Opinion
NO. 01-16-00357-CV
10-26-2017
INTERNATIONAL MEDICINE CENTER ENTERPRISES, INC. AND EDWARD R. RENSIMER, M.D., Appellants v. SCONET, INC. AND THOMAS F. HURLEY, Appellees And SCONET, INC. AND THOMAS F. HURLEY, Appellants v. INTERNATIONAL MEDICINE CENTER ENTERPRISES, INC. AND EDWARD R. RENSIMER, M.D., Appellees
On Appeal from the 61st District Court Harris County, Texas
Trial Court Case No. 2013-32307
MEMORANDUM OPINION
International Medicine Center Enterprises, Inc. ("IMC") and Edward R. Rensimer, M.D. ("Rensimer") are appealing the judgment in favor of ScoNet, Inc. ("ScoNet") and Thomas F. Hurley ("Hurley"), rendered after a jury trial. IMC and Rensimer argue that: (1) the trial court erred by granting a directed verdict against them on their Deceptive Trade Practices Act ("DTPA") claim; (2) the trial court erred by granting a directed verdict against them on their fraud claim; (3) there is legally and factually insufficient evidence to support the jury's damages award on their breach of contract and negligence claims; and (4) the trial court erred by denying their motion for costs and attorney's fees. ScoNet is also appealing the trial court's refusal to award it its reasonable and necessary attorney's fees with respect to IMC and Rensimer's Texas Theft Liability Act ("TTLA") and DTPA claims. We modify the trial court's judgment to award costs of court to IMC and Rensimer, as required by Rule of Civil Procedure 131, and we affirm the judgment as modified.
Background
IMC is a small corporation whose business operations focus on medical care. The corporation's sole physician, Dr. Edward Rensimer, is also its president and founder.
In 2010, IMC's practice manager, Rachelle Guerra, began searching for a vendor to provide IT service and support to IMC. Guerra contacted ScoNet, an IT services company that provides network services to clients.
Guerra, Rensimer's wife Jane, and IMC's in-house IT person, Stephen Cooper, attended the initial meeting with ScoNet's sales director, Nancy Baker, and ScoNet's president, Michel Yammine. According to Baker, the parties discussed IMC's needs and the type of IT services that ScoNet could provide, if hired. Baker also testified that ScoNet informed IMC that, once it was hired, ScoNet would look at IMC's network in more detail and make specific recommendations for improvements and upgrades, as needed.
Neither Guerra nor Jane Rensimer testified at trial regarding the substance of that meeting, or any other negotiations between ScoNet and IMC.
ScoNet's standard services agreement provides: "During the term of this agreement [ScoNet] shall conduct Services (outlined in Schedule A) in accordance with a schedule mutually agreed upon between [ScoNet] and [IMC] and consistent with the requirements of this Agreement." "Schedule A" is a standard document that lists various services that ScoNet is able to provide to clients, including, "System Security," and "Updates." Specifically, Schedule A states:
System Security - Set security to protect network from intrusion. Review log files to identify potential hackers. Run integrity checks using security maintenance software and other utilities.
Updates - Apply updates to operating system, anti-virus, anti-SPAM and other server based utilities and applications.
The standard services agreement also includes a provision which, if agreed to, requires clients to pay for a minimum amount of weekly support by ScoNet. Baker testified that she explained to Guerra that this provision, which is referred to in the standard agreement as a "retainer," is optional and confers several benefits to clients who agree to pay for a minimum amount of weekly support. Specifically, the Service Agreement states, under the heading "Price": (1) "A minimum of 2 hours a week @ $95 per hour for network services and support (retainer)"; and (2) "$105 per hour for overtime network service and support that exceeds 4 hours every two (2) weeks."
On February 22, 2010, Guerra emailed Baker for clarification of some of the proposed terms included in the standard agreement: "The quote stated 1 to 2 hours. We will be billed for 1 hour each week and then if we use 2 hours some weeks the additional amount will be at $95. Or will we automatically be billed for two hours each week?" Baker replied that same day:
Although IMC and Rensimer argued to the trial court that the email between Baker and Guerra was inadmissible parole evidence, the trial court admitted the evidence, and IMC and Rensimer are not challenging the trial court's evidentiary ruling on appeal.
