Court Opinion

ID: 3122073
Source: CourtListenerOpinion
Date Created: 2015-10-16 14:18:48.437559+00
Date Added: 2024-06-11T08:15:08.956660
License: Public Domain

Opinion issued August 30, 2012

                                 In The

                           Court of Appeals
                                 For The

                       First District of Texas
                        ————————————
                           NO. 01-10-01079-CV
                         ———————————
 BANKCARD PROCESSING INTERNATIONAL, L.L.C., MERCHANT
  PROCESSING, INC., OLLIE S. ACKLEY, JEFF MAINE, KENNETH
  MAINE, DIVERSIFIED CHECK SOLUTIONS, L.L.C., DIVERSIFIED
 PAYMENT SOLUTIONS, L.L.C., ACHECK21, L.L.C., AND JEANINNE
                   MCCONNELL, Appellants
                                   V.
              UNITED BUSINESS SERVICES, L.P., Appellee

                                  AND

             UNITED BUSINESS SERVICES, L.P., Appellant

                                   V.

  BANKCARD PROCESSING INTERNATIONAL, L.L.C., MERCHANT
  PROCESSING, INC., OLLIE S. ACKLEY, JEFF MAINE, KENNETH
  MAINE, DIVERSIFIED CHECK SOLUTIONS, L.L.C., DIVERSIFIED
  PAYMENT SOLUTIONS, L.L.C., ACHECK21, L.L.C., AND JEANINNE
                 MCCONNELL, Appellees

                    On Appeal from the 152nd District Court
                             Harris County, Texas
                       Trial Court Case No. 2006-30498

                            MEMORANDUM OPINION

      United Business Services, L.P. (“UBS”) entered into a business relationship

with Bankcard Processing International, L.L.C. (“BPI”) and Merchant Processing,

Inc. (“MPI”) for the purpose of forming a joint venture to provide electronic check

imaging and processing services.     After an unsuccessful test of the proposed

services, BPI and MPI ended their relationship with UBS, and their owners created

competing business entities. UBS filed suit and asserted claims for fraud, breach

of fiduciary duty, and breach of contract against BPI, MPI, and several related

entities and individuals.

      After a jury trial, the court entered judgment in favor of UBS for

$1.5 million. On appeal, the appellants contend that the damages award is not

supported by legally sufficient evidence. Because the only evidence regarding

damages did not conform to the measure of damages submitted to the jury, we

conclude that there is no evidence to support the verdict. We reverse the trial

                                        2
court’s judgment, in part, and render judgment that UBS take nothing on its

affirmative causes of action.

      UBS also appealed from the trial court’s judgment, arguing that the court

erred in its pretrial ruling that the parties’ confidentiality and nondisclosure

agreements were unenforceable. The court did not specify a basis for its ruling on

the motions for summary judgment, and on appeal, UBS did not address each

possible ground on which the trial court could have based its ruling. Thus, we

affirm the trial court’s ruling on the motions for summary judgment.

      Finally, UBS contends that because it was the prevailing party with respect

to a counterclaim asserted against it by BPI for breach of contract, the trial court

erred by denying its motions for contractual attorney’s fees. UBS was entitled to

recover attorney’s fees under the parties’ contract, so we reverse the judgment as to

that issue, and we remand for further proceedings consistent with this opinion.

                                   Background

      UBS was a limited partnership that provided merchant-processing services.

BPI and MPI were similar businesses. BPI resold merchant-processing services,

primarily to utilities.   MPI resold merchant-processing services, primarily to

municipalities. Kenneth Maine and Jeff Maine owned BPI. Ollie S. Ackley

owned MPI.

                                         3
      In 2003, Congress passed the Check Clearing for the 21st Century Act

(“Check 21 Act”), which authorized the electronic imaging and processing of

checks. For approximately two years, UBS conducted research in contemplation

of possibly entering this market, and it eventually contracted with two payment-

processing software companies, U.S. Dataworks and Turbo Transactions.

