Court Opinion

ID: 9387299
Source: CourtListenerOpinion
Date Created: 2023-04-17 16:07:33.677444+00
Date Added: 2024-06-11T17:18:12.382734
License: Public Domain

Opinion issued April 13, 2023

                                   In The

                            Court of Appeals
                                  For The

                        First District of Texas
                          ————————————
                            NO. 01-20-00055-CV
                         ———————————
      AMERICAN MIDSTREAM (ALABAMA INTRASTATE), LLC,
                  Appellant/Counter-Appellee
                                     V.
 RAINBOW ENERGY MARKETING CORPORATION, Appellee/Counter-
                      Appellant

                  On Appeal from the 157th District Court
                           Harris County, Texas
                     Trial Court Case No. 2017-24591

                                OPINION

     Appellee Rainbow Energy Marketing Corporation (Rainbow) sued appellant

American Midstream (Alabama Intrastate), LCC, (AMID) for breach of contract,

repudiation, fraud, and negligent misrepresentation relating to a natural gas
transportation contract. AMID counter-sued Rainbow for breach of contract.

Following a bench trial, the trial court found in favor of Rainbow on its claims, and

Rainbow elected to recover on its breach of contract claim. The trial court rendered

judgment awarding Rainbow $6,145,215.89 as actual damages, plus pre-judgment

interest, costs, and post-judgment interest. In five issues, AMID contends that

(1) the evidence was insufficient to support the trial court’s findings on Rainbow’s

tort claims; (2) the evidence was insufficient to support the trial court’s findings on

Rainbow’s breach of contract and repudiation claims; (3) even if the trial court’s

liability findings stand, Rainbow’s damages are unrecoverable; (4) AMID is

entitled to recover on its own counterclaim for breach of contract against Rainbow;

and (5) in the alternative, AMID is entitled to have the case remanded for a new

trial. Rainbow contends, in its sole issue, that the trial court erred in denying its

request for attorney’s fees.

      We conclude that the evidence was sufficient to support the trial court’s

findings on the breach of contract claim, and therefore do not address the

remaining tort claims. We further conclude that the evidence was sufficient to

support the trial court’s award of damages, and we conclude that the trial court did

not err in denying Rainbow’s claim for attorney’s fees.

      Accordingly, we affirm.

                                          2
                                     Background

      This lawsuit arises out of a contract between Rainbow—a natural gas trading

company—and AMID—a natural gas transportation company that owns the

Magnolia pipeline. The parties refer to this contract as the MAG-0005. Effective

March 1, 2015, AMID agreed to provide firm balancing services and transportation

of certain quantities of natural gas to Rainbow. In return, Rainbow agreed to pay a

demand charge or “firm transportation rate” of more than $1 million per year,

regardless of the services it actually used. As the trial court found here, “In the

natural gas industry, pipelines offer service that is either firm or interruptible. A

pipeline can curtail or decline to provide firm service only if specifically

authorized by the contract. A pipeline can curtail or decline to provide interruptible

service for any reason.”1

      AMID, however, faced difficulties in performing under the MAG-0005. Its

relationship with the connecting Transco pipeline complicated its performance, and

on several occasions between January 2016 and January 2017, AMID limited or

curtailed Rainbow’s use of the balancing services provided for by the MAG-0005.

1
      See also “Natural gas power plants purchase fuel using different types of
      contracts,”           U.S.           Energy          Information             Admin.,
      https://www.eia.gov/todayinenergy/detail.php?id=35112 (Feb. 27, 2018, last
      visited March 29, 2023) (stating that “firm” contracts provide agreed-upon
      capacity at higher priority for transport and “cannot be curtailed . . . except under
      unforeseeable circumstances,” while “interruptible” contracts are lower-priority
      and may be stopped or curtailed if firm contract holders use all available capacity
      or for other reasons).
                                            3
Rainbow nevertheless continued paying the demand charges. Rainbow had

negotiated the MAG-0005 as a firm contract so that it could increase the amount of

gas it could supply to its customers. It needed to know that AMID’s performance

under the MAG-0005 would be reliable so that Rainbow, in turn, could be sure to

have the gas supply and transportation capacity to meet its own obligations to its

customers. Rainbow worked with AMID to determine if the difficulties with the

MAG-0005 could be resolved.

      Ultimately, in December 2016, AMID informed Rainbow that it would no

longer be able to use the full capacity provided for in the MAG-0005 over

consecutive days, that the contract would be treated as interruptible rather than

firm, and that AMID had to limit service to Rainbow to “stay under the radar” with

Transco. On February 1, 2017, Rainbow sent written notice to AMID terminating

the MAG-0005.

      In April 2017, Rainbow sued AMID, asserting that AMID breached the

MAG-0005. Rainbow also alleged causes of action for fraud, fraudulent

inducement, and negligent misrepresentation based on AMID’s knowing or

reckless representations that it had sufficient capacity in its pipeline to guarantee

20,000 MMBtu of gas per day in balancing services and representing that

Rainbow’s right to use AMID’s system would be “firm,” when, in fact, it could not

perform. AMID filed a counterclaim alleging that Rainbow breached the MAG-

                                         4
0005 by failing to pay the transportation rate, also referred to as a demand charge,

and by failing to comply with other billing and payment terms and that Rainbow

wrongfully terminated the contract.

      The trial court conducted a bench trial on Rainbow’s claims for breach of

contract, repudiation, fraud and negligent misrepresentation as well as AMID’s

counterclaim for wrongful termination of the contract. The testimony, documents,

and other evidence was voluminous.

A.    Rainbow Trades Natural Gas

      Rainbow’s president Stacy Tschider testified regarding Rainbow’s general

business model, putting into context the MAG-0005 and its negotiation,

performance by the parties, and consequences of its breach. Rainbow is a natural

gas trading company in the business of supplying customers with natural gas since

1994. Rainbow’s business model included a strategy of making “forward sales,” or

commitments to provide a particular quantity of gas at a specified location and date

in the future, especially during the winter months. These contracts were typically

negotiated and signed during the summer months. Rainbow would then enter other

agreements to purchase gas at various locations to satisfy the sales contracts,

including making “baseload” purchases—purchases scheduled in advance—plus

daily trades and buys.

                                         5
      In addition to its purchase of the gas itself, Rainbow also entered contracts

for transportation rights to move the purchased gas to its customers. Transportation

of natural gas involves the receipt of the gas by the company providing the

transportation, the movement of gas through the transporter’s pipeline system, and

the delivery of gas by the transporter for the shipper’s account. Rainbow entered

both “firm” and “interruptible” transportation contracts with various pipelines.

Rainbow also used contacts in the industry to purchase “recallable” excess

capacity, which is excess capacity that shippers were frequently required by

industry regulations to have available (and thus might need to “recall” or put back

into use) but would not actually need to use on any given day.

      To facilitate these transportation transactions, a shipper like Rainbow would

make a “nomination,” or a request for service under a specific contract, indicating

the specific date, quantities, and receipt and delivery locations. Rainbow typically

made these nominations to transport gas from one location to another in pairs. It

would make a nomination for the point where gas entered a particular pipeline and

another for where it exits. Nominations are subsequently “confirmed” by the

transporter. For the most part, pipelines keep nominations into and out of their

system in balance to maintain the proper operational pressure on the pipeline.

Transportation services thus can include both storage services and balancing

services, which essentially allow a customer to either “pull” gas that it will owe

                                         6
back to the pipeline or “park” gas that the pipeline will owe back the customer at a

future time so that the customer can balance gas supply with actual demand.

      Tschider testified that Rainbow has “contracts with hundreds of companies

throughout the United States” and other parts of North America. He stated that

“reliability” was the most important concern in meeting customers’ needs, and

Rainbow’s extensive business network helped the company have “the tools in

place to be able to facilitate [its] transactions.” Rainbow does business with over

one-hundred companies and utilities, and, over the years, Rainbow has entered

hundreds of contracts with companies like Duke Energy and Shell.

      Tschider explained that Rainbow had entered thousands of forward sales

contracts as both a buyer and a seller, depending on the circumstances. Tschider

stated that this type of contract allowed the company to understand in advance the

cost of the purchase, the cost for transportation, and the price at which to sell the

gas to make a profit. Forward sales contracts allowed “supply certainty,” which

helped Rainbow provide reliability to its business partners and customers. Tschider

further testified that Rainbow preferred to use firm, as opposed to interruptible,

contracts. Thus, it engaged in what he called “back-to-back transactions,” meaning

that “[Rainbow has] very, very little risk associated with that transaction.

Everything is matched. I’m buying firm, I’m transporting firm, and I’m selling

firm.” Tschider testified that Rainbow did this type of deal “all the time.”

                                          7
B.    AMID Owns the Magnolia Pipeline

      AMID is one of the transportation companies that Rainbow used to transport

natural gas to its customers. Formed in 2009, AMID owns, operates, and develops

numerous midstream energy assets, including natural gas pipelines, gathering

systems, processing plants, and storage facilities. One of the pipelines owned by

AMID is the Magnolia pipeline, a small natural gas pipeline located in Alabama

that connects to the larger Transco pipeline. The Transco pipeline connects Texas

to Pennsylvania and is divided into zones. Because of its location, the Magnolia

pipeline has strategic significance in moving natural gas into colder northern states.

There is a constraint point, where gas transportation bottlenecks in times of peak

demand, at station 85 of the Transco pipeline, just west of the Magnolia-Transco

Interconnect. The Magnolia also serves to connect other pipeline systems, such as

the Tennessee Gas pipeline and the Southcross pipeline, to the Transco pipeline.

      Numerous parties, regulations, and agreements govern interactions between

AMID’s Magnolia pipeline and the Transco pipeline. The Federal Energy

Regulatory Commission (FERC) regulates, among other things, interstate

transmission of natural gas. As part of its oversight, FERC requires natural gas

companies to file tariffs, or compilations of all the effective rate schedules and

copies of each form or service agreement. See, e.g., 18 C.F.R. § 154.2(b) (defining

“FERC Gas Tariff”). The rate schedule in the tariffs includes “a statement of a rate

                                          8
or charge for a particular classification of transportation or sale of natural gas”

subject to FERC’s jurisdiction and “all terms, conditions, classifications, practices,

rules, and regulations affecting such rate or charge.” Id. § 154.2(e). In addition to

the regulations provided by federal and state entities, interactions between the

Magnolia and the Transco are subject to the terms of private agreements like the

Operational Balancing Agreement (OBA) between AMID and The Williams

Companies, the owner of the Transco pipeline.

C.    Rainbow Contracted with AMID for Transportation Services

      Rainbow originally became interested in using the Magnolia pipeline to

transport gas from the Tennessee pipeline to the Southcross pipeline, and then to

the Magnolia and on to Rainbow’s ultimate customers. AMID and Rainbow

entered into their first agreement for Rainbow to transport natural gas on AMID’s

Magnolia pipeline in 2014 and renewed through 2018, including while this

underlying litigation was on-going. This contract, the MAG-0001, provided for

firm transportation of 25,000 MMBtus of natural gas to be moved though the

Magnolia pipeline system.

      Rainbow realized that its current customers had even more demand than it

could supply using the MAG-0001. Because of the potential for backlog or

constriction on the Transco at station 85, near the Mississippi-Alabama border, and

the possibility of acquiring cheaper gas in the part of the south that falls within

                                          9
Transco’s “Zone 4” and entering into additional forward sale contracts with

customers in colder locales along the east coast in “Zone 5,” Rainbow became

interested in an additional contract with AMID to provide balancing services.