The 1 to 2 hours of support we proposed means that if you elect to have a minimum of 1 hour of support per week or 2 hours of support per week, the hourly rate will be $95 for the hour(s) you commit to, and additional hours will be billed at a rate of $105/hour. For example, if during a week we provided 2 hours of technical support:
• with the 1 hour weekly minimum you would be charged $200 (1 hour x $95/hour)+(1 hour x $105 for additional hours)
• with the 2 hour weekly minimum you would be charged $190 (2 hours x $95/hour)
It's not a huge difference but starting out, we will probably use the 2 hours a week just until everything is stabilized. Our billing period is every two weeks so we are a little flexible with the hours. It is up to you if you want a minimum of 1 or 2 hours. Eventually, we should just need 1 hour a week to support your site and we will always be available as needed when additional hours are required. Whatever hours you commit to, that will be the minimum we charge and you will need to use the hours or lose them (we monitor usage and almost always use the allotted hours).
There is no evidence that Baker or anyone else with ScoNet represented to IMC during the negotiation of the Service Agreement that the retainer, or any other contract provision, required IMC to perform weekly security updates as part of its "proactive" service. Specifically, Baker did not testify that the phrase "network service and support" included the installation of any security updates, or that she had told Guerra that such proactive maintenance included weekly updates.
The same day as Baker's and Guerra's email exchange, IMC and ScoNet entered into ScoNet's standard IT services agreement. The Service Agreement, which includes all of the standard service agreement's language as well as Schedule A, reflects that IMC opted for two hours of weekly minimum support. Specifically, the agreement states in part that IMC would be charged "[a] minimum of 2 hours a week @ $95 per hour for network service and support (retainer)." The agreement also includes an express warranty that "all services performed by [ScoNet's] employees, agents, or contractors under this agreement will be performed in a good, workmanlike manner."
The record reflects that ScoNet regularly invoiced IMC for its services and that those invoices stated that IMC was being charged "2 hours minimum per week @ $95/hour." The invoices were accompanied by service tickets identifying the services actually provided, and the time ScoNet spent on each service.
Although not expressly covered by the Service Agreement, ScoNet also provided IT services to Rensimer for e-mail on his iPhone and personal services like music on his iPhone and iTunes application. According to IMC, these personal services were charged to IMC pursuant to the payment and price terms of the Service Agreement. Rensimer, however, had no direct interaction with ScoNet during the term of the Service Agreement. If Rensimer needed IT assistance, he contacted an IMC employee who would contact ScoNet if he could not resolve the issue himself.
Rensimer was not involved in any meetings or negotiations relating to the Service Agreement. Rensimer admitted that he had no knowledge of the contents of the Service Agreement and did not receive or rely on any representations regarding the content of that agreement.
Rensimer also acknowledged that he did not understand the types of services that ScoNet was being hired to provide and that he "deferred that over to the practice manager at the time, Rachelle Guerra and Stephen [Cooper]."
On June 22, 2011, Rensimer's wife Jane, requested ScoNet's assistance with accessing the IMC network from her home computer. After ScoNet's service technician, Hurley, resolved this issue, Jane asked him for help accessing a storage device from her computer. The parties refer to this storage device by its brand name, DROBO.
The DROBO is a standalone storage device that uses multiple hard drives to store files so that, if one hard drive fails, the data is not lost. This device was designed to be plugged into a computer via a USB cord. Cooper, IMC's IT employee, had installed the DROBO two years before Jane's service call to ScoNet. The DROBO was on the Rensimers' home wireless network which allowed both Jane and Rensimer to access the files stored on the device from their respective computers.
The Rensimers' computers use different operating systems. Jane accessed the DROBO from her Dell laptop running Windows software while Rensimer accessed the DROBO from his Apple MacBook.
However, Jane had lost the ability to access the DROBO from her computer. When this problem had persisted for ten days, she requested Hurley's assistance. Jane told Hurley that Cooper had tried multiple times to assist her with accessing the storage device, but he had been unable to resolve the issue.