      The president of UBS met Jeff Maine at a golf tournament in mid-2004, and

the two men began to discuss the possibility of working together to sell Check 21

services. In August 2005, BPI entered into a sales agreement with UBS, which

provided that BPI would sell UBS’s products. Later, the president of UBS also

met with Ackley to discuss the prospect of MPI working with UBS and BPI to sell

Check 21 services.

      Before sharing the information it had collected regarding the Check 21 Act,

the software needed to implement it, and the potential market for these services,

UBS required Ackley and both of the Maines to sign confidentiality and

nondisclosure agreements. In January 2006, UBS, BPI, and MPI signed a letter of

intent describing their intention to work together as a new venture, selling both

automatic clearing house (ACH) services and Check 21 services. Between January

and April 2006, UBS tested its Check 21 products and services at customers’

facilities. But the testing showed that the products failed to perform as anticipated.

                                          4
      In mid-April 2006, BPI and MPI informed UBS that they were discontinuing

their relationship under the letter of intent, stating that their activities up to that

point had been due diligence and noting the fact that UBS’s products and services

did not work. Five days later, the owners of BPI and MPI created their own

companies to compete with UBS in the market for reselling Check 21 services.

These new companies were Diversified Check Solutions, L.L.C., Diversified

Payment Solutions, L.L.C., and ACheck21, L.L.C.

      UBS sued BPI, MPI, their owners, and the companies they formed to

compete in the Check 21 market. The lawsuit also named as defendants a software

designer who had worked with UBS and provided information to BPI and MPI

when they worked together under the letter of intent. Among other things, UBS

alleged fraud and breach of fiduciary duty. BPI countersued for, among other

things, breach of the 2005 sales agreement.

      Before trial, the parties filed competing motions for summary judgment on

the issue of the enforceability of the confidentiality and nondisclosure agreements.

UBS argued that the agreements were unambiguous and enforceable as a matter of

law. The defendants filed a cross-motion for partial summary judgment arguing

that the nondisclosure agreements were not enforceable because the “confidential

information” referenced by the agreements was equally available to the defendants

before they signed the nondisclosure agreements, and such information was

                                          5
already in the defendants’ possession prior to signing the nondisclosure

agreements. The defendants also argued that UBS had no possessory, proprietary,

or ownership interest in the disputed “confidential information,” which was not

secret but in the public domain. Thus, the defendants contended there was no

evidence of any improper disclosure or use of information that caused harm to

UBS. The trial court denied UBS’s motion for summary judgment and granted the

appellants’ motion without specifying the basis for its ruling.

      At trial, UBS’s expert accounting witness, Greg Cowhey, testified that he

calculated a value for the proposed enterprise by projecting what its profits would

have been based on the parties’ own assumptions, i.e., that the product worked, the

market accepted the product, potential contracts would be realized, and overall

estimated levels of use of the product and growth in demand for their services

would occur. After estimating the lost future profits, Cowhey calculated their

present value using a discounted cash flow methodology. Cowhey testified that

UBS’s damages were approximately $3.7 to 4.2 million. He also testified that he

never calculated a value for UBS, L.P. and that he disregarded its historical

performance.

      The damages question asked the jury to determine what sum of money

would compensate UBS for damages caused by the defendants’ wrongful acts.

The jury was specifically instructed to consider only one element of damages—the

                                          6
“benefit of the bargain”—and “none other.” The charge further instructed the jury

that “benefit of the bargain” means:

      the difference, if any, between the value of UBS, L.P.’s business after
      the individuals or entities committed the wrongful acts against UBS,
      L.P., and the value of UBS, L.P.’s business if the individuals or
      entities had not committed such wrongful acts against UBS, L.P.

The jury found in favor of UBS on its liability questions, finding that the appellants

committed fraud and breached their fiduciary duties.             The jury awarded

$1.5 million in damages to UBS. The jury also found in favor of UBS on the

defendants’ counterclaim for breach of a 2005 sales agreement, finding that the

defendants should take nothing by way of their counterclaim.

      UBS moved for an award of contractual attorney’s fees, arguing that it was

the prevailing party. The defendants also sought statutory attorneys’ fees based on

the pretrial ruling that a covenant not to compete in the 2005 sales agreement was

not enforceable. The trial court denied the motions for attorney’s fees, reasoning

that the awards of fees would cancel each other out.

