment, it did not. It is more than a ‘clarification.’ It is a change in the law.”)
(internal citations omitted). We therefore hold that the trial court erred when it
ruled that the covenant not to compete in the LLC Agreement was unenforceable
because it did not contain the limitations found in subsection 15.50(b) of the
Business and Commerce Code and then relied on that ruling in part to determine
that Metro’s termination of Dr. Francis and Juansrich was non-adverse.

      C.     The trial court erred when it granted Juansrich’s second Rule 166
             motion.
                                         17
       A judicial admission results when a party makes a statement of fact which
conclusively disproves a right of recovery or a defense. In re Estate of Guerrero,
465 S.W.3d 693, 705 (Tex. App.—Houston [14th Dist.] 2015, pet. denied). A
judicial admission is a formal waiver of proof that dispenses with the production of
evidence on an issue and bars the admitting party from disputing it. Id. The
elements required for a judicial admission are: (1) a statement made during a
judicial proceeding; (2) that is contrary to an essential fact or defense asserted by
the person making the admission; (3) that is deliberate, clear, and unequivocal; (4)
that if given conclusive effect, would be consistent with public policy; and (5) that
is not destructive of the opposing party’s theory of recovery. Id. at 705–06. An
attorney’s statements on behalf of a client may serve as a judicial admission. Id. at
705.

       Juansrich argued that Metro’s judicial admission occurred three separate
times, all related to Metro’s motion for summary judgment asserting that
Juansrich’s termination was adverse because Juansrich had materially breached the
LLC Agreement.       According to Juansrich, the first instance occurred in a
supplemental motion for summary judgment which provided that “Here, Metro
became operational on May 22, 2011.” The second occurred when a Metro lawyer
stated during the summary judgment hearing that Juansrich “withdrew within five
years after Metro became operational.” The third occurred in a Power Point slide
stating that “Metro became operational on May 22, 2011.” As explained above,
“Operational” (emphasis added) was a defined term in the LLC Agreement.
Operational however, also has a generic meaning when applied to a business,
meaning the state of being functional. Here, none of Metro’s alleged judicial
admissions used “operational” with a capitalized “O.”         Based on these dual
meanings, and the fact Metro used the uncapitalized version of operational, we

                                         18
hold that it is not clear in what sense Metro used the term. Therefore, the three
alleged admissions do not meet the requirement of being deliberate, clear, and
unequivocal. See Estate of Guerrero, 465 S.W.3d at 706. We conclude that none
of the statements rise to the level of a judicial admission as to the contractually
defined term and therefore the trial court erred when it granted Juansrich’s second
Rule 166 motion.

      Because we have determined that the trial court erred when it granted
Juansrich’s second Rule 166 motion, we need not reach Metro’s argument that
Francis waived the judicial admission by not objecting to all contrary evidence
offered during the bench trial. Having determined that the trial court erred when it
granted both of Juansrich’s Rule 166 Motions, we sustain Metro’s third issue in
part, and conclude that Juansrich cannot simply elect to recover under its breach of
contract cause action seeking payment on the value of its membership units.
Instead, the breach of contract claim seeking payment for Juansrich’s ownership
interest must be remanded to the trial court for further proceedings.

      B.     Distributions

      As stated above, the trial court found that Juansrich was entitled to
$191,764.21 as its proportionate share of the December 2014 distribution allegedly
made by Metro for earnings in September and October 2014, a time-period when
Juansrich was still a Metro member. Metro argues that the evidence is legally
insufficient to support the trial court’s finding.

      When an appellant challenges the legal sufficiency of the evidence on an
adverse finding on an issue on which it did not have the burden of proof it must
demonstrate on appeal that there is no evidence to support the adverse finding.
Univ. Gen. Hosp., L.P. v. Prexus Health Consultants, LLC, 403 S.W.3d 547, 550
(Tex. App.—Houston [14th Dist.] 2013, no pet.). In conducting a legal-sufficiency
                                           19
review, we must consider all the record evidence in the light most favorable to the
appealed finding and indulge every reasonable inference that supports it. Id. at
550–51 (citing City of Keller v. Wilson, 168 S.W.3d 802, 821–22 (Tex. 2005)).
The evidence is legally sufficient if it would enable reasonable and fair-minded
people to reach the decision under review. Id. at 551. This Court must credit
favorable evidence if a reasonable trier of fact could, and disregard contrary
evidence unless a reasonable trier of fact could not. Id. The trier of fact is the sole
judge of the witnesses’ credibility and the weight to be given their testimony. Id.