Hurley testified that although he was familiar with standalone storage devices like the one used by the Rensimers, he had no experience with the DROBO brand. After he determined that Jane's computer could not see the DROBO on the network, Hurley concluded that there was either an issue with the network's access to the DROBO, or a hardware problem with the DROBO itself. Hurley used the USB cord on the DROBO to plug it directly into Jane's computer in order to determine whether there was a network access issue. According to Hurley, if the DROBO had been working properly, the computer would have immediately recognized the device when he plugged in the USB cord. Jane's computer could tell that some device was connected, but it would not recognize or access the DROBO.
At that point, the computer prompted Hurley to initialize the DROBO. Hurley testified that initializing is only required if the device is new and has never been used on any computer, or the device is broken. Because Hurley knew that the DROBO was not new, he thought that the initialization request meant that it was broken or corrupted in some manner. According to Hurley, initializing the DROBO recreates the "disk signature" for locating and accessing files on the drive. Hurley testified that initializing a standalone storage device like the DROBO does not erase the data stored on the device.
However, initializing the DROBO did not resolve the issue and Hurley called the manufacturer for support. According to Hurley, the manufacturer "suggested that third party programs be used to recover the data." Hurley then contacted Cooper to further discuss the issue, and Cooper told Hurley that he would take over further troubleshooting of the DROBO. Cooper later contacted a third-party recovery software company who informed Cooper that Hurley's initialization of the device caused the DROBO to delete the data.
After the DROBO incident, IMC gave ScoNet thirty days' notice on July 25, 2011 that it was terminating the Service Agreement and it hired a new IT services provider.
IMC and Rensimer subsequently sued ScoNet and Hurley for various causes of action including violations of the DTPA, violations of the TTLA, breach of contract, fraud, and negligence.
IMC and Rensimer generally alleged in their petition causes of action against the "defendants," i.e., ScoNet and Hurley. Except for IMC and Rensimer's negligence claim, the underlying facts they alleged are limited to ScoNet's conduct.
Specifically, IMC and Rensimer alleged that ScoNet engaged in false, misleading, or deceptive acts or practices in violation of sections 17.46(b)(5), (7), (12), (22), (24) and 17.50(a)(2)-(3) of the DTPA by:
(1) misrepresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have (section 17.46(b)(5));
(2) misrepresenting that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another (section 17.46(b)(7));
(3) misrepresenting that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law (section 17.46(b)(12));TEX. BUS. & COM. CODE ANN. §§ 17.46(b)(5), (7), (12), (22), (24) and 17.50(a)(2)-(3) (West 2015).
(4) misrepresenting that work or services have been performed on, or parts replaced in, goods when the work or services were not performed or the parts replaced (section 17.46(b)(22));
(5) failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed (section 17.46(b)(24));
(6) breaching their express and implied warranties to provide good and workmanlike performance of services (section 17.50(a)(2)); and
(7) engaging in an unconscionable action or course of action (section 17.50(a)(3)).
IMC and Rensimer further alleged that ScoNet violated the TTLA by unlawfully appropriating IMC's property, i.e., by refusing to refund payments for services IMC alleged were never performed.
IMC and Rensimer alleged that ScoNet breached the Service Agreement by failing to provide regular security updates, failing to return money paid for security updates that were not provided, and by refusing to remedy its failure of performance. IMC and Rensimer also argued at trial that ScoNet breached the agreement's express warranty that all services would be "performed in a good, workmanlike manner" because Hurley, who was not qualified to service the DROBO, initialized the device, which resulted in the loss of Rensimer's files.
IMC and Rensimer also alleged that ScoNet breached its implied and express warranties to provide competent and qualified technicians to provide all services required by the Security Agreement because Hurley was not competent or qualified to provide the IT services IMC and Rensimer required pursuant to the contract.
IMC and Rensimer also alleged that ScoNet and Hurley engaged in fraud by "misrepresenting their ability, misrepresenting their expertise, misrepresenting their services, and misrepresenting their charges."