      The defendants appealed, raising three issues challenging the sufficiency of

the evidence to support the jury’s award of damages and one issue challenging

UBS’s standing to recover damages that the jury found were suffered by its general

partner, UBS II, Inc. UBS also appealed, challenging the trial court’s ruling on the

competing partial motions for summary judgment and the court’s ruling denying

contractual attorney’s fees.
                                          7
                                      Analysis

   I.      Defendants’ appeal

        In their first issue, the defendants challenge the legal sufficiency of the

evidence to support the damages award because it did not coincide with the

measure of damages submitted to the jury. The jury was given the following

question and instructions regarding damages:

        What sum of money, if any, if paid now in cash, would fairly and
        reasonably compensate Plaintiff UBS, L.P., for its damages, if any,
        that resulted from or were proximately caused by the wrongful acts of
        the listed individuals or entities?

        ....

        Consider the following elements of damages, if any, and none other.

        “Benefit of the bargain” means the difference, if any, between the
        value of UBS, L.P.’s business after the individuals or entities
        committed the wrongful acts against UBS, L.P., and the value of UBS,
        L.P.’s business if the individuals or entities had not committed such
        wrongful acts against UBS, L.P.

Neither party objected to this part of the jury charge.

        In the absence of an objection to the court’s charge, we evaluate the

sufficiency of the evidence in light of the court’s charge as given to the jury.

Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). In a legal sufficiency, or “no-

evidence” review, we determine whether the evidence would enable reasonable

and fair-minded people to reach the verdict under review. City of Keller v. Wilson,

168 S.W.3d 802, 827 (Tex. 2005).          In making this determination, we credit
                                           8
favorable evidence if a reasonable fact-finder could, and we disregard contrary

evidence unless a reasonable fact-finder could not. Id. We consider the evidence

in the light most favorable to the finding under review and indulge every

reasonable inference that would support it. Id. at 822. So long as the evidence

falls within the zone of reasonable disagreement, we may not substitute our

judgment for that of the fact-finder. Id. The trier of fact is the sole judge of the

credibility of the witnesses and the weight accorded to their testimony. Id. at 819.

Although we consider the evidence in the light most favorable to the challenged

findings, indulging every reasonable inference that supports them, we may not

disregard evidence that allows only one inference. Id. at 822.

      Gregory Cowhey, an accounting expert, testified about UBS’s damages. His

testimony focused primarily on his credentials and experience, the methodology he

used to calculate UBS’s damages, and the assumptions, estimates, and information

he relied on in making his calculations. Cowhey testified that he determined “the

present value of the future profits lost by virtue of the termination of the joint

venture arrangement.” He calculated the venture’s lost future profits over a period

of five years beginning December 31, 2006. He relied on two sets of projections to

infer how the joint venture would have performed: one projection assumed the

businesses of U.S. Dataworks, Turbocheck, and U.S. Clearing Systems were joined

together, and the other projection was one prepared by the defendants in relation to

                                         9
the anticipated profitability of Diversified Check Solutions. Cowhey then used the

discounted cash flow methodology to calculate the present value of the projected

future earnings.   He testified that this method was “generally relied upon by

experts” to “value businesses.”

      Cowhey testified about his opinion of the total damages UBS sustained as a

result of the events that gave rise to the lawsuit. He said that the damages were

comprised of the capital invested and the “lost profits prospectively after the

formation of the joint venture.” He testified that UBS’s capital investment was

approximately $1,051,000 and UBS’s one-third share of the lost profits ranged

from $2,657,000 to $3,213,000. Thus, he opined that UBS’s total damages were

between $3,708,000 and $4,264,000.

      As part of his valuation analysis, Cowhey did not calculate the value of

UBS’s business. This was made evident during Cowhey’s testimony at trial:

      Q.    Now, with all these numbers you have been talking about you
            came [up] with between 2.6 and $3.2 million in damages, right?

      A.    For the future profit component, yes.

      Q.    And you came up with that by valuing a hypothetical joint
            venture, right?

      A.    Yes.

      Q.    Okay. You did not value and didn’t try to value the Plaintiff in
            this case, UBS Limited Partnership, did you?