Tschider and other Rainbow representatives testified that obtaining additional

capacity and balancing services would allow Rainbow additional flexibility to

enter into more forward sales contracts with customers along the Transco pipeline.

D.    Rainbow and AMID Executed the MAG-0005

      To obtain this additional flexibility that would result from a balancing

agreement with AMID, Tim Moreino with Rainbow negotiated with George

Matthews from AMID what the parties’ referred to in emails as an “FT [Firm

Transportation] Balancing Agreement.” Matthews emailed Rainbow with the

summation of their negotiations, writing that the agreement included a provision to

“[l]imit the number of days going short to Transco in the beginning of the month to

no more than 4 days at 20,000/day,” and that the “[m]aximum long/short on any

given day is 20,000 MMBtu.” Matthews further stated that, “if Transco ever says

nominations and physical flow don’t match and they need to, parties [must] take

corrective action to make them match.” He likewise agreed that “the agreement is

FT [Firm Transportation] but if our hand is forced it can be curtailed.”

      AMID and Rainbow formalized this agreement and executed the MAG-0005

in 2015. The MAG-0005 provided that Rainbow could “transport” up to 20,000

                                         10
MMBtu of natural gas each day on the Magnolia pipeline. The MAG-0005

identified the Magnolia-Transco Interconnect as both the primary receipt point and

the delivery point.

      Significantly, the MAG-0005 relieved Rainbow of the obligation to balance

its receipts and deliveries on a daily basis under certain circumstances, thus

providing what the parties described as “balancing services” or “park and loan”

services. This meant that, subject to some limitations, Rainbow could make a daily

delivery nomination of up to 20,000 MMBtu without a corresponding receipt

nomination, and vice-versa, as long as all of its deliveries and receipts reconciled

or balanced at the end of the month.

      The dispute between Rainbow and AMID focused on these balancing

services. Section 9.1 of the MAG-0005 provided relevant details:

      Receipts and Deliveries of Gas. Except as otherwise provided for
      herein, for the purposes of Section 8 of the SOC,2 Shipper [Rainbow]
      shall not be obligated to balance receipts and deliveries of gas on a
      daily basis unless, on or for any Day, either Transporter [AMID] or
      Shipper is requested or required by an upstream or downstream party
      to balance receipts and deliveries of gas attributable to Shipper. If
      Transporter is requested or required by an upstream or downstream
      party to balance receipts or deliveries of gas that are attributable to
      Shipper, Transporter may cease receiving gas from or delivering gas
      to or for Shipper until the upstream or downstream party no longer

2
      “SOC” referred to the statement of terms and conditions incorporated by reference
      for firm transportation on AMID’s system. FERC requires that these terms be filed
      with it. The SOC, among other things, specifies the priority for how AMID will
      curtail service if necessary—“make up gas” first, the interruptible service, then
      firm service.
                                         11
      requests or requires Transporter to balance receipts and deliveries of
      Shipper’s gas.

Section 9.2 provided that any imbalances would be corrected on a monthly basis:

      Monthly Balancing. Notwithstanding Section 9.1, Shipper will use its
      best commercial efforts to balance receipts and deliveries of gas on a
      monthly basis so that, at the end of any Month, Shipper has no gas
      imbalances on Transporter’s System.

Section 9.3 further limited Rainbow’s nominations “during the first ten (10) Days

of a Month to no more than four (4) consecutive days during which, on any Day,

[Rainbow] has nominated receipts of gas into [AMID’s] system without

nominating Equivalent Quantities of gas out of [AMID’s] system.”

      In return for Rainbow’s right to nominate up to 20,000 MMBtu of gas on

AMID’s Magnolia pipeline each day, Rainbow agreed to pay a “demand rate” of

$.014 per MMBtu of natural gas allowed under the contract regardless of the

amount of capacity it actually used. This translates to $2,800 per day or $1,022,000

per year.

      The MAG-0005’s effective date was March 1, 2015. Tschider testified that,

prior to entering into new forward sales contracts that would rely, in part, on the

MAG-0005, Rainbow wanted to be sure that AMID would perform reliably.

Tschider stated that Rainbow did not want to enter into forward sales contracts

with customers without verifying that it would be able to meet demand because

Rainbow would otherwise be exposed to financial and reputational losses.

                                        12
Rainbow’s expert, William Coorsh, likewise testified that, in terms of Rainbow’s

overall business strategy, the MAG-0005 contract was intended to serve as a sort

of “insurance policy,” providing additional options for increasing its supply to its

customers, particularly on days of high demand. Coorsh stated that the MAG-0005

could only be useful if AMID’s performance was reliable because the “ultimate

risk” in entering into forward sales is “the inability to perform.” Thus, Rainbow

needed to address the issue of supply certainty.

      Rainbow began to use the MAG-0005 to make daily trades, rather than

immediately expanding its forward sales commitments. However, during the first

winter that the MAG-0005 was in effect, AMID limited service to Rainbow under

the contract.

      On January 8, 2016, AMID advised Rainbow to limit imbalances more

strictly than was required by the terms of the MAG-0005. AMID limited

Rainbow’s nomination for January 11, 2016, telling it not to pull more than 1319

MMBtu of gas on January 11 because an Operational Flow Order (OFO) from

Transco was in effect. AMID later advised Rainbow that the OFO did not affect

Rainbow’s ability to use the MAG-0005, but because of the timing of these

communications, Rainbow lost the opportunity to use the MAG-0005 to support its

daily trades. Rainbow nominated only 1,116 MMBtu of gas for January 11. AMID

confirmed that reduced nomination in full.

                                         13
      On January 22, 2016, AMID again told Rainbow it could not use the MAG-

0005 to pull any gas on January 23 and 24. Rainbow was otherwise able to use the

MAG-0005 and made 17 more out-of-balance nominations in January 2016, which

were confirmed in full by AMID.

E.    AMID is Subject to an Operational Balancing Agreement with Transco

      AMID argued that, beginning in January 2016, its performance under the

MAG-0005 was impacted by its relationship with Transco. Interactions between

the Magnolia pipeline and the Transco pipeline are subject to an Operational

Balancing Agreement (OBA), in which the parties agreed to specific procedures

for balancing between nominated (or scheduled) levels of service and actual

quantities moving through the Transco pipeline from the identified delivery and

receipt points. The OBA obligates AMID, as the OBA party, to resolve imbalances

created at the Magnolia-Transco interconnect. These imbalances arise due to

differences in quantities of natural gas scheduled through the interconnect and the

gas actually measured as delivered at the interconnect.

      Relevant here, the OBA provides:

      The Parties intend that the quantity of gas actually delivered and
      received each day at each Location will equal the Scheduled
      Quantities for that Location. All Scheduled Quantities at each
      Location will be deemed to have been received and/or delivered under
      the applicable shipper agreements. Any imbalance created, when the
      actual physical flow is different than the Scheduled Quantities, will be
      the “Operational Imbalance,” which will be the responsibility of the
      Parties to eliminate pursuant to this Agreement.

                                         14
      There is only one “Location” identified in the OBA—the Transco-Magnolia

Interconnect. The OBA further provided that “Operational Imbalances shall be

resolved” pursuant to the provisions of the Transco’s FERC Gas Tariff, “provided

that the final resolution of the OBA Imbalance shall be determined pursuant to

Exhibit 2 hereto.”

      Section 16(b) of the OBA provides that Transco could limit imbalances at

the Magnolia-Transco interconnect if (1) imbalances exceeded 5% of total

nominations at the interconnect and (2) those imbalances created operational

concerns. Exhibit 2 contained specific provisions for resolving operational

imbalances depending upon whether the operational imbalance was within or

exceeded the 5% cumulative limit.

      Transco’s FERC Gas Tariff, specifying the general rules and rates for

service, provided that, because the interconnect of the Transco and Magnolia

pipelines was subject to an OBA, that document governed the transactions between

the two pipelines. The tariff further provides that Transco can issue Operational

Flow Orders, or OFOs. An OFO is a notice issued by the pipeline requiring

shippers to balance their gas supply with their customers’ usage or risk incurring

noncompliance charges. OFOs help a pipeline protect the operational integrity of

the pipeline by restricting service or requiring affirmative action by the shipper to

address imbalances or other operational concerns. Transco’s FERC tariff provides:

                                         15
      In order to alleviate operating conditions which may threaten the
      integrity of [Transco’s] pipeline system, it may be necessary for
      [Transco] to issue Operational Flow Orders (OFOs) to effectuate
      adjustments in Buyer’s daily receipts or deliveries over a reasonable
      period of time to maintain a current or cumulative balance between
      Buyer’s receipts and deliveries in accordance with the terms of
      Seller’s transportation rate schedules (Imbalance OFO), or to ensure
      that gas quantities are received and delivered by Buyer where
      scheduled (Scheduling OFO). Before issuing an OFO, Seller will
      attempt to remedy those operating conditions through requests for
      voluntary action provided, however, exigent circumstances may exist
      which require immediate issuance of an OFO.

      AMID presented evidence that, starting in January 2016, Transco began

policing imbalances at the Magnolia-Transco interconnect more strictly than it had

been in previous years. AMID showed that the number of OFOs issued by Transco

increased after it executed the MAG-0005, from four OFOs in the last half of 2015

to twenty in 2017. These OFOs, which AMID introduced into evidence at trial,

were “Imbalance OFOs.” The OFOs also had a line for designating whether “OBA

parties”—parties like AMID, which had an OBA with Transco—were subject to a

particular OFO. All of the OFOs introduced into evidence stated that OBA parties

like AMID were not subject to the OFO. Furthermore, neither AMID nor Rainbow

was named in any of the OFOs or otherwise directed to take action.

      Additionally, Rainbow had its own agreement with Transco—a pooling

agreement that required Rainbow to balance its receipts and deliveries on Transco.

                                        16
F.    Rainbow and AMID Performed Under the MAG-0005

      Based on the two refusals of service by AMID on January 8 and January 22,

2016, Rainbow decided not to enter into any monthly contracts for February or

March 2016. It continued to use the MAG-0005 to support daily trades while the

parties worked out the details of performing under the MAG-0005 in light of

AMID’s obligations under its OBA with Transco.

      On February 11, 2016, despite having previously confirmed a nomination to

pull gas using the MAG-0005, AMID curtailed one of Rainbow’s nominations,

cutting Rainbow’s nomination to zero. AMID presented evidence that Transco

again had an OFO in place, but that flow order stated that parties with an OBA in

place, parties like AMID, were not subject to the order. AMID also presented

evidence that the Southcross pipeline was experiencing issues. Rainbow presented

evidence that, following this February 11 curtailment, it lost money because it had

to purchase gas at significantly higher prices to satisfy its obligations to its

customers for that day.

      This difficulty prompted Tim Moreino with Rainbow to discuss the situation

with George Matthews, AMID’s director of producer services who had negotiated

the MAG-0005 on AMID’s behalf. In a phone call on February 18, 2016,

Matthews acknowledged that AMID had “screwed up” by curtailing Rainbow’s

February 11 nomination, but he stated that AMID hoped to improve its

                                        17
performance going forward. Moreino asked whether AMID had set up a formal

“park and loan” rate with FERC, and Matthews said no. Matthews explained,

“[W]e do these kind of things like we do with you guys on the balancing deal . . .

as buy/sells, typically. But we also refer to them oftentimes internally as park and

loans. Even though that’s not really what they are.” Matthews stated that, rather

than a formal park and loan service, AMID intended to meet its balancing

obligations to Rainbow by “swinging and balancing on OBAs.”