IMC and Rensimer further alleged that Hurley, and by extenfsion, his employer ScoNet, failed to exercise ordinary care by initializing the DROBO, and, therefore, both parties are liable for negligence and professional negligence.
ScoNet and Hurley counterclaimed for attorney's fees based on their defense of the TTLA and DTPA claims. Prior to trial, IMC and Rensimer nonsuited their TTLA claim.
At trial, IMC's expert testified that Hurley erased the data stored on the DROBO when he initialized the device and that the third-party vendor he contacted estimated that it would cost $22,500 to recover the data. IMC's expert, however, also acknowledged that third-party software or another provider might be able to recover the data for less money.
ScoNet's expert testified that Jane's access problem with the DROBO was caused by either the failure of one of the DROBO's discs or a failure of the DROBO's hardware. He also testified that data existed on all four of the DROBO's drives after Hurley initialized the DROBO, and that Hurley's initialization of the device was not responsible for the Rensimers' inability to access the stored data.
After reviewing the update history of IMC's three servers, IMC's expert also determined that updates had been installed on one of those servers during the term of the Service Agreement. He also testified that although the update history for one of the other servers had been lost when that server was rebuilt in 2014, he was nevertheless able to conclude that no updates had been installed on that server by ScoNet because there were no service tickets indicating that any such installments had been performed. IMC's expert also testified that IMC's new IT services provider installed forty-six updates to IMC's third server after the Service Agreement terminated. He did not, however, testify that those updates were required, or whether those updates should have been installed earlier. He also acknowledged that it can sometimes be prudent not to perform updates in order to avoid causing a conflict or problem.
The only witness to testify at trial regarding the amount of IMC's breach of contract damages was Rensimer, and his testimony was based almost exclusively on a one-page exhibit that did no more than summarize three categories of IMC's alleged damages:
| Damages Incurred | $ 23,506.00 |
| Charging for Services Not Performed | $ 5,920.00 |
| Attorney's Fees | $ 152,382.26 |
Rensimer testified that a portion of the damages he and IMC were seeking in this case was based on the "amount of money that an expert has advised or allocated to the security updates that [IMC] paid for that the experts said were not provided." The exhibit Rensimer relied on stated, "Charging for Services Not Performed $ 5,920.00." No lay or expert witness, however, explained how this amount was calculated. In fact, Rensimer testified that he did not know how to calculate the amount of damages with regard to the "security updates amount."
The evidence also demonstrated that ScoNet reviewed IMC's network and made recommendations for improvements, monitored IMC's servers on a weekly basis, installed security updates, monitored anti-virus software, and responded to service calls.
At the close of IMC's and Rensimer's case, ScoNet and Hurley moved for a directed verdict on IMC's and Rensimer's DTPA and fraud claims. The trial court granted both motions. As a result, the jury was only asked to determine ScoNet's liability with respect to IMC's breach of contract and negligence claims. The jury charge did not include any questions addressing Rensimer's personal claims nor did the charge include any questions regarding Hurley's liability. IMC and Rensimer did not object to these omissions.
The jury found that ScoNet failed to comply with the Service Agreement and awarded IMC $1.00 in damages. The jury found that ScoNet's negligence caused damage to the DROBO, and awarded IMC past damages of $1,006 and future damages of $11,250.
The parties submitted their respective claims for attorney's fees to the trial court via post-trial motions by agreement.
On February 1, 2016, the trial court entered its final judgment in accordance with the jury's findings. The trial court rendered judgment in favor of IMC and Rensimer against ScoNet, and awarded IMC $1.00 on its breach of contract claim and $12,256.00 on its negligence claim. The trial court also rendered a take-nothing judgment in favor of IMC and Rensimer on ScoNet's counterclaims for attorney's fees. The trial court did not award Rensimer any amount of damages. The court also did not expressly render judgment in favor of, or against, Hurley. The trial court's judgment does not include an award of costs or attorney's fees to any party and orders that "all relief not expressly granted in this judgment is hereby denied."