      A.    I was not asked to do that.
                                          10
      Q.    You weren’t asked to and you didn’t?

      A.    That is correct.

      Cowhey did testify that a value for UBS could be implied from a transaction

in which a UBS investor agreed to convert a $300,000 loan into a 7% ownership

interest in the partnership.   Based on that October 2005 transaction, Cowhey

testified that a value of $4.26 million could be implied, but he emphasized that he

did not rely on this method to estimate a value for UBS:

      A.    That is not my valuation. I said this again this morning. That is
            their—the investor put up $300,000 and got back 7 percent.
            That’s factually what happened. . . . This 7 percent represents
            300. Do the math. What does 100 represent? That is just a
            fact.

      Q.    Okay. And, so, 4.26 million . . . value is a fact, right?

      A.    If you look at that transaction, that is what that tells you. That
            is a mathematical fact. If 300,000 equals 7 percent, then 100
            percent equals 41285 [sic] that is just a mathematical factor.

      Q.    And, so, UBS is worth $4.286 million in October of ’05. Did
            you look at their value as to how it looked, say, December 31,
            2005?

      A.    You asked me this before. My answer is, again, I was never
            asked to value UBS at any date.

      Q.    Did you ever try to look at a value of UBS on January 19th,
            2006?

      A.    You asked me that before and I said I was never asked to value
            UBS at any date.

                                         11
      Cowhey’s opinion of UBS’s damages was based solely upon his lost-profits

analysis. But Cowhey’s testimony does not support any amount of damages as

measured by the instructions submitted to the jury, which is the standard we use to

evaluate the sufficiency of the evidence. The jury was not asked to consider lost

profits as an element of damages. Rather, the jury was instructed to consider only

one potential element of damages, “and none other.” The sole element of damages

submitted to the jury was the “benefit of the bargain,” defined in the jury charge as

“the difference, if any, between the value of UBS, L.P.’s business after the

individuals or entities committed the wrongful acts against UBS, L.P., and the

value of UBS, L.P.’s business if the individuals or entities had not committed such

wrongful acts against UBS, L.P.”

      Even to the extent that a reference to a company’s “business” might be

understood as a colloquial reference to its profits, that understanding of “business”

cannot be squared with the instruction given to the jury, which required a

comparison of two values of the “business”—one valuation “after the individuals

or entities committed the wrongful acts against UBS, L.P.,” and another valuation

of “UBS, L.P.’s business if the individuals or entities had not committed such

wrongful acts against UBS, L.P.”       The only way the jury could have even

attempted to measure the benefit of the bargain, as defined by the jury instructions

and based upon Cowhey’s lost-profits analysis, would be to assume that the value

                                         12
of “UBS, L.P.’s business after the individuals or entities committed the wrongful

acts against UBS, L.P.” was zero. But Cowhey offered no opinion that UBS’s

“business” became utterly worthless upon the dissolution of the nascent joint

venture, and the record would not support any such conclusion in light of the fact

that UBS was an ongoing business concern separate and apart from the new

business opportunity it had hoped to exploit with BPI and MPI as its co-venturers.

      To the extent that the instruction given to the jury is given its more natural

reading, which suggests that the jury should assess the value of UBS as a

“business” (as opposed to its mere expectation of profits from a new business

opportunity, projected over a fixed period of time), Cowhey’s opinion testimony

supplied no evidence upon which the factfinder could assess the value of UBS. In

particular, a reasonable factfinder could not disregard his repeated testimony that

he did not establish a value for UBS, L.P. at any time because he was never asked

to do so. See City of Keller, 168 S.W.3d at 822. Nothing in Cowhey’s testimony

proves the value of UBS’s business after the defendants’ wrongful acts or in the

absence of such wrongful acts.