      Moreino pointed out the problems with AMID’s curtailment of its

nomination and asked Matthews about the future of the balancing agreement now

that Transco was “paying more attention to the flows and the OBAs.” Matthews

responded that AMID cut Rainbow’s nomination after they tried to reduce other

ways but were “still out of whack and [Transco] pushed,” resulting in AMID

curtailing the entirety of Rainbow’s nomination that day. Matthews told Moreino

that this was done because “[w]e don’t want the attention, we don’t want the

scrutiny [from Transco].” Matthews told Moreino that Transco “effectively

threatened . . . to put an OFO in for our point [and] we don’t want that.”

Ultimately, Matthews indicated that “everything is fine” and that the curtailment in

February “was an anomaly.” Matthews stated that AMID was working toward

building better relationships with the people at Transco.

                                         18
      Tschider likewise testified that, following the problems in the winter of

2016, his team from Rainbow met with Matthews from AMID. Similar to

Moreino’s testimony, Tschider testified that Rainbow told AMID, “You guys are

treating this as an interruptible contract and that’s not what we signed up for. The

contract is a forward balancing contract.” According to Tschider, Matthews

informed Rainbow that AMID would “correct this” and “make it right.” Matthews

also testified that AMID always intended to provide the services it committed to in

the MAG-0005 “[t]hrough a combination of history, historical imbalances that

[AMID] had successfully run across the Transco interconnect and through the

OBA.” Matthews agreed that AMID could have satisfied its obligations to

Rainbow through other methods like buying or selling additional gas from third

parties, but AMID never considered doing so.

      Messages exchanged between schedulers at AMID and Rainbow indicated

that the parties continued interacting and that Rainbow made nominations under

the MAG-0005 through the summer of 2016. Rainbow did not always use its full

20,000 MMBtu capacity, consistent with Rainbow’s intention to use the MAG-

0005 as an “insurance policy” or additional tool to secure the supply needed for its

customers.

      Nevertheless, Rainbow identified eight occasions on which AMID’s

scheduler, Ed Formell, told Rainbow its full 20,000 MMBtu was not available. For

                                        19
example, on May 13, 2016, Rainbow’s scheduler asked AMID, “[F]or the weekend

can we put in 15k / day from Transco[?]” Formell responded, “No, 10 is about the

max I can take into me right now.” Tschider testified that, because Rainbow was

not able to use the full 20,000 MMBtu reliably through the summer of 2016,

Rainbow could not commit to the additional forward sales contracts that it had

anticipated when executing the MAG-0005. Rainbow used the MAG-0005 to

support daily trade only.

      In the fall of 2016, AMID again told Rainbow to limit imbalances on three

occasions: (1) on November 22, 2016, AMID notified Rainbow that balancing

services available were limited to 15,000 MMBtu; (2) on December 6, 2016,

Transco issued a critical operations alert, and AMID notified Rainbow that its

nomination could be no more than 3,000 MMBtu out of balance, resulting in

Rainbow making no nomination at all for December 7, 2016; and (3) on December

15, 2016, when Transco issued an OFO and AMID notified Rainbow that it could

use only 10,000 MMBtu of balancing services, resulting in Rainbow submitting a

nomination for 3,466 MMBtu of out-of-balance capacity the next day, which

AMID confirmed in full. Rainbow submitted 29 other out-of-balance nominations

that winter, all of which were confirmed in full.

      To address the ongoing concerns regarding AMID’s inconsistent

performance, Rainbow arranged another phone call on December 7, 2016, for the

                                         20
parties to discuss the effect of Transco’s ongoing restrictions on their continued

performance under the MAG-0005. During this call, AMID’s Patricia De La Rosa,

who supervised scheduling on the Magnolia pipeline, stated that Transco “started

to call [AMID] out” more frequently and that AMID “would like to keep our

imbalance under the radar with Transco, as much as possible.” She expressed a

belief that AMID “still had some flexibility” under the terms of its OBA with

Transco, but that “[t]he quantity on any given day is what’s going to really be a bit

more, you know, stringent.” Formell further stated, “To be honest, . . . 20,000

probably isn’t going to be the number anymore.” De La Rosa stated during this

phone call that the MAG-0005 was interruptible, rather than firm, and that

Rainbow could not use the full Maximum Daily Quantity identified in the MAG-

0005 on three consecutive days.

      Rainbow continued to negotiate with AMID regarding the performance

according to the terms of the MAG-0005, identifying its concern as being that its

scheduler “has not been able to utilize all 20,000dth on called days, the volume has

been 10,000dth.”3 A series of communications indicated that the parties were

attempting to agree to some amendments that would allow the parties to continue

performing. Rainbow made its last nominations in January 2017 while these

negotiations were ongoing.

3
      MMBtu is roughly equivalent to a decatherm (dth), and both are used
      interchangeably by the parties as measure of units of natural gas.
                                         21
      No resolution occurred, however, and on February 1, 2017, Rainbow Energy

sent notice to AMID that it was terminating the MAG-0005. It ceased making its

monthly demand payments and did not make any additional nominations under the

MAG-0005.

G.    Rainbow Presented its Damages Model

      In addition to the above evidence relevant to its breach of contract and fraud

claims, Rainbow presented evidence of the damages it sustained because of

AMID’s unreliable performance under the MAG-0005. Rainbow supported its

damages evidence with testimony from Stacy Tschider, damages expert William

Coorsh, and Rainbow employee Richard Phelan, among other evidence.

      Rainbow asserted that, but for AMID’s failure to treat the MAG-0005 as a

firm contract, it would have used the MAG-0005 as a tool to make additional sales

to its customers. Thus, AMID’s failure to perform resulted in lost profits to

Rainbow. Specifically, Rainbow presented evidence that, if AMID had performed

reliably, as if the MAG-0005 were firm, it would have made larger daily trades in

January 2016 and then would have entered into larger or additional forward sales

contracts to its already-existing customers. It would have used the MAG-0005 for

the term of the contract as a source of gas on days of high pricing.

      Both Tschider and Coorsh testified that Rainbow agreed to the terms of the

MAG-0005, including the demand charges of $2,800 per day regardless of

                                         22
Rainbow’s actual usage, because it would provide Rainbow with the capacity to

reliably enter additional or larger forward sales contract with Rainbow’s

established customers. Coorsh in particular testified that the value of the MAG-

0005 was as an “insurance policy”—firm capacity that Rainbow would have

available when needed to meet obligations to its customers—rather than for daily

use. Coorsh stated that “the more conservative approach to take” with a firm

contract like the MAG-0005 was to enter into forward-sales contracts to sell the

gas, rather than using it for daily trades, because “the cash flow is certain, the

volumes to be delivered are certain.” Coorsh testified that the certainty of supply at

the Magnolia-Transco interconnect provided for in the MAG-0005 should have

given Rainbow the additional tools it needed to increase its forward sales.

      Tschider, Coorsh, and Phelan all testified that reliability of performance was

the key feature that both Rainbow and its customers relied upon. If AMID did not

perform reliably, Rainbow could not enter into forward sales contracts by

depending on the supply that the MAG-0005 was intended to provide. Coorsh

testified that a contract that was negotiated to be firm but was treated as

interruptible presented a very risky situation in which Rainbow would be exposed

to the inability to deliver the agreed-upon quantities of gas to its own customers,

which put it at risk for financial losses and reputational damage.

                                         23
      Thus, Coorsh and others testified that Rainbow’s damages resulted, not from

any one day on which AMID failed to provide service, but from AMID’s failure to

treat the MAG-0005 as a firm contract. Coorsh stated that the commercial effect of

AMID’s curtailment of Rainbow’s nominations was “devastating” because “[i]t

shows doubt.” The problems that could arise for Rainbow if AMID failed to

perform after Rainbow had already entered into firm, forward sales agreements

included “reputation damage, financial consequences, in an extremely high-priced

environment, perhaps financial bankruptcy.” Coorsh stated, “[I]f there is doubt, the

whole strategy falls apart.”

      Coorsh testified that it was reasonable for Rainbow to look to the totality of

AMID’s performance, or lack thereof, under the MAG-0005 in determining its

damages. He stated that a company like Rainbow would not make major decisions

about contracts and business strategies focusing “on just one thing.” It would,

instead, focus on its knowledge of the marketplace and its customers, where and

how it would supply gas to those customers and “a multitude of other things.” He

stated, “To isolate it to particular days and say that this is what the damages are

under the totality of the contract just isn’t right. The totality of the damages are

based on what [Rainbow] could have done over the entire term.”

      Coorsh and Tschider both testified that AMID’s breaches destroyed the

benefit of the bargain in its entirety. Rainbow already had the MAG-0001 for

                                        24
transportation services, and it entered into the MAG-0005 balancing agreement so

that it could increase the reliability of its supply so that it could increase its forward

sales. If Rainbow could not get the firm service at the quantity agreed to, then it

could not get the benefit of the MAG-0005.

      The damages model presented by Rainbow set out in detail the sales that

Rainbow would have made if it could have used the MAG-0005 as negotiated. The

figures for quantities of gas sold and for the anticipated revenue and costs were

based on real transactions for revenue, business with its current customers, and

representations for potential business that it lost as a benefit of the bargain due to

AMID’s breach of the MAG-0005. It used publicly-reported index prices to

establish the prices of gas and other costs during the months for which it claimed

lost profits, spanning over the winter months from 2016 to 2018.

      Coorsh explained that Rainbow’s damages model determined the lost

revenue components using “actual forward transactions that were executed by

Rainbow” in conjunction with the MAG-0001 contract. Coorsh testified that,

despite the forward sales executed based on the MAG-0001, Rainbow “had more

demand from buyers than [it] could satisfy” and it “very clearly . . . had the ability

to enter into other forward sales” at the same average price as the actually executed

sales under the MAG-0001. Phelan likewise testified about Rainbow’s business

involvement with companies like Macquarie Energy LLC, Shell Energy North

                                           25
America, and Duke Energy. Phelan testified, for example, that when Rainbow

negotiated its contracts between November 2016 and March 2017, Duke was

looking for quantities between 10,000 and 20,000, but Rainbow only had the firm

capacity to guarantee 7,500. Duke “needed to lock in their winter supply during the

summer,” so Duke agreed to the reduced amount with Rainbow and looked to

other suppliers to meet its remaining gas supply needs for “[t]heir power plant [in]

Transco Zone 5.” Tschider also testified regarding additional demand that Rainbow

could have met using forward sales.

      Using the month of November 2016 as an example, Coorsh explained the

details of Rainbow’s damages model. He testified that the average forward sales

price “in conjunction with sales associated with the MAG-0001 was approximately

$1.416, maybe $1.42, something like that. And in the model, they conservatively

used $1.40 [as the average value for the sales that were lost under the MAG-

0005].” Coorsh further explained the method used for determining the cost side of

the model. He stated that the index prices that were used on the cost side of the

model came from “Platts Gas Daily prices” that reflected the actual transactional

prices in contracts that Rainbow would have been able to enter into with

counterparties to buy gas to supply to its customers. Coorsh testified that “[t]he

publisher [of the Platts Gas Daily] surveys the market. They have transparency into

the market and they survey deals that are done at fixed prices and subsequently

                                        26
publish their index.” The model calculated the cost that Rainbow would have

incurred to satisfy its forward contracts by determining what Rainbow would have

paid in the daily market. Other related expenses, such as fuel, usage, and transport

costs were based on established measures such as Transco’s tariff or actual deals

that Rainbow had been able to execute using other assets like the MAG-0001.