IMC and Rensimer filed a motion for new trial and a motion to modify judgment on the grounds that the trial court erred in granting the motion for directed verdict on their fraud and DTPA claims, that the jury's damages awards are factually and legally insufficient, and the trial court erred in denying their motion for attorney's fees and court costs. The trial court denied both motions.
IMC, Rensimer, ScoNet, and Hurley filed notices of appeal challenging the trial court's judgment.
On appeal, IMC and Rensimer argue that: (1) the trial court erred by granting a directed verdict against them on their DTPA claim; (2) the trial court erred by granting a directed verdict against them on their fraud claim; (3) there is legally and factually insufficient evidence to support the jury's damages award on their breach of contract and negligence claims; and (4) the trial court erred by denying their motion for costs and attorney's fees.
ScoNet argues that the trial court erred by not awarding it its reasonable and necessary attorney's fees because it was the prevailing party with respect to IMC and Rensimer's TTLA and DTPA claims.
Directed Verdicts on DTPA and Fraud Claims
In their first and second issues, IMC and Rensimer argue that the trial court erred by granting a directed verdict against them on their DTPA and fraud claims because there was more than a scintilla of evidence supporting these claims. IMC and Rensimer further contend that the trial court erred in granting the directed verdict on their DTPA claims based on the court's incorrect ruling that one act cannot constitute multiple causes of action.
IMC and Rensimer also argue that the trial court's granting of a directed verdict on their fraud claim is premised on the trial court's incorrect ruling that one act cannot support more than one legal theory of recovery. According to IMC and Rensimer, Hurley's act of initializing the DROBO constituted both negligence and a breach of ScoNet and Hurley's express warranty of good, workmanlike performance, and the trial court incorrectly ruled that one act cannot constitute multiple causes of action. The record reflects, however, that ScoNet moved for a directed verdict on the fraud claim on an evidentiary basis, and the trial court granted the directed verdict on that basis. The trial court did not grant the directed verdict because it determined that the fraud claim only sounded in negligence or some other cause of action.
ScoNet and Hurley argue that the evidence showed that the entire basis of the claim was the alleged nonperformance of the Service Agreement and mere nonperformance of a contract, without more, is not actionable under the DTPA. ScoNet and Hurley further contend that the professional services provided by ScoNet are exempt from the DTPA and that Rensimer was not a consumer under the DTPA.
ScoNet and Hurley also argue that the trial court's granting of a directed verdict on IMC's and Rensimer's fraud claims should be affirmed because there was no evidence of a material misrepresentation, no evidence that any such misrepresentation was made with knowledge of its falsity, and no evidence that the misrepresentation was made with the intent that it be relied upon.
A. Standard of Review
We review directed verdicts under the same legal-sufficiency standard that applies to no-evidence summary judgments. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013) (citing King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750 (Tex. 2003)). We sustain a legal-sufficiency point when (1) there is a complete absence of evidence regarding a vital fact, (2) rules of law or evidence preclude according weight to the only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a scintilla, or (4) the evidence conclusively establishes the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). We consider the evidence in the light most favorable to the nonmovant, crediting evidence a reasonable jury could credit and disregarding contrary evidence and inferences unless a reasonable jury could not. Id. at 827. Conclusive evidence cannot be disregarded. See id. at 816 ("Evidence is conclusive only if reasonable people could not differ in their conclusion.").
The nonmovant bears the burden to identify evidence before the trial court that raises a genuine issue of material fact as to each challenged element of its cause of action. See Boerjan v. Rodriguez, 436 S.W.3d 307, 310 (Tex. 2014). A directed verdict in favor of the defendant is proper if the plaintiff "fails to present evidence raising a fact issue essential to [its] right of recovery," or the plaintiff "admits or the evidence conclusively establishes a defense to [its] cause of action." Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000). We may affirm a directed verdict on any ground that supports it. Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429, 443 (Tex. App.—Dallas 2002, pet. denied).