      We sustain a legal sufficiency (or no-evidence) issue only if the record
reveals one of the following: (1) the 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 scintilla; or (4) the evidence established conclusively the
opposite of the vital fact. Id. Evidence that is so weak as to do no more than
create a mere surmise or suspicion that the fact exists is less than a scintilla. Id.
“The Texas Supreme Court has held that conclusory or speculative opinion
testimony is incompetent evidence and cannot support a judgment.” Hong v.
Integrated Eng’g, Inc., No. 14-06-00579-CV, 2008 WL 660650, at *4 (Tex.
App.—Houston [14th Dist.] March 11, 2008, pet. denied) (mem. op.) (internal
quotations omitted).

      Shelia Enriquez testified that she reviewed Metro’s financial documents,
including financial statements, bank records, and Metro’s distribution schedule.
These documents were admitted into evidence for the trial judge to review.
Distributions for a particular month were normally made around the middle of the
following month. Metro made a distribution for every month in 2014 except for
the months of September and October.           Enriquez opined that the November

                                          20
distribution, made in December, included revenue attributable to the months of
September and October.

       Enriquez reviewed Metro’s records and determined that there was sufficient
cash in the company in both September and October to make distributions, yet
none were made. Enriquez then looked at the November distribution (made in
December) and concluded that $801,600 of the total distribution of $1,043,600.37
was attributable to income earned in September and October.                   According to
Enriquez, Juansrich’s percentage share of those earnings was 23.92268, which
yields a payment for Juansrich of $191,764.21.               During her trial testimony,
Enriquez explained, in a step-by-step manner, how she arrived at this amount, a
number derived from Metro’s own records.                We hold this testimony is not
conclusory and is legally sufficient to support the trial court’s award of that exact
amount in the final judgment.

           We therefore overrule this part of Metro’s third issue on appeal and affirm
the final judgment’s award of $191,764.51 for missed distributions.

III.   The trial court erred when it awarded Dr. Francis attorney’s fees
       pursuant to the Covenant Not to Compete Act.

       In its final issue on appeal, Metro challenges the trial court’s award of
attorneys’ fees to Dr. Francis pursuant to the Covenant Not to Compete Act.3 See
Tex. Bus. & Com. Code Ann. § 15.51(c) (authorizing a trial court to award
attorney’s fees in certain circumstances). The judgment’s fee award was based on
the trial court (1) granting Dr. Francis’s motion for summary judgment declaring
the non-competition provision in the LLC Agreement unenforceable; and (2) a

       3
         There is no dispute on appeal that the Covenant Not to Compete Act is the sole basis
pursuant to which the trial court awarded the $403,918.15 in attorney’s fees and costs because
Dr. Francis conceded on appeal “that the fees and costs were not recoverable under the [LLC]
Agreement.”

                                             21
subsequent pretrial order granting Dr. Francis’s motion seeking attorney’s fees
pursuant to Subsection C of the statute. See id. The trial court ordered Metro to
pay Dr. Francis $380,471.50 in attorney’s fees plus $23,446.65 in costs. The pre-
trial orders were then merged into the final judgment.

       Metro argues in its final issue on appeal that the trial court erred when it
awarded the attorney’s fees because (1) the primary purpose of the LLC
Agreement was not to obligate Dr. Francis to render personal services; and (2)
even if the primary purpose was to render personal services, Dr. Francis failed to
establish that Metro knew at the time of the execution of the LLC Agreement that
the covenant did not contain reasonable limitations as to time, geographical area,
and the scope of activity to be restrained.4 Dr. Francis responds that the trial court
did not abuse its discretion when it awarded the attorney’s fees because he
adequately established both statutory requirements.

       Subsection 15.51(c) of the Covenant Not to Compete Act provides that a
“court may award the promisor the costs, including reasonable attorney’s fees,
actually and reasonably incurred by the promisor in defending the action to enforce
the covenant,” but only if the promisor can establish that “the primary purpose of
the agreement to which the covenant is ancillary is to obligate the promisor to
render personal services.”         See Tex. Bus. & Com. Code Ann. § 15.51(c). We
conclude that Dr. Francis failed to meet this initial, statutory requirement for the
recovery of fees.

       This issue requires us to review the trial court’s construction of the
Covenants Not to Compete Act. Statutory interpretation presents a question of law

       4
         As stated above, the final judgment also includes a second award of attorney’s fees
totaling $23,048.50 pursuant to section 3.152(c) of the Texas Business Organizations Code.
Metro affirmatively stated in its appellate briefing that it does not challenge this award on appeal.
We therefore affirm this part of the final judgment.