Rainbow then determined the expected profits by subtracting the costs from the

revenues.

      Coorsh testified that the damages model was “conservative” in selecting the

rates it used to calculate expected revenue and costs. The model was also

conservative in that it sought lost profits only for the winter months (January-

March and November-December of 2016 and 2017, and January through March of

2018). Coorsh further testified that the model “takes into account what I would call

mitigated damages, what actually happened. And secondly, it takes into account

the demand charge that was due to Magnolia.” The damages model accounted for

the profits that Rainbow was able to realize using the MAG-0005 to make daily

trades. The damages model thus included Rainbow’s actual revenues based on, in

Coorsh’s words, “making the best of a bad situation.”

      Phelan also testified that Rainbow accounted for the demand charges as part

of its costs. Phelan stated that Rainbow was not seeking return of the demand

charges paid in 2015. Instead, Rainbow took the demand charges “post the breach

                                        27
all the way to the last payment that [Rainbow] made” and included that expense in

the damages model “showing what [Rainbow] would have actually paid for that

product had we had it.” Then, in determining the total damages, Rainbow included

a “credit for demand charges paid post-breach” of $996,800. The total damages

provided for in Rainbow’s damages model were $6,686,143.79.

H.    Trial Court Found in Favor of Rainbow and Signed the Final Judgment

      The trial court found that the MAG-005 “concerns firm balancing services

AMID would provide to Rainbow on AMID’s Magnolia System.” The trial court

outlined the material terms:

      (a) AMID would provide Rainbow with a firm balancing service of up
      to 20,000 MMBtu/day—meaning Rainbow could make a delivery
      nomination of up to 20,000 MMBtu each day without a corresponding
      receipt nomination and vice-versa, allowing Rainbow to “pull” gas
      (have gas deemed delivered into Transco at the Magnolia-Transco
      Interconnect) or “park” gas (have gas deemed delivered into Magnolia
      at the Magnolia-Transco Interconnect);

      (b) Rainbow was required to balance receipts and deliveries only on a
      monthly basis;

      (c) Rainbow could not use the MAG-0005 to park gas or pull gas on
      four consecutive days in the first ten days of each month;

      (d) Rainbow could not use the MAG-0005 in such a way that it
      created an imbalance between receipts and deliveries on Transco (or
      Southcross) and Transco (or Southcross) requested or required
      Rainbow and/or AMID to not create such an imbalance;

      (e) AMID was excused from performing if Transco (or Southcross)
      requested or required AMID to balance physical flow and scheduled

                                       28
      receipts or deliveries at the Magnolia-Transco (or Southcross-
      Magnolia) Interconnect; and

      (f) Rainbow was required to pay demand charges to AMID in the
      amount of $2,800/day.

      The trial court further found that as a result of the December 7, 2016

conference call—during which Patricia De La Rosa, AMID’s scheduling

supervisor, told Rainbow that it could not pull 20,000 MMBtu over three

consecutive days, that the MAG-0005 was interruptible, and that AMID needed to

limit service to Rainbow in order to “stay under the radar” with Transco—

Rainbow “could not reasonably rely upon the MAG-0005 as a reliable source of

natural gas.” Rainbow informed AMID on December 21, 2016, via email between

Tim Moreino and George Matthews, that AMID had failed to provide the promised

20,000 MMBtu of gas, in breach of the MAG-0005. Rainbow ceased performance

after January 13, 2017, and on February 1, 2017, Rainbow sent AMID a letter

terminating the MAG-0005. The trial court concluded that De La Rosa’s

statements on December 7 constituted a repudiation by AMID that Rainbow

accepted “by providing notice of default on December 21, 2016, ceasing service

after January 13, 2017, and terminating the MAG-0005 on February 1, 2017.”

      Relevant to damages, the trial court found that “[i]t was foreseeable to

AMID that Rainbow would use the MAG-0005 to supply forward contracts with

its customers after Rainbow was able to confirm the reliability of the MAG-0005”

                                      29
and that “Rainbow would not be able to use the MAG-0005 to supply forward

contracts if it was not reliable on days that Rainbow tested the MAG-0005.” The

trial court concluded that “AMID’s refusals to provide service constituted a

material breach of MAG-0005 and effectively made the firm balance service

interruptible, destroying the benefit of the bargain for Rainbow.” The trial court

further concluded that “AMID’s material breach proximately and foreseeably

damaged Rainbow by making it impossible for Rainbow to reliably enter into

forward sales with customers—under which Rainbow would have earned profits.”

The trial court concluded that “Rainbow mitigated its damages by not entering into

forward sales contract with its customers using MAG-0005” because Rainbow

“would have suffered lost profits, cover costs, and reputational damage” had it

entered into contracts and AMID failed to perform. “Rainbow also mitigated its

damages by entering into daily trades using balancing services provided by MAG-

0005 on days that it was able to confirm that balancing services were available.”

      The trial court found that Rainbow’s damages model accurately accounted

for all costs and net profits that Rainbow would have realized had AMID

performed. It concluded, “Rainbow’s damages, as reflected in the Damages Model

were a natural, probable, and foreseeable result of AMID’s breach and of AMID’s

fraud. Such damages were foreseeable to AMID at the time the parties entered

MAG-0005 as the probable, natural result of its breach.”

                                         30
      Rainbow moved for entry of judgment, and AMID sought amended and

additional findings of fact and conclusions of law. These motions were heard by

the trial court on August 23, 2019. Regarding construing the MAG-0005, the trial

court stated: “I considered your experts. I considered the OBA. I considered the

FERC tariff. I considered all of these things that sort of created the foundation for

which MAG-0005 was entered.”

      After this hearing, the trial court signed an amended conclusion of law that

set forth its interpretation of MAG-0005 Section 9.1. In its amended findings and

conclusions, the trial court stated,

      In construing Section 9.1, the Court considered the entirety of the
      MAG-0005 Agreement and objective evidence of the surrounding
      facts and circumstances (including the OBA and Transco’s FERC
      tariff) as an aid in the construction of the MAG-0005, and determined
      that this was the only reasonable interpretation of Section 9.1. The
      Court considered evidence of industry custom and usage, which was
      supportive of the unambiguous meaning of the MAG-005, but did not
      add to, delete from, or change the plain text of the MAG-0005 based
      on such evidence.

The trial court also provided additional clarification regarding attorney’s fees,

stating that it would not award them to Rainbow because of AMID’s status as a

limited liability company .

      The trial court rendered its Modified Final Judgment on November 22, 2019.

It awarded Rainbow $6,145,215.89 in “actual benefit-of-the-bargain damages for

Rainbow’s lost profits,” $449,097.42 in prejudgment interest, plus costs and post-

                                         31
judgment interest. The trial court further ordered that AMID take nothing on its

counterclaim for breach of contract.

                               Standard of Review

      In its first two issues, AMID argues that the evidence is insufficient to

support the trial court’s judgment. In an appeal from a bench trial, we review legal-

sufficiency challenges to the trial court’s findings of fact under the same standards

that are applied to review the evidence supporting a jury’s verdict. BMC Software

Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). Where, as here, the trial

court issued findings of fact and conclusions of law, the trial court’s findings of

fact have the same weight as a jury verdict. Merry Homes, Inc. v. Luu, 312 S.W.3d

938, 943 (Tex. App.—Houston [1st Dist.] 2010, no pet.).

      An appellant who attacks the legal sufficiency of an adverse finding on an

issue on which he did not have the burden of proof must demonstrate on appeal

that no evidence supports the adverse finding. Exxon Corp. v. Emerald Oil & Gas,

Co., L.C., 348 S.W.3d 194, 215 (Tex. 2011). We consider the evidence in the light

most favorable to the challenged finding, crediting favorable evidence if a

reasonable fact finder could and disregarding contrary evidence unless a

reasonable fact finder could not. City of Keller v. Wilson, 168 S.W.3d 802, 822

(Tex. 2005). We will sustain a no-evidence challenge if the record shows: (1) a

complete absence of evidence of a vital fact, (2) the court is barred by the rules of

                                         32
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 mere scintilla,

or (4) the evidence conclusively establishes the opposite of a vital fact. Id. at 810.

      In reviewing the factual sufficiency of the evidence, we consider all of the

evidence in the record in a neutral light and set aside the fact findings only if it

they so contrary to the overwhelming weight of the evidence as to be clearly wrong

and unjust. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). When an appellant

challenges an adverse finding on an issue on which it did not have the burden of

proof at trial, we set aside the verdict only if the evidence supporting the finding is

so weak as to make the verdict clearly wrong and manifestly unjust. See id.;

Reliant Energy Servs., Inc. v. Cotton Valley Compression, L.L.C., 336 S.W.3d 764,

782 (Tex. App.—Houston [1st Dist.] 2011, no pet.).

      We are mindful that the trial court, as fact finder, was the sole judge of the

credibility of the witnesses and the weight to be given their testimony. See City of

Keller, 168 S.W.3d at 819; McKeehan v. Wilmington Sav. Fund Soc’y, FSB, 554

S.W.3d 692, 698 (Tex. App.—Houston [1st Dist.] 2018, no pet.). The trial court

may choose to believe one witness and disbelieve another. See City of Keller, 168

S.W.3d at 819. It is the fact finder’s role to resolve conflicts in the evidence, and

we may not substitute our judgment for that of the fact finder. McKeehan, 554

S.W.3d at 698.

                                          33
                               Breach of Contract

      In its second issue, AMID contends that Rainbow’s breach of contract and

repudiation claim fails as a matter of law. AMID argues that, if the parties’ MAG-

0005 contract is applied as written, there is legally and factually insufficient

evidence that AMID breached or repudiated the contract. AMID also argues that it

was excused from performing after Rainbow elected to continue the contract

despite the purported breaches, but then changed its mind, terminated the contract,

and ceased its monthly payments.

A.    Relevant Law

      In construing a contract, we must give effect to the parties’ intentions, as

expressed in their agreement. Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc.,

590 S.W.3d 471, 479 (Tex. 2019). We look to the language of the parties’

agreement and give a contract’s language its plain, grammatical meaning unless it

“would clearly defeat the parties’ intentions.” Id. (quoting Anadarko Petroleum

Corp. v. Thompson, 94 S.W.3d 550, 554 (Tex. 2002)). “We construe contracts

under a de novo standard of review.” Id.

B.    Construction of Section 9.1

      Section 9.1 provides:

      [Rainbow Energy] shall not be obligated to balance receipts and
      deliveries of gas on a daily basis unless, on or for any Day, either
      [AMID] or [Rainbow] is requested or required by an upstream or
      downstream party to balance receipts and deliveries of gas attributable

                                           34
      to [Rainbow]. If [AMID] is requested or required by an upstream or
      downstream party to balance receipts or deliveries of gas that are
      attributable to [Rainbow], [AMID] may cease receiving gas from or
      delivering gas to or for [Rainbow] until the upstream or downstream
      party no longer requests or requires Transporter [AMID] to balance
      receipts and deliveries of [Rainbow’s] gas.

      The trial court adopted Rainbow’s interpretation of Section 9.1, making the

following conclusion of law regarding its construction:

      It is unambiguous under Section 9.1 of the MAG-0005 that AMID
      was excused from providing firm balancing service to Rainbow if and
      only if Transco either (a) requested or required AMID to balance
      scheduled quantities with physical deliveries of gas at the Magnolia-
      Transco Interconnect where Rainbow’s use of the MAG-0005 created
      an imbalance between scheduled quantities and physical deliveries at
      that point; or (b) requested or required Rainbow or AMID to balance
      Rainbow’s receipts and deliveries on Transco where use of the MAG-
      0005 would create an imbalance between Rainbow’s scheduled
      receipts and scheduled deliveries on Transco.