B. DTPA Claim
1. Applicable Law
The DTPA prohibits "[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce" and creates causes of action for consumers based (1) on the use or employment of a false, misleading, or deceptive act or practice that is included in the "laundry list" of violations under section 17.46(b), (2) the breach of any express or implied warranty, and (3) an unconscionable action or course of action. See TEX. BUS. & COM. CODE ANN. § 17.46(a)-(b) (West Supp. 2016), §§ 17.50(a)(1)-(3) (West 2011). IMC and Rensimer alleged causes of action against ScoNet and Hurley based on sections 17.50(a)(1)-(3).
To prevail on a DTPA claim, IMC and Rensimer must prove that: (1) they were consumers; (2) ScoNet and Hurley engaged in at least one of the laundry list items set forth above; (3) IMC and Rensimer detrimentally relied on the false, misleading, or deceptive act or practice; and (4) the false, misleading, or deceptive act or practice was a producing cause of IMC and Rensimer's injury. See TEX. BUS. & COM. CODE ANN. § 17.50(a)(1).
"The contractual relationship of the parties may create duties under both contract and tort law." Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986). However, a mere breach of contract, without more, does not violate the DTPA. Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). While the failure to perform a contract would typically violate only the contract, misrepresentations made before entering into the contract may still violate the DTPA. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 304-05 (Tex. 2006). The reasoning for this is that a duty to refrain from such conduct arises from the general obligations under the common law and DTPA, rather than the contract itself, and may be asserted in tort. See id.
Representations that are made outside the contract may also violate the DTPA. Cont'l Dredging, Inc. v. De-Kaizered, Inc., 120 S.W.3d 380, 390 (Tex. App.—Texarkana 2003, pet. denied). Whether a breach of contract rises to the level of a misrepresentation sufficient to trigger the DTPA is a fact-driven inquiry. Id. at 389. Whether the facts, once ascertained, constitute a DTPA violation is a question of law. Id. Where an action "depends entirely on pleading and proving the contract in order to establish a duty, the action remains one for breach of contract only, regardless of how it is framed by the pleadings." OXY USA, Inc. v. Cook, 127 S.W.3d 16, 20 (Tex. App.—Tyler 2003, pet. denied).
2. Analysis
In their first issue on appeal, IMC and Rensimer argue that ScoNet and Hurley violated six sections of the DTPA based on the language of the Service Agreement, numerous pre-contract misrepresentations and omissions, and the fact that ScoNet regularly invoiced IMC for at least two hours of network service every week.
Specifically, IMC and Rensimer alleged that ScoNet engaged in false, misleading, or deceptive acts or practices in violation of sections 17.46(b)(5), (7), (12), (22) and 17.50(a)(2)-(3) of the DTPA by: (1) misrepresenting during pre-contract negotiations that ScoNet could do everything provided for in the Service Agreement and that their technicians would provide good and workmanlike performance of such IT services in order to induce IMC to enter into the Service Agreement; (2) failing to disclose to IMC and Rensimer during pre-contract negotiations that ScoNet's technicians were not competent or qualified to provide all requested services covered by the Service Agreement; (3) misrepresenting and warranting that their technicians, including Hurley, would provide good and workmanlike performance of IT services covered by the Service Agreement; (4) misrepresenting, based on language in the Service Agreement, that ScoNet was required to provide pro-active maintenance to IMC every week, including security updates; (5) including misleading language in the Service Agreement's pricing provision, i.e., the word "retainer," which ScoNet contends is non-refundable, but which IMC and Rensimer interpret to mean that they would have to pay for a minimum of two hours of work per week only if ScoNet performed such work; (6) failing to disclose to IMC and Rensimer during pre-contract negotiations that IMC and Rensimer were required to pay a weekly non-refundable "retainer" to ScoNet under Service Agreement, regardless of whether ScoNet provided any such services; (7) misrepresenting on its invoices that security updates required by the Service Agreement were performed when they were not, and (8) engaging in an unconscionable action or course of action, i.e., misrepresenting on its invoices that security updates were done when they were not, because ScoNet knew that IMC was relying upon ScoNet's technical expertise and that IMC did not have the ability to independently determine whether such updates had been done.