                                                 22
subject to de novo review. Texas Law Shield, LLP v. Crowley, 513 S.W.3d 582,
588 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). This issue also requires
us to review the trial court’s construction of the LLC Agreement, the contract at
issue in this dispute. If a contract is not ambiguous, it is construed as a matter of
law. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). We
review a trial court’s legal conclusions de novo. Trelltex, Inc. v. Intecx, L.L.C.,
494 S.W.3d 781, 790 (Tex. App.—Houston [14th Dist.] 2016, no pet.). When
performing a de novo review, we exercise our own judgment and redetermine each
legal issue. Id. Neither side has argued the LLC Agreement is ambiguous and we
agree that it is not. See Lane-Valente Indus. (Nat’l), Inc, v. J.P. Morgan Chase
Bank, N.A., 468 S.W.3d 200, 205 (Tex. App.—Houston [14th Dist.] 2015, no pet.)
(stating that deciding whether a contract is ambiguous is a question of law). We
therefore review the trial court’s implied legal conclusion that the primary purpose
of the LLC Agreement was to obligate the members to provide personal services
de novo.

      Here, it is undisputed that Dr. Francis was never an employee of Metro and
never had an employment contract with Metro. Instead, the only contract at issue
here is the LLC Agreement, which the parties signed in order “to develop, own,
and operate an ambulatory surgical center.” The LLC Agreement has lengthy
provisions establishing how doctors could become and remain members of the
company. The LLC Agreement also covered the management of the surgical
center. We conclude that the primary purpose of the LLC Agreement, as its title
and content implies, was to create and then regulate a limited liability company for
the purpose of developing and operating an ambulatory surgical center from which
its members could ultimately derive profits. See Rimkus Consulting Grp., Inc. v.
Cammarata, 688 F.Supp.2d 598, 678 (S. D. Tex. 2010) (“The language of the

                                         23
Agreement shows that the primary purpose was not to obligate Bell to render
services to Rimkus.”); CSL Prop. Mgmt. Co. v. Thyssenkrupp Elevator, Co., No.
01-11-00665-CV, 2013 WL 396252, at *6 (Tex. App.—Houston [1st Dist.] Jan.
31, 2013, no pet.) (mem. op.) (“A primary purpose of the assumption agreement, as
evidenced on the face of the agreement, is to protect Thyssenkrupp from the risks
associated with Greatland’s removal of Emergency Services as the general
contractor for the project after the project commenced, especially with respect to
the payment of the contract price.”); Swinehart v. Stubbeman, McRae, Sealy,
Laughlin & Browder, Inc., 48 S.W.3d 865, 877 (Tex. App.—Houston [14th Dist.]
2001, pet. denied) (holding in a legal malpractice case that the Statute of Frauds
applied to underlying contract because, after “considering all the terms of the third
contract, it is clear that the primary purpose of the contract was to secure interests
in oil and gas lease” rather than the acquisition of geologic information gathered by
a petroleum geologist).     We conclude that the primary purpose of the LLC
Agreement was not to obligate its members to render personal services.
Accordingly, we hold that Dr. Francis failed to meet the first requirement for the
recovery of attorney’s fees pursuant to the Covenant Not to Compete Act. See
Tex. Bus. & Com. Code Ann. § 15.51(c) (“If the primary purpose of the agreement
to which the covenant is ancillary is to obligate the promisor to render personal
services . . . the court may award the promisor the costs, including reasonable
attorney’s fees, actually and reasonably incurred by the promisor in defending the
action to enforce the covenant.”). We sustain Metro’s fourth issue, reverse the trial
court’s award of attorney’s fees and costs pursuant to the Covenants Not to
Compete Act and render judgment that Dr. Francis take nothing on that claim.

                                   CONCLUSION

      Because Metro has not challenged the trial court’s award of $23,048.50 in

                                         24
attorney’s fees pursuant to section 3.152(c) of the Texas Business Organizations
Code, we affirm that part of the trial court’s final judgment. Having sustained
Metro’s first and second issues on appeal, we reverse the trial court’s final
judgment based on Juansrich’s conversion cause of action and render judgment
that Juansrich take nothing on its conversion, aiding and abetting, and unjust
enrichment causes of action.      Having reversed and rendered a take-nothing
judgment on Juansrich’s tort causes of action and having sustained the part of
Metro’s third issue challenging the trial court’s Rule 166 orders which prevent
Juansrich from electing to recover on its breach of contract cause of action seeking
payment for the value of its membership units, we remand that claim to the trial
court for further proceedings. Having overruled the part of Metro’s third issue
challenging the sufficiency of the evidence supporting the award of $191,764.21
for missed distribution payments, we affirm that part of the final judgment.
Having sustained Metro’s fourth issue challenging the part of the trial court’s final
judgment awarding attorney’s fees to Dr. Francis pursuant to the Covenants Not to
Compete Act, we reverse and render judgment that Dr. Francis take nothing on that
claim.

                                       /s/    Jerry Zimmerer
                                              Justice

Panel consists of Chief Justice Christopher and Justices Jewell and Zimmerer.

                                         25