AMID argues that the trial court’s “many references to ‘scheduled receipts,’

‘scheduled deliveries’ and ‘physical deliveries’ do not appear in the plain text of

Section 9.1” and that the trial court erred “in adding its own extra-contractual,

narrow language to Section 9.1.”

      The MAG-0005 allowed Rainbow to move up to 20,000 MMBtus of gas

into and out of the Magnolia pipeline through the Magnolia-Transco interconnect.

AMID agreed “to receive up to the MDQ [Aggregate Maximum Daily Quantity, or

20,000 MMBtus] of gas tendered at the Receipt Point [the Magnolia-Transco

Interconnect] and to transport and redeliver the Equivalent Quantity to the account

                                        35
of [Rainbow] at the Delivery Point [also identified as the Magnolia-Transco

Interconnect] on a Firm basis.”

      Section 9.1 provided that Rainbow was not obligated to balance the receipts

or deliveries, and it provided two exceptions to AMID’s performance of this term.

Section 9.1 stated that Rainbow did not need to balance receipts and deliveries on

the Magnolia pipeline on a daily basis unless an upstream party requested or

required balancing of “receipts and deliveries of gas attributable to [Rainbow].”

Section 9.1 further provided that AMID could “cease receiving gas from or

delivering gas to or for [Rainbow]” if AMID was requested or required by an

upstream party to “balance receipts or deliveries of gas that are attributable to

[Rainbow].”

      AMID agrees that Section 9.1 is unambiguous, as the trial court found.

AMID argues, however, that the trial court erred in relying on extrinsic evidence to

insert “many nuanced distinctions into Section 9.1 regarding scheduling

imbalances and physical imbalances.” This argument, however, ignores the

entirety of the MAG-0005 and the language of Section 9.1.

      In construing a contract, we strive to give effect to all the provisions of the

contract so that none will be rendered meaningless. El Paso Field Servs., L.P. v.

MasTec N. Am., Inc., 389 S.W.3d 802, 805, 808 (Tex. 2012). We construe phrases

and words “in conjunction with the specific rights and obligations contained in the

                                         36
contract.” See id. at 808. Unless there is an indication that the parties intended to

give a word a technical or special meaning, we give the terms their “plain,

ordinary, and generally accepted meaning.” Id.

      Section 9.1 sets out two clauses providing limitations on Rainbow’s right to

be out of balance on the Magnolia pipeline and AMID’s obligation to perform

under the MAG-0005. The first sentence of Section 9.1 provides that Rainbow was

not obligated to balance receipts and deliveries on a daily basis unless AMID or

Rainbow was requested or required by a party like Transco “to balance receipts

and deliveries of gas attributable to [Rainbow].” (Emphasis added.) The second

sentence further provides that if AMID is requested or required by a party like

Transco “to balance receipts or deliveries of gas that are attributable to

[Rainbow]”, then AMID can cease receiving or delivering gas from or to Rainbow.

(Emphasis added.)

      We cannot read these two distinct clauses as excusing AMID from

performance under the MAG-0005 because a party like Transco had issued a

general OFO or general request. Rather, the requests or requirements from a party

like Transco were required to meet the express provisions in Section 9.1—that the

requests address the specific balancing concerns implicated by Section 9.1 and that

they be “attributable to” Rainbow.

                                         37
      Furthermore, the two sentences of Section 9.1 use different language to raise

two different balancing concerns. Sentence 1 of Section 9.1 references both AMID

and Rainbow and requires that the request from a party like Transco require

“balance[ing] receipts and deliveries of gas attributable to [Rainbow].” (Emphasis

added.) This necessarily implicates a point-to-point imbalance or scheduling

imbalance—an imbalance between receipts scheduled into the pipeline and

deliveries scheduled out of the pipeline. This comports with the trial court’s

construction that AMID was excused from performing if a party like Transco

“requested or required Rainbow or AMID to balance Rainbow’s receipts and

deliveries on Transco where use of the MAG-0005 would create an imbalance

between Rainbow’s scheduled receipts and scheduled deliveries on Transco.”

      Sentence two of Section 9.1 sets out an additional provision. It states that

AMID could quit receiving gas from or delivering gas to or for Rainbow if a party

like Transco required it to balance “receipts or deliveries.” (Emphasis added.) This

implicates a single-point imbalance or operational imbalance—an imbalance

between the amount of gas scheduled to move through a point like the Transco-

Magnolia interconnect and the amount of gas actually measured at that point. This

comports with the trial court’s construction that AMID was excused from

performing if Transco “requested or required AMID to balance scheduled

quantities with physical deliveries of gas at the Magnolia-Transco Interconnect

                                        38
where Rainbow’s use of the MAG-0005 created an imbalance between scheduled

quantities and physical deliveries at that point.”

      American Midstream argues that the trial court erroneously considered

extrinsic evidence, such as the terms of the OBA and expert testimony, in

construing Section 9.1. We disagree. Based on the trial court’s findings, it does not

appear that the trial court improperly considered extrinsic evidence to construe

Section 9.1.

      The parol evidence rule, which “applies to writings that evidence the

creation, modification, termination, or securing of a right or obligation under the

contract,” bars consideration of evidence that contradicts, varies, or adds to the

terms of an unambiguous written agreement. Barrow-Shaver Res., 590 S.W.3d at

483. Specifically, “[e]vidence of prior or contemporaneous agreements is

inadmissible as parol evidence when the contract is unambiguous.” Id. (citing ERI

Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 875 (Tex. 2010)).

      Nevertheless, “a court may still consider surrounding facts and

circumstances as an aid in the construction of the contract’s language.” Id. (quoting

First Bank v. Brumitt, 519 S.W.3d 95, 110 (Tex. 2017), internal quotation marks

omitted). While “evidence of circumstances can be used to ‘inform the contract

text and render it capable of only one meaning,’ extrinsic evidence can be

                                          39
considered only to interpret an ambiguous writing, not to create ambiguity.” Id.;

see Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 450 (Tex. 2015).

      In Barrow-Shaver, the supreme court held that evidence of the parties’

substantive negotiations directly related to the creation of their unambiguous

contract and, thus, the parol evidence rule barred consideration of evidence of the

parties’ substantive negotiations. 590 S.W.3d at 483. The court went on to hold:

      We can consider the surrounding circumstances, however, including
      the fact that negotiations took place between sophisticated parties in
      this commercial oil and gas context. See, e.g., [Kachina Pipeline, 471
      S.W.3d at 450] (recognizing that a court may consider objective
      factors of the facts and circumstances surrounding the context of the
      parties’ contract, such as the setting in which the contract was
      negotiated, commercial or otherwise (citation omitted)). In URI, Inc.
      v. Kleberg County, we explained that:

          the “facts and circumstances” extant at the time a contract is
          executed may be consulted only to inform the meaning of the
          language the parties chose to effectuate their accord. In construing
          an unambiguous contract or in determining whether an ambiguity
          exists, courts may not seek the parties’ intent beyond the meaning
          the contract language reasonably yields when construed in
          context.

      543 S.W.3d at 763. “[S]urrounding facts and circumstances cannot be
      employed to ‘make the language say what it unambiguously does not
      say’ or ‘to show that the parties probably meant, or could have meant,
      something other than what their agreement stated.’” Id. at 757
      (citations omitted).

Id. at 483–84.

      Given this precedent, we conclude that the trial court did not violate the

parol evidence rule in construing the MAG-0005. Nothing in the trial court’s

                                        40
conclusion of law interpreting Section 9.1 indicated a reliance on anything beyond

the language used by the parties in Section 9.1 specifically and in the MAG-0005

generally. To the extent that the trial court used the surrounding facts and

circumstances—i.e., that the negotiation of the MAG-0005 occurred between

sophisticated parties knowledgeable in commercial natural gas transactions—to

inform its conclusions, there is no indication that those circumstance served to alter

the meaning of the words chosen by the parties in the MAG-0005. See id.

      Rather, the two different clauses in Section 9.1 must be construed in a way

that gives effect to both without rendering any of the provisions meaningless. See

El Paso Field Servs., 389 S.W.3d at 808. The evidence that AMID complains of—

including AMID’s OBA with Transco, Transco’s FERC tariff, and expert

testimony regarding how these transactions actually occurred—does not alter the

meaning of the MAG-0005. The differences in meaning as construed above is

based on the language of the MAG-0005 itself.

C.    Evidence Supporting the Finding of Breach of the MAG-0005

      In light of the proper construction of the MAG-0005, we now consider the

sufficiency of the evidence supporting the trial court’s findings that AMID

breached the contract.

      The trial court’s findings of fact identified seven specific days on which

AMID breached the MAG-0005. The trial court concluded that “AMID’s refusals

                                         41
to provide service constituted a material breach of MAG-0005 and effectively

made the firm balancing service interruptible, destroying the benefit of the

bargain.” The trial court further concluded that “[t]here is no evidence of any

request or requirement meeting [the criteria set out in Section 9.1] that would

excuse AMID from performing or prevent Rainbow from using the MAG-0005.”

The trial court specified that “[n]o request or requirement from Transco was issued

excusing AMID from performing” and thus, “[t]here is no excuse for AMID’s

breach.”

      AMID does not dispute that it limited or curtailed Rainbow’s nominations

under the MAG-0005 on the days identified by the trial court. It disagrees,

however, with the legal significance that the trial court ascribed to the curtailments.

AMID asserts that the breaches identified by the trial court in its findings “fall into

two overlapping categories: (1) days when there was an OFO or critical alert from

Transco, and (2) days when [AMID] advised Rainbow via instant message to

nominate less than 20,000 MMBtu of balancing services but did not curtail a

nomination.” AMID argues that the Transco’s OFOs and critical alerts “satisfied

the conditions in Section 9.1 of the MAG-0005 [excusing AMID from providing

balancing services] as a matter of law”:

      [The OFOs] all were issued in Zone 4 where the Magnolia-Transco
      interconnect is located. They all apply to every shipper on the Transco
      pipeline, including Rainbow. And they all requested or required
      shippers to limit imbalances. Therefore, as a matter of law, Rainbow
                                           42
      had no right to be out of balance under Section 9.1 of the MAG-0005
      on any day an OFO or critical alert was in place.

Thus, AMID asserts that these incidents do not constitute breaches of the MAG-

0005 because AMID’s performance was excused under the contract’s terms.

      The OFOs at issue here are imbalance OFOs that Transco issued to make

adjustments in daily receipts or deliveries on the Transco pipeline over the

specified period of time to maintain a current or cumulative balance between its

customer’s receipts and deliveries in accordance with the terms of Transco’s

transportation rate schedules. The OFOs directed shippers to limit imbalances on

the Transco pipeline between receipts and deliveries to specific levels. For

example, the OFO issued for January 10, 2016, provided for a “tolerance %

allowed” of 5%. The OFOs also identified the zone impacted, and they could

identify “affected shippers.”