      No evidence supports the damages awarded in this case as measured against

the jury instruction. Accordingly, we conclude that, based on this record, no

reasonable and fair-minded factfinder could have found that UBS sustained

damages in the amount of $1.5 million. See id. at 827. We hold that the evidence

                                        13
is legally insufficient to support this part of the trial court’s judgment. We sustain

the defendants’ first issue, reverse the trial court’s judgment in part, and render

judgment that UBS take nothing by way of its lawsuit. In light of this disposition,

we do not reach the defendants’ three other appellate issues. See TEX. R. APP.

P. 47.1.

   II.      UBS’s appeal

         UBS appeals two of the trial court’s pretrial rulings: the court’s ruling on the

parties’ competing motions for partial summary judgment and the court’s denial of

UBS’s motion for contractual attorney’s fees.

            a. Enforceability of confidentiality and nondisclosure agreements

         UBS moved for partial summary judgment on the enforceability of the

confidentiality and nondisclosure agreements signed by Ackley and the Maines. It

sought a ruling that the three nondisclosure agreements were not ambiguous and

were enforceable. UBS relied primarily on an express waiver of defenses in the

agreements, which stated:

         Recipient hereby waives all claims and other allegations that could
         otherwise be raised as related to Provider’s Confidential Information
         including but not limited to allegations that said Confidential
         Information (a) was in Recipient’s possession prior to Provider’s
         disclosure to Recipient, (b) was in the public domain prior to
         disclosure to Recipient, or (c) lawfully enters the public domain
         through no violation of this Agreement after disclosure to Recipient.
         This waiver is absolute and Recipient hereby agrees that all
         Confidential Information provided by Provider is subject to this
         absolute waiver such that no issues of fact exist whatsoever.
                                            14
      Recipient agrees that Provider shall have the power to initiate
      whatever legal proceedings it deems appropriate for a violation of this
      Agreement and, further, that this absolute waiver shall be sufficient to
      support a grant of summary judgment as related to Provider’s
      disclosure of said Confidential Information. . . .

The defendants responded to UBS’s motion for summary judgment with a cross-

motion for partial summary judgment seeking a ruling that the nondisclosure

agreements were unenforceable as a matter of law because:

      (1) the NDA Agmts improperly define “Confidential Information” to
          include information: (a) that was equally available to Defendants
          prior to the NDA Agmts; (b) that was already in Defendants’
          possession prior to the NDA Agmts; (c) that was already in the
          public domain prior to the NDA Agmts; and ([d]) that lawfully
          entered the public domain after the NDA Agmts. A[] properly-
          drafted NDA agreement specifically excludes such information
          from the definition of “Confidential Information” because it is
          impossible to prove improper disclosure of the information is
          already in the public domain;

      (2) UBS’s purported “Confidential Information” was not, and is not,
          secret; and

      (3) UBS had no possessory, proprietary, or ownership interest in the
          information and there is no evidence of improper disclosure or use
          causing harm to UBS.

The defendants argued that UBS’s information about Check 21 was in the public

domain, that UBS had no evidence that it owned the allegedly confidential

information, and that the evidence conclusively showed that the allegedly

confidential information was owned by other companies, specifically U.S.

Dataworks, Inc., which owned the Clearingworks software, and companies owned

                                        15
by Dennis Foster, which owned the Turbotransactions/CheckData software. The

defendants relied on deposition testimony to show that UBS’s allegations of

improper disclosures pertained to information about Clearingworks software and

Turbotransactions/CheckData software.

      The trial court denied UBS’s motion for summary judgment and granted the

defendants’ motion, without specifying the basis for its ruling. On appeal, UBS

reurges the argument that it made in the trial court that the defendants waived all

defenses to the enforceability of the nondisclosure agreement by the terms of that

agreement. UBS’s appellate briefing addresses the defendants’ argument that the

information that UBS sought to protect was in the public domain, but it does not

address the defendants’ arguments that the information actually belonged to other

companies and that there was no evidence of improper disclosure or use causing

harm to UBS.

      An appellant may raise an issue that generally contends the trial court erred

in rendering summary judgment, see Malooly Brothers, Inc. v. Napier, 461 S.W.2d
119, 121 (Tex. 1970), but the appellant must also “present those arguments and

supporting authority in order to merit reversal.” McCoy v. Rogers, 240 S.W.3d
267, 272 (Tex. App.—Houston [1st Dist.] 2007, pet. denied); see Klentzman v.