      Contrary to AMID’s argument, none of the OFOs reference gas attributable

to Rainbow as creating an imbalance on the Transco pipeline. Furthermore, the

OFOs at issue here stated that OBA parties, like AMID, were not subject to the

OFOs. Thus, AMID failed to present evidence that the OFOs excused its

performance under the MAG-0005. Rainbow presented evidence that it had a

pooling agreement with Transco that required Rainbow to always balance its

receipts and deliveries on the Transco pipeline and, as a result, its receipts and

deliveries on the pipeline were balanced. And AMID’s George Matthews testified

                                       43
that, regardless of the OFOs, it was possible that AMID could have met its

obligations to Rainbow to allow it to be out of balance on the Magnolia pipeline

under the MAG-0005 through other means such as purchasing or selling gas from

other parties, but AMID did not consider doing so.

      Thus, Rainbow presented evidence that these OFOs did not fall within

Section 9.1’s exceptions for AMID’s performance of the MAG-0005. The OFOs

and critical alerts identified by AMID did not apply to OBA parties, like AMID,

and Rainbow’s nominations would not have caused an imbalance on the Transco

pipeline. Rainbow established that AMID could have used “other available tools”

to fulfill the terms of the MAG-0005, such as purchasing gas from other shippers.

Instead, AMID limited Rainbow’s nominations. We conclude that the evidence

was, thus, legally sufficient to support the trial court’s breach findings. See

Emerald Oil & Gas, 348 S.W.3d at 215 (holding that appellant who attacks legal

sufficiency of finding on which it did not have burden of proof must demonstrate

that no evidence supports challenged finding).

      AMID asserts that its “advice” that Rainbow limit nominations on

November 22, 2016, and during the summer of 2016 did not constitute a breach of

the MAG-0005 because it did not actually curtail any of Rainbow’s nominations

on those dates. AMID argues that, to demonstrate breach, Rainbow had to provide

                                        44
evidence that it made a nomination that AMID curtailed.4 But this argument

disregards the contractual terms and the evidence of the parties’ conduct.

      The communications from AMID to Rainbow informing Rainbow that there

was limited capacity and that Rainbow could not use its full 20,000 MMBtu in

services occurred while Rainbow was considering and preparing its nominations.

Evidence indicated that the communications could not be considered “advice” that

Rainbow could disregard. AMID’s scheduler in charge of the Magnolia pipeline

testified that shippers like Rainbow were expected to comply with his instructions.

And Rainbow’s president, Tschider, testified that Rainbow could not make

downstream deals to sell gas if it would not be able to obtain the supplies through

the MAG-0005. If Rainbow proceeded to make a nomination it had already been

told could not be confirmed, Rainbow would expose itself to additional loss and

difficulty in meeting its obligations to its own customers. Thus, Rainbow presented

evidence that when AMID told Rainbow that it could not make a full nomination

for a particular day, regardless of whether AMID limited its performance before or

4
      Rainbow argues that submitting a nomination even after it was told via instant
      message that the capacity was not available would have been “futile.” See, e.g.,
      DiGiuseppe v. Lawler, 269 S.W.3d 588, 594–95 (Tex. 2008) (observing that Texas
      law generally does not require performance of futile acts). AMID characterizes
      this argument as “a theory of anticipatory breach,” and it argues that there is no
      evidence of anticipatory breach because AMID’s statements to Rainbow did not
      amount to a complete repudiation of the contract. As discussed above, the trial
      court found that AMID’s conduct in this regard—telling Rainbow that it could not
      make a nomination for the full 20,000 MMBtus on certain days—was itself a
      breach of the contract’s terms.
                                          45
after Rainbow made the official nomination, AMID breached the terms of the

MAG-0005.

      Additionally, AMID’s argument that it did not breach the MAG-0005 when

in merely informed Rainbow that it could not use the full benefits (as opposed to

curtailing a nomination after Rainbow made it) does not comport with the

contractual obligations set out. AMID argues that there is no evidence that it

refused service on those days because Rainbow never made a nomination that was

actually refused by AMID. We observe, however, that the MAG-0005 obligated

Rainbow to pay the contractual demand charges, regardless of its actual usage of

the MAG-0005. In return, AMID agreed to firm—not interruptible—capacity of up

to 20,000 MMBtus per day for Rainbow to use at its discretion. Nothing in the

contract required Rainbow to make a full nomination for capacity that AMID had

already said was not available.

      In breach of its obligations, AMID told Rainbow on multiple occasions that

it could not provide the full 20,000 MMBtu promised in the MAG-0005. As the

trial court concluded, there was no evidence of an OFO or other request that met

the criteria of Section 9.1 that would have excused AMID’s performance. These

repeated, unexcused failures to perform constituted a material breach of the MAG-

0005 by AMID and, as the trial court held, “effectively made the firm balancing

service interruptible.”

                                       46
      We conclude, after considering all the evidence in a neutral light, that the

trial court’s findings are not so contrary to the overwhelming weight of the

evidence as to be clearly wrong and unjust. See Cain, 709 S.W.2d at 176.

Accordingly, we conclude that the evidence is factually sufficient to support the

trial court’s findings of breach.

D.    AMID’s Repudiation of the MAG-0005

      Rainbow argues that, in addition to the specific refusals of service discussed

above indicating that AMID treated the MAG-0005 as an interruptible rather than

firm, AMID expressly repudiated the MAG-0005 in December 2016. The trial

court found that De La Rosa’s statements on AMID’s behalf during the December

7, 2016 call constituted a repudiation of the MAG-0005. AMID argues, however,

that the evidence is legally and factually insufficient to support the trial court’s

repudiation finding.

      To constitute a repudiation, a party to a contract must have absolutely and

unconditionally refused to perform the contract without just excuse. El Paso Prod.

Co. v. Valence Operating Co., 112 S.W.3d 616, 621 (Tex. App.—Houston [1st

Dist.] 2003, pet. denied). Repudiation of a contract is a “positive and unconditional

refusal to perform the contract in the future,” evidenced by “conduct that shows a

fixed intention to abandon, renounce, and refuse to perform the contract.” CMA-

                                         47
CGM (Am.), Inc. v. Empire Truck Lines, Inc., 416 S.W.3d 495, 519 (Tex. App.—

Houston [1st Dist.] 2013, pet. denied).

      Prior to the December 7, 2016 phone call, Rainbow had expressed its

concerns that AMID was not performing as required by the MAG-0005 because

Rainbow had not been able to utilize the entire 20,000 MMBtu of capacity as

needed. During the phone call, De La Rosa and other representatives from AMID

expressly stated that AMID could not maintain the promised volume of 20,000

MMbtu because, realistically, AMID could only provide 10,000 MMBtu. De La

Rosa stated that Rainbow needed to understand that the MAG-0005 was

interruptible rather than firm, and AMID made it clear that these changes limiting

service to Rainbow under MAG-0005 were made so that AMID could “stay under

the radar” with Transco.

      AMID argues, essentially, that these statements were not a repudiation of the

MAG-0005, but rather that the parties were discussing changes in the industry and

in Transco’s policies that had impacted the parties’ performance under the MAG-

0005. AMID asserts that the statements of De La Rosa and its other representatives

on the December 7 phone call were not an unequivocal, absolute refusal to perform

under the MAG-0005. It argues: “Neither De La Rosa, nor anyone else on the

December 7 call, stated that [AMID] would refuse to allow Rainbow to be out of

balance absent a request or requirement from Transco to stay in balance. And both

                                          48
parties agreed to ‘huddle up’ to address Transco’s restrictions moving forward.”

But the transcript of the call itself supports the trial court’s determination that

AMID expressed that it was no longer able to perform the MAG-0005 as agreed.5

      AMID also argues that Rainbow “elected to continue performance under the

MAG-0005 after each alleged breach and repudiation.” It asserts that Rainbow, as

the non-breaching party, could “choose either to treat the contract as terminated or

as continuing; it cannot do both,” citing Man Industry (India), Ltd. v. Midcontinent

Express Pipeline, LLC, 407 S.W.3d 342 (Tex. App.—Houston [14th Dist.] 2013,

pet. denied) (breach), and El Paso Production Co., 112 S.W.3d 616 (repudiation)

to support its contentions. AMID points to the fact that the parties did not cease

performance until January 13, 2017, “nearly six weeks after the alleged repudiation

and one month after the last alleged breach.” However, AMID’s cases supporting

its arguments about “seeking to benefit from the contract or insisting on continued

performance ‘operates as a conclusive choice,’ depriving the non-breaching party

of an excuse to terminate its own performance” are distinguishable. Both

Smithdale Court Inc. v. Keely, No. 01-92-00018-CV, 1993 WL 282922 (Tex.

5
      AMID argues, “Even if there were some evidence of breach or repudiation, . . . [it]
      was excused as a matter of law from performing after Rainbow wrongfully
      terminated the MAG-0005 on February 1, 2017.” As we held above, the evidence
      supported the trial court’s conclusion that AMID breached and ultimately
      repudiated the MAG-0005. Thus, Rainbow’s termination of the contract was not
      “wrongful.” And, as we discuss further below with regard to damages, AMID’s
      breach and subsequent repudiation caused Rainbow lost profits for the term of the
      MAG-0005 contract.
                                          49
App.—Houston [1st Dist.] Jul. 29, 1993, no pet.) (not designated for publication)

and Levco Construction, Inc. v. Whole Foods Market Rocky Mountain/Southwest

L.P., 549 S.W.3d 618 (Tex. App.—Houston [1st Dist.] 2017, no pet.) involved

finite performance—a contract for sale of a home and a construction contract,

respectively. See Smithdale Ct. Inc., 1993 WL 282922, at *3; Levco Constr., 549

S.W.3d at 643, 645. They are not contracts, like the MAG-0005, that would be

performed as discrete transactions conducted on an on-going basis. The fact that

Rainbow continued to negotiate to see if it could retain the benefit of the MAG-

0005 agreement does not constitute an election to continue the contract. See Man

Indus., 407 S.W.3d at 368.

       We conclude that the evidence is legally and factually sufficient to support

the trial court’s repudiation findings. See Emerald Oil & Gas, 348 S.W.3d at 215;

Cain, 709 S.W.2d at 176.

       We overrule AMID’s second issue.

                                      Damages

       In its third issue, AMID argues that, even if we conclude that the trial court’s

liability   findings   stand,   Rainbow    Energy’s     damages     are   nevertheless

unrecoverable.

                                          50
A.    Relevant Law

      “The goal in measuring damages for a breach-of-contract claim is to provide

just compensation for any loss or damage actually sustained as a result of the

breach.” Parkway Dental Assocs., P.A. v. Ho & Huang Props., L.P., 391 S.W.3d

596, 607 (Tex. App.—Houston [14th Dist.] 2012, no pet.). Damages for breach of

contract may include both direct and consequential damages. Signature Indus.

Servs., LLC v. Int’l Paper Co., 638 S.W.3d 179, 186 (Tex. 2022). Direct damages

include restoring “the benefit of a plaintiff’s bargain.” Id. Consequential damages

“compensate the plaintiff for foreseeable losses that were caused by the breach but

were not a necessary consequence of it.” Id.

      “The normal measure of damages in a breach-of-contract case is the

expectancy or benefit-of-the-bargain measure.” Parkway Dental, 391 S.W.3d at

607. The purpose of this measure of damages is to restore the injured party to the

economic position it would have occupied had the contract been performed. Id. at

607. “To restore an injured party to the position he would have been in had the

contract been performed, it must be determined what additions to the injured

party’s wealth have been prevented by the breach and what subtractions from his

wealth have been caused by it.” Sharifi v. Steen Auto., LLC, 370 S.W.3d 126, 148

(Tex. App.—Dallas 2012, no pet.) (citing Lafarge Corp. v. Wolff, Inc., 977 S.W.2d

181, 187 (Tex. App.—Austin 1998, pet. denied)). Benefit-of-the-bargain damages

                                        51
include lost profits that are proved with reasonable certainty. See Phillips v.

Carlton Energy Grp., LLC, 475 S.W.3d 265, 278 (Tex. 2015); see also USPLS, LC

v. Gaas, No. 01-20-00604-CV, 2022 WL 3722135, at *8 (Tex. App.—Houston

[1st Dist.] Aug. 30, 2022, pet. filed) (mem. op.) (“Lost profits may be either direct

damages—profits lost on the contract itself—or consequential damages—profits

lost on other contracts resulting from the breach.”).

      The Supreme Court of Texas has set out the rules concerning the sufficiency

of evidence of lost-profits damages:

      Recovery for lost profits does not require that the loss be susceptible
      of exact calculation. However, the injured party must do more than
      show that [it] suffered some lost profits. The amount of the loss must
      be shown by competent evidence with reasonable certainty. What
      constitutes reasonably certain evidence of lost profits is a fact
      intensive determination. As a minimum, opinions or estimates of lost
      profits must be based on objective facts, figures, or data from which
      the amount of lost profits can be ascertained. Although supporting
      documentation may affect the weight of the evidence, it is not
      necessary to produce in court the documents supporting the opinions
      or estimates.

Horizon Health Corp. v. Acadia Healthcare Co., Inc., 520 S.W.3d 848, 859–60

(Tex. 2017) (quoting ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 876

(Tex. 2010)).

      “Thus, lost profits damages can be recovered only when both the fact and

amount of damages is proved with reasonable certainty.” Id.; see Cash Am. Pawn,

LP v. Alonzo, No. 01-19-00801-CV, 2021 WL 4155795, at *8 (Tex. App.—

                                          52
Houston [1st Dist.] Sept. 14, 2021, no pet.) (“Lost profits are damages for the loss

of net income to a business measured by reasonable certainty.”). The “general

rule” for obtaining recovery of lost profits as damages requires the party to

demonstrate that “a loss of profits is the natural and probable consequence of the

act or omission complained of” and establish the amount of lost profits “with

sufficient certainty.” Horizon Health Corp., 520 S.W.3d at 860 (quoting Tex.

Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex.

1994)); see Bowen v. Robinson, 227 S.W.3d 86, 96 (Tex. App.—Houston [1st

Dist.] 2006, pet. denied).

      “Opinions or estimates are competent evidence of lost profits if based on

objective facts, figures, or data from which the amount of lost profits can be

ascertained.” Cash Pawn Am., 2021 WL 4155795, at *8; see Phillips, 475 S.W.3d

at 279; ERI Consulting Eng’rs, 318 S.W.3d at 876. However, “anticipated profits

cannot be recovered where they are dependent upon uncertain and changing

conditions, such as market fluctuations, or the chances of business, or where there

is no evidence from which they may be intelligently estimated.” Horizon Health

Corp., 520 S.W.3d at 860 (quoting Tex. Instruments, Inc., 877 S.W.2d at 279).

“The law is wisely skeptical of claims of lost profits from untested ventures or in

unpredictable circumstances, which in reality are little more than wishful

thinking.” Id. (quoting Phillips, 475 S.W.3d at 280). “When the evidence

                                        53
supporting a claim for lost profits damages is largely speculative or a mere hope

for success, lost profits have not been established with reasonable certainty.” Id.

(citing Tex. Instruments, Inc., 877 S.W.2d at 279).

      While the proper measure of damages is a question of law that we review de

novo, Signature Indus. Servs., 638 S.W.3d at 187, the question of what constitutes

reasonably certain evidence of lost profits is a fact intensive determination.

Phillips, 475 S.W.3d at 279. The fact finder generally has discretion to award

damages within the range of evidence presented at trial. Gulf States Utils. Co. v.

Low, 79 S.W.3d 561, 566 (Tex. 2002).

B.    The Trial Court’s Damages Findings

      The trial court found damages against AMID as follows: (1) $6,145,215.89

for lost profits as the benefit-of-the-bargain damages supported by breach of

contract and fraud findings; (2) $3,215,923.72 for benefit-of-the-bargain damages

related to AMID’s repudiation, measured by the alleged lost profits from forward

sales beginning in January 2017; or (3) $991,550.61 for out-of-pocket damages,

supported    by   breach    of    contract,    fraud,   repudiation,   and   negligent

misrepresentation findings, measured by the demand charges Rainbow paid under

the contract minus its net revenue. Rainbow Energy elected to recover its

$6,145,215.89 benefit-of-the-bargain damages, as measured by its lost profits, on

the breach of contract finding.

                                          54
      The trial court found that it “was foreseeable to AMID that Rainbow would

use the MAG-0005 to supply forward contracts with its customers after Rainbow

was able to confirm the reliability of the MAG-0005” and that “Rainbow would

not be able to use the MAG-0005 to supply forward contracts if it was not reliable

on days that Rainbow tested the MAG-0005.”

      The trial court considered AMID’s refusal of services on January 8 and

January 22, 2016, and held, “Had AMID performed as promised in January 2016,

it is reasonably certain Rainbow would have entered into forward sales contracts

with its customers for February 2016 at a price of $4.069/MMBtu and for March

2016 at a price of $1.911/MMBtu (the NYMEX LDS for the month plus the

average basis reported by the Intercontinental Exchange).” The trial court further

found that Rainbow “suffered immediate damages” when AMID curtailed its

February 11, 2016 nomination and it was required to purchase more expensive gas

to satisfy its obligations to its customers. The trial court further found that AMID’s

“ongoing non-performance” caused Rainbow to determine that it “could not

reliably enter into any forward sales contracts for the 2016-2017 winter season

using the MAG-0005 without incurring substantial risks,” so it “used the MAG-

0005 to support daily trades only.” This was followed by AMID’s additional

failure to perform and the December 7 phone call in which De La Rosa stated that

the MAG-0005 would have to be viewed as interruptible going forward.

                                         55
         The trial court concluded that AMID’s conduct “effectively made the firm

balancing service interruptible, destroying the benefit of the bargain for Rainbow.”

This material breach “proximately and foreseeably damaged Rainbow by making it

impossible for Rainbow to reliably enter into forward sales with customers—under

which Rainbow would have earned profits.”

         Looking at Rainbow’s damages model, the trial court concluded that it was

“reasonably certain that Rainbow would have realized lost profits had AMID

performed its obligations under the MAG-0005 Agreement” and that “Rainbow

would have realized the revenue reflected in the Damages Model with forward

sales contract with customers (for February-March 2016, November 2016-March

2017, and November 2017-March 2018) and increased daily trading in January

2018.” The trial court determined that the Damages Model accurately reflected

Rainbow’s actual net profits using the MAG-0005 and Rainbow’s expected net

profits that it would have realized had AMID performed according to the contract’s

terms.

         Thus, the trial court determined that, to restore Rainbow to the economic

position that it would have occupied had AMID performed, the damages had to

account for the profits that Rainbow lost because it could not rely on the MAG-

0005 as a firm balancing agreement. These lost profits were calculated based on

the established demand of existing customers and revenue and costs based on

                                         56
Rainbow’s own transactions under other agreements or index prices. The damages

model accounted for mitigated damages, considering that Rainbow used the MAG-

0005 to the extent that it could for daily trades.

      AMID now argues that (1) there is insufficient evidence of the proper

measure of damages; (2) Rainbow’s lost-profits model rests on unfounded

assumptions; and (3) Rainbow failed to prove lost profits with reasonable certainty.

C.    The Proper Measure of Rainbow’s Damages

      AMID first argues that “there is legally and factually insufficient evidence of

the proper measure of damages.” AMID asserts that the “award of damages failed

to account for the value of the MAG-0005 as a transportation contract,” noting that

“[t]ransportation services are different than balancing services” and “the MAG-

0005 offered both.” AMID argues that by its plain language, the MAG-0005

provided transportation services and that the trial court could not rely on parol

testimony or Rainbow’s own performance to change the terms as written.

      We observe, however, that Rainbow’s damages model is based on AMID’s

breach of its obligation to provide balancing services under the MAG-0005.

Establishing damages flowing from that breach is not a matter of contract

interpretation. In presenting evidence of its lost profits, Rainbow is not attempting

to change the terms of the contract in a way that would implicate the parol

evidence rule. See Barrow-Shaver Res., 590 S.W.3d at 483 (holding that parol

                                           57
evidence rule “applies to writings that evidence the creation, modification,

termination, or securing of a right or obligation under the contract,” and bars

consideration of evidence that contradicts, varies, or adds to terms of unambiguous

written agreements). Rather, Rainbow proved that AMID’s breach of its obligation

to provide the balancing services bargained for in the MAG-0005 caused damages,

as required to establish its breach of contract claim. See, e.g., Davis v. Nat’l Lloyds

Ins. Co., 484 S.W.3d 459, 468 (Tex. App.—Houston [1st Dist.] 2015, pet. denied)

(providing that plaintiff’s damages resulting from breach is essential element of

breach of contract claim). Rainbow was not obligated to assert or establish a

breach of AMID’s obligation to provide transportation services under the MAG-

0005 to prove that Rainbow sustained damages because of AMID’s breach of the

balancing provision.

      AMID further argues that, because Rainbow failed to present any evidence

of the value of the MAG-0005 as a transportation contract, there is legally

insufficient evidence to support the award of benefit-of-the-bargain or out-of-

pocket damages, citing Highland Capital Management L.P. v. Ryder Scott Co. See

402 S.W.3d 719, 726–30 (Tex. App.—Houston [1st Dist.] 2012, no pet.). The

contract and damages in Highland Capital are distinguishable from the damages

here. In that case, this Court reviewed a trial court’s grant of summary judgment

dismissing appellant Highland Capital’s claims for negligence and negligent

                                          58
misrepresentation in part on the ground that the appellant presented no evidence as

to the fair market value of the defective bonds at the time of their purchase. Id. at

727–28. The Court in Highland Capital concluded that, because there was no

evidence of the value of what appellant received when it purchased the bonds,

there was no way to calculate the difference between what it bargained for and

what it actually received. Thus, there was no evidence to support its claim for

damages. Id. Here, the MAG-0005 is a different kind of contract. It was not a

contract for a one-time sale, but a contract to provide ongoing services and

evidence of the value received at the time the parties entered the MAG-0005 is not

an essential component of damages.

      Rainbow’s damages model demonstrated the essential components of its

damages claim. Rainbow presented evidence of the difference between what it

bargained for—a firm balancing contract that it could rely on to enter into forward

sales contracts—and what it received—interruptible, unreliable performance that

would not support forward sales contracts. The damages model used facts and data

from Rainbow’s ongoing operations to account for the revenue and costs

surrounding the forward sales that it had anticipated in entering into the MAG-

0005, and it accounted for the mitigation of those lost-profit damages by including

the profit that Rainbow was able to realize under the MAG-0005 despite AMID’s

non-performance.

                                         59
      Furthermore, AMID’s argument that Rainbow was required to present

evidence of the value of the MAG-0005 solely as a transportation contract

disregards the nature of the parties’ ongoing business relationship. The parties had

already negotiated and continued to perform under the MAG-0001 as a

transportation contract. Rainbow’s president Stacey Tschider asserted that the

MAG-0005’s benefit to Rainbow was as a balancing contract. The emails and other

communications between the parties during negotiation of the MAG-0005, in

which it was clear that Rainbow was seeking the balancing services that it

negotiated for as a tool to expand its forward sales, likewise support the trial

court’s findings that the value of the MAG-0005 was a firm balancing agreement.