Brady, 312 S.W.3d 886, 899 (Tex. App.—Houston [1st Dist.] 2009, no pet.)

(“Although we recognize that such a broad [Malooly] issue is authorized, an

                                        16
appellant must nevertheless also present argument and supporting authorities in

support of that issue.”). When multiple grounds for summary judgment exist and

the trial court does not specify the ground on which it granted summary judgment,

an appellant must negate on appeal all possible grounds, and if he fails to do so the

appellate court must uphold the summary judgment. See Star–Telegram, Inc. v.

Doe, 915 S.W.2d 471, 473 (Tex. 1995); Ellis v. Precision Engine Rebuilders, Inc.,

68 S.W.3d 894, 898 (Tex. App.—Houston [1st Dist.] 2002, no pet).

      As authorized by Malooly Brothers, UBS’s brief includes a broad issue

challenging the trial court’s denial of its motion for summary judgment and grant

of the defendants’ motion.     UBS briefed its argument that the nondisclosure

agreements were enforceable as a matter of law based on the defendants’ waiver,

lack of ambiguity, and a duty of confidentiality that it alleges the common law

imposes on the defendants. UBS mentions the defendants’ contention that the

information was not protected because it was in the public domain, which they

asserted in their competing motion for summary judgment. But UBS does not

provide citation to any authority or any meaningful analysis of why the court

would have erred in accepting that argument. UBS also did not address the

defendants’ alternative grounds for summary judgment, specifically that the

evidence conclusively showed that the information UBS sought to protect was

                                         17
owned by other companies and that there had been no showing of any breach of the

nondisclosure agreements.

      Because UBS did not brief these alternative grounds for summary judgment,

we must overrule UBS’s first issue without considering the propriety of granting

summary judgment on the unchallenged grounds. See Ellis, 68 S.W.3d at 898;

McCoy, 240 S.W.3d at 272.

          b. Contractual attorney’s fees

      In its second issue, UBS challenges the trial court’s ruling on contractual

attorney’s fees.    Both parties brought claims under the August 2005 sales

agreement. UBS sued the defendants for violation of a covenant not to compete,

and the defendants countersued UBS for breach of contract.          The defendants

prevailed on a pretrial motion for partial summary judgment, which held that the

covenant not to compete was unenforceable. The defendants sought attorney’s

fees under the discretionary attorney’s fees provisions of section 15.51(c) of the

Texas Business and Commerce Code. The trial court denied the defendants’

statutory attorney’s fees.

      At the time of trial, the defendants had a live counterclaim for breach of

contract pertaining to the sales agreement of August 22, 2005. The jury found that

UBS did not breach the sales agreement contract. UBS sought attorney’s fees,

arguing that it was the prevailing party under the contract, which provided:

                                         18
      In the event that it is necessary for an Attorney to file suit or compel
      arbitration for the enforcement of this Agreement, the prevailing Party
      to such proceedings shall be entitled to recovery of its reasonable and
      necessary Attorney’s Fees, expert’s fees and costs of
      litigation/arbitration.

In a post-trial hearing, the trial court indicated that it believed there was no

prevailing party under the 2005 sales agreement. The trial court explained that

either both parties prevailed under the contract or neither party did because the

defendants defeated UBS’s claim of breach of covenant not to compete by way of

pretrial summary judgment and UBS won on the breach of contract claim when the

jury found that UBS did not breach the contract. The court stated,

      The Noncompete was knocked out and then Sales Agreement there
      was no violation of it. . . . And they prevailed under the Noncompete
      aspect of it by getting it knocked out of the case. So, it is really my
      belief that no one’s entitled to attorney’s fees under the Sales
      Agreement issue.

      ....

      So, you have an issue of attorney’s fees for the Covenant Not to
      Compete. He has an issue for attorney’s fees under the Sales
      Agreement because he could recover—he is going to argue that he can
      recover attorney’s fees as the prevailing party under the Sales
      Agreement. . . . I am saying that it balances each other out. . . . I
      suspect it is going to balance each other out for the most part. And it
      may not zero each other out, but I am not going to award attorney’s
      fees on this.