      We conclude that the trial court did not err in determining damages based on

the breach of the balancing services bargained for in the MAG-0005. See Signature

Indus. Servs., 638 S.W.3d at 187 (holding that proper measure of damages is

question of law).

D.    Assumptions Underlying Damages Model

      AMID further argues that the award of lost profits as benefit-of-the-bargain

damages fails as a matter of law because the lost profits model relied on

assumptions that vary from the facts and that do not fill the “reasonable certainty”

the law requires. We disagree.

                                        60
      As Rainbow points out in its briefing, AMID does not attack the revenue or

costs identified in the damages model. AMID asserts in its reply brief that “[t]his

Court may assume that data is correct,” but it argues that the model itself was

flawed. AMID and Rainbow thus take two different views of how to determine the

proper damages resulting from the breach here. AMID contends that damages were

only available for days that Rainbow attempted to use the MAG-0005 but was

unable to do so. AMID argues that the damages model is flawed because it

assumes that AMID refused balancing services on days when there are no findings

of breach and no evidence of any refusal of service by AMID.

      Under Rainbow’s model, however, the damages flowed from the breach of

the term making performance “firm,” not from any one denial of service. Rainbow

asserted, and the trial court found, that by failing to treat the contract as firm,

AMID destroyed the benefit of the bargain. AMID’s treatment of the MAG-0005

contract as interruptible made AMID’s performance unreliable. Thus, Rainbow

could not rely on the MAG-0005 as a tool to fulfill forward sales to its own

customers. The loss of this business resulted in millions of dollars of lost profits.

      AMID argues that Rainbow’s lost-profits model was based on assumptions

that were not supported by the facts, including assumptions that Rainbow would

have entered into forward sales contracts to sell gas at locked-in prices in Zone 5,

based at least in part on using the balancing services under the MAG-0005 to buy

                                          61
the gas in Zone 4. AMID also argues that Rainbow’s damages model theorizes that

Rainbow “would have used the MAG-0005 on many days in which Rainbow did

not in fact use the MAG-0005.” Thus, AMID argues that Rainbow’s estimate of its

lost profits “falls far afield of the ‘reasonable certainty’ the law requires.”

      These arguments disregard the evidence that the value of the MAG-0005 to

Rainbow was in its reliability to use it as needed to supply gas for forward sales.

Rainbow presented evidence, in the form of testimony from Tschider and Coorsh,

among others, that the benefit of the MAG-0005 was to be used on days of high

pricing in Transco’s Zone 5 and that made the MAG-0005’s reliability necessary

even if it was not used daily or even monthly. Tschider and Phelan testified for

Rainbow regarding the demand it received from established customers. Rainbow

presented evidence of requests for service from companies like Duke Energy and

others, seeking more gas than Rainbow was able to provide. Tshcider and Phelan

testified that, if Rainbow could have relied upon AMID’s performance under the

MAG-0005, Rainbow would have entered into larger or additional forward sales

contracts to meet this demand.

      Thus, Rainbow’s damages model was supported by evidence that it had

customers willing to enter into forward sales contracts for the months identified

and at the prices reflected in their model, based on the average publicly-available

pricing index. But Rainbow was unable to enter into these contracts because AMID

                                           62
failed to perform its obligations under the MAG-0005. Rainbow acknowledges that

it did not actually attempt to use the MAG-0005 on all the days that it would have

used it had AMID performed reliably. Tschider testified that Rainbow did not enter

into the anticipated forward sales contracts because AMID breached the MAG-

0005 by treating it as interruptible. Because Rainbow did not have the forward

sales contract in place, it used the MAG-0005 for daily trades only. This accounted

for the difference between the days that Rainbow actually used the MAG-0005 and

the usage as reflected in the damages model. We conclude that this evidence

supports the trial court’s determination that these discrepancies do not render the

damages model unreliable.

      AMID also argues that Rainbow’s trading strategy was “hypothetical” and

constituted a “new and unproven” trading strategy that was a “risk” and “at odds

with Rainbow’s 25-year trading history.” This misrepresents the evidence

presented at trial. Tschider testified that Rainbow had entered into hundreds of

forward sales contracts over its years of operation and that it was a commonly-used

trading strategy. Coorsh testified that using forward contracts was the most

conservative way to do business because it created certainty regarding costs and

profit. And according to Coorsh, Rainbow’s damages model determined the lost

revenue components using “actual forward transactions that were executed by

Rainbow” in conjunction with the MAG-0001 contract.

                                        63
      Coorsh also testified that Rainbow’s anticipated use of the MAG-0005 as a

tool to support additional forward sales to its customer base was “a reasonable

strategy” that was based on “what they have done in the past” and “the way that

they conduct their business”:

      There is no reason to expect from an experienced gas trading and
      marketing perspective that they would do something totally different
      than what they have done in the past. Their entire business is serving
      customers with reliable supply. This [the MAG-0005] is just one more
      way to do that. I would not anticipate to see written documentation
      explicit to one contract saying that this is what we are going to do,
      especially when the plan is to do what they have always done and
      expect to do in the future.

Thus, Coorsh’s testimony supports the trial court’s findings that the purpose

behind Rainbow’s “testing” of the MAG-0005 was to establish the reliability of

AMID’s performance, not the feasibility of entering into forward sales as a general

strategy.

E.    Damages Established with Reasonable Certainty

      AMID argues that, even if Rainbow established the fact of its lost-profits

damages, it failed to prove the amount of damages with the reasonable certainty

required by Texas law. However, the strategies and related lost profits here were

supported by expert testimony and Rainbow’s own extensive business conducted

under other contracts. Rainbow’s experts acknowledged that natural gas trading

involves some risk and uncertainty, but it nevertheless presented sufficient

evidence based on how the market unfolded for the relevant periods to support its

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damages model. And as Coorsh and Phelan testified, the figures used in AMID’s

damages model were conservative.

      Coorsh addressed AMID’s contention that the damages model “used the

market with 20/20 hindsight.” He disagreed, stating, “There is no hindsight. The

model is a reflection of what they would have done in the real world.” He pointed

out, for example, that the model for January 2018 showed projected sales using the

MAG-0005 that would have resulted in Rainbow losing approximately $1 million

dollars. Coorsh testified that this loss demonstrates that Rainbow did not use

hindsight to create the model, because the use of hindsight would have prevented a

model containing projected losses. He also pointed to December 2017 as another

example. In that month, Rainbow had only minimal lost profits. He stated, “If they

had hindsight, they would have changed the dates in which they put gas to

Magnolia so that they would have made money. But they didn’t do that. Okay?

They showed what decisions they would have made on a day-to-day basis.”

      Rainbow used objective facts and data regarding market performance,

including its own performance on other contracts like the MAG-0001 to existing

customers and the average prices of gas during the period for which it missed the

identified opportunities to supply additional gas to its customers. AMID’s briefing

does not identify any particular revenue or cost figures as being unsound. We

conclude that the evidence presented by Rainbow was sufficient for the trial court

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to determine the amount of lost-profit damages with reasonable certainty. See

Horizon Health Corp., 520 S.W.3d at 859–60.

      We overrule AMID’s third issue.

                            AMID’s Remaining Issues

      In its first issue, AMID argues that Rainbow Energy’s fraud and negligent

misrepresentation claims fail because there is no evidence of a false representation

and there is no evidence of justifiable reliance. However, the trial court’s judgment

is supported by the trial court’s breach of contract findings, which we have

affirmed. The tort findings would not afford any greater relief or damages, and so

we need not address AMID’s first issue. See TEX. R. APP. P. 47.1.

      In its fourth issue AMID argues that it is entitled to recover on its own

counterclaim for breach of contract. However, when one party to a contract

commits a material breach of the contract, the other party is discharged or excused

from further performance. Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc.,

134 S.W.3d 195, 196 (Tex. 2004) (per curiam).

      We have determined that the trial court properly concluded that AMID

committed a material breach of the MAG-0005 and repudiated it by treating it as

interruptible rather than firm. Thus, Rainbow was discharged or excused from

further performance under the MAG-0005. See id. Because AMID cannot show

that it tendered performance in connection with the MAG-0005, the trial court

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properly concluded that it was not entitled to the demand charges it sought under

the MAG-0005.6

      We overrule AMID’s fourth issue.

      In its fifth issue, AMID argues, in the alternative, that we should remand the

case for a new trial. It bases this assertion on its argument that the trial court

misconstrued the MAG-0005. See, e.g., Best v. Falcon Rock Cmty. Ass’n, 2018

WL 4139092, at *1, *4–5 (Tex. App.—Houston [14th Dist.] Aug. 30, 2018, no

pet.) (remanding for new bench trial because trial court misconstrued unambiguous

contract term). Because we have concluded that the trial court did not misconstrue

the MAG-0005, we overrule AMID’s fifth issue.

      We overrule AMID’s fifth issue.

                     Rainbow’s Request for Attorney’s Fees

      Rainbow sought attorney’s fees from AMID, but the trial court ruled that

Rainbow could not recover attorney’s fees from AMID under Civil Practice and

Remedies Code section 38.001 because AMID is a limited liability company.

      This Court has previously held that Civil Practice and Remedies Code

section 38.001 as it existed when this suit was filed does not authorize the recovery

of attorney’s fees in a breach-of-contract action against a limited liability

6
      We note that Rainbow’s damages model incorporates the demand charges due
      under the MAG-0005 as a cost in calculating its lost profits.
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company.7 TEC Olmos, LLC v. ConocoPhillips Co., 555 S.W.3d 176, 188 (Tex.

App.—Houston [1st Dist.] 2018, pet. denied) (“Under the plain language of section

38.001, a trial court cannot order limited liability partnerships (L.L.P.), limited

liability companies (L.L.C.), or limited partnerships (L.P.) to pay attorneys’

fees.”); Alta Mesa Holdings, L.P. v. Ives, 488 S.W.3d 438, 455 (Tex. App.—

Houston [14th Dist.] 2016, pet. denied). We decline Rainbow’s request that we

overrule this precedent.

      We overrule Rainbow’s request for attorney’s fees.

7
      The legislature amended Civil Practice and Remedies Code section 38.001
      effective September 1, 2021, to permit recovery of attorney’s fees from an
      individual or “organization,” as defined by Business Organizations Code section
      1.002. See Act of May 28, 2021, 87th Leg., R.S., ch. 665, § 1, 2021 Tex. Sess.
      Law Serv. (West) (to be codified at TEX. CIV. PRAC. & REM. CODE § 38.001). This
      suit was filed prior to that amendment taking effect, and so we apply the version
      that was in effect when this action was commenced. See id. § 2 (amendment
      applies to award of attorney’s fees in action commenced on or after effective date
      of September 1, 2021).

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                                    Conclusion

       We conclude that the trial court’s findings that AMID breached and

repudiated the MAG-0005 and the findings of $6,145,215.89 in lost profit, benefit-

of-the-bargain damages (plus $449,097.42 in prejudgment interest) were supported

by sufficient evidence. We likewise conclude that the trial court correctly

determined that AMID take nothing on its own breach of contract claim, and it

properly denied Rainbow’s claim for attorney’s fees. Accordingly, we affirm the

trial court’s judgment.

                                              Richard Hightower
                                              Justice

Panel consists of Justices Kelly, Hightower, and Farris.

Farris, J., dissenting.

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