UBS challenges this ruling on appeal.

      Whether a party is entitled to attorney’s fees is a question of law that we

review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999).
                                        19
Under Texas law, a court may award attorney’s fees only when they are authorized

by statute or by the parties’ contract. MBM Fin. Corp. v. Woodlands Operating

Co., 292 S.W.3d 660, 669 (Tex. 2009). Under Texas statutory law, a party may

recover reasonable attorney’s fees from an individual or corporation, in addition to

the amount of a valid claim and costs, if the claim is for breach of an oral or

written contract. See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (West

2008). However, “[p]arties are free to contract for a fee-recovery standard either

looser or stricter than Chapter 38’s . . . .” Intercontinental Grp. P’ship v. KB Home

Lone Star L.P., 295 S.W.3d 650, 653 (Tex. 2009). When parties include such a

provision in a contract, the language of the contract, rather than the language of the

statute, controls. Id. at 654–56 (reviewing definition of “prevailing party” under

contract to determine whether plaintiff who had not recovered any actual damages

was entitled to recover attorney’s fees).       When a contract does not define

“prevailing party,” we are to “presume the parties intended the term’s ordinary

meaning.” Id. at 653.

      A prevailing party is the party who successfully prosecutes a cause of action

or defends against it. Silver Lion, Inc. v. Dolphin St., Inc., No. 01-07-00370-CV,

2010 WL 2025749, at *18 (Tex. App.—Houston [1st Dist.] May 20, 2010, pet.

denied) (mem. op.); Weng Enters., Inc. v. Embassy World Travel, Inc., 837 S.W.2d
217, 222–23 (Tex. App.—Houston [1st Dist.] 1992, no writ). To be a “prevailing

                                         20
party,” a party must be successful on the merits of the claim. Robbins v. Capozzi,

100 S.W.3d 18, 27 (Tex. App.—Tyler 2002, no pet.).            A prevailing party is

vindicated by the court’s judgment. Id. Thus, a plaintiff who receives a finding of

liability but no damages is not a prevailing party for the purposes of attorney’s

fees. See Intercontinental Grp. P’ship, 295 S.W.3d at 653. But a defendant who

successfully defends a cause of action is a prevailing party. Silver Lion, Inc., 2010
WL 2025749, at *18; Robbins, 100 S.W.3d at 22–23, 27; Weng Enters., Inc., 837
S.W.2d at 822–23; see also Epps v. Fowler, 351 S.W.3d 862, 868-69 (Tex. 2011)

(holding that defendant is prevailing party for purposes of award of attorney’s fees

when plaintiff nonsuits case with prejudice).

      As to the breach of contract claim regarding the 2005 sales agreement, UBS

was the prevailing party because it successfully defended this claim and the jury

found that it did not breach the contract. See Silver Lion, 2010 WL 2025749, at

*18; Robbins, 100 S.W.3d at 27; Weng Enters., 837 S.W.2d at 822–23. The

parties’ contract states that the prevailing party “shall” be entitled to recover

attorney’s fees. Under the parties’ contract, UBS was entitled to attorney’s fees,

and the trial court erred by denying them. See, e.g., Robinson v. Budget Rent-A-

Car Sys., Inc., 51 S.W.3d 425, 428 (Tex. App.—Houston [1st Dist.] 2001, pet.

denied) (observing that word “shall” is ordinarily construed to be mandatory).

Accordingly, we sustain UBS’s second issue.

                                         21
                                   Conclusion

      Having held that the damages award is not supported by legally sufficient

evidence, we reverse the trial court’s judgment, in part, and render judgment that

UBS take nothing on its suit. Further, having held that the trial court erred by

denying UBS’s request for attorney’s fees as the prevailing party on the

defendants’ breach of the 2005 sales agreement cause of action, we reverse the trial

court’s judgment insofar as it does not award attorney’s fees and remand for

further proceedings thereon. We affirm the judgment of the trial court in all other

regards.

                                             Michael Massengale
                                             Justice

Panel consists of Justices Jennings, Massengale, and Huddle.

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