With respect to their first alleged DTPA violation, IMC and Rensimer argue that ScoNet overstated the abilities and IT expertise of the company and its technicians during contract negotiations in order to induce IMC to enter into the Service Agreement. They argue that the evidence at trial proved that Baker and Yammine represented to IMC that ScoNet could provide any IT support that IMC needed. Whether Baker misrepresented that ScoNet could do everything in the contract is dependent upon the pleading and proving of the contract, and the interpretation of the contract's requirements. See id. (stating that where an action "depends entirely on pleading and proving the contract in order to establish a duty, the action remains one for breach of contract only, regardless of how it is framed by the pleadings.").
With respect to their second and third allegations, IMC and Rensimer argue that ScoNet violated the DTPA by failing to disclose that its technicians were not competent or qualified to provide all requested IT services covered by the Service Agreement during pre-contract negotiations and actively misrepresenting and warranting that their technicians, including Hurley, would provide good and workmanlike performance of such services. Whether ScoNet misrepresented, or failed to disclose the competency and qualifications of its technicians with respect to their ability to perform the IT services covered by Service Agreement, and thus, their ability to provide good and workmanlike performance of such services, is dependent upon pleading and proving of the contract, and the interpretation of the contract's requirements. See id.
Similarly, IMC and Rensimer's fourth and fifth alleged DTPA violations are based on IMC and Rensimer's and ScoNet's conflicting interpretations of the Service Agreement's requirement and the word "retainer," a term in the contract. In order to maintain a cause of action against ScoNet based on an alleged violation of the Service Agreement, IMC and Rensimer would need to plead and prove the contract. IMC and Rensimer's seventh and eighth alleged DTPA violations are also based on IMC and Rensimer's interpretation of the invoices and the Service Agreement, and proof that the invoices misrepresented ScoNet's satisfaction of its contractual obligations are also dependent on pleading and proving the contract. Because all of these allegations arise out of and are dependent upon the Service Agreement, these portions of IMC and Rensimer's DTPA cause of action sound only in contract. See id. (stating that where an action "depends entirely on pleading and proving the contract in order to establish a duty, the action remains one for breach of contract only, regardless of how it is framed by the pleadings.").
With respect to their sixth allegation, IMC and Rensimer argue that ScoNet failed to disclose to IMC that the Service Agreement's retainer was non-refundable, and that IMC had to use its two hours of network support and maintenance or lose them. In order to maintain a cause of action against ScoNet based on their interpretation of the Service Agreement, IMC and Rensimer would need to plead and prove the contract. Furthermore, when IMC's representative asked for clarification regarding the pricing provision's retainer in a pre-contract email to Baker, Baker informed her that IMC would be required to pay for the minimum hours of weekly service that IMC agreed to, regardless of whether ScoNet performed such services: "Whatever hours you commit to, that will be the minimum we charge and you will need to use the hours or lose them." See generally Bus. Staffing, Inc. v. Jackson Hot Oil Serv., 401 S.W.3d 224, 243 (Tex. App.—El Paso 2012, pet. denied) (stating parole evidence rule is inapplicable to DTPA claims). Thus, the evidence conclusively establishes that ScoNet disclosed to IMC that the Service Agreement's retainer was non-refundable, and that IMC had to use its weekly hours of network support and maintenance or it would lose them. Because the evidence conclusively establishes the opposite of a vital fact of one of IMC's and Rensimer's DTPA claims and the other DTPA allegations are more properly characterized as breach of contract claims, the trial court did not err in granting a directed verdict on IMC's and Rensimer's DTPA cause of action. See City of Keller, 168 S.W.3d at 810.
We overrule IMC's and Rensimer's first issue challenging the trial court's granting of a directed verdict on their DTPA claims.
C. Fraud
In their second issue on appeal, IMC and Rensimer argue that the trial court erred by granting a directed verdict against them on their fraud claims because there was more than a scintilla of evidence supporting these claims.
1. Applicable Law
To establish fraud, the evidence must show: (1) the defendant made a false, material representation; (2) the defendant knew the representation was false, or made it recklessly without any knowledge of its truth; (3) the defendant intended that the plaintiff act on the representation; and (4) the plaintiff suffered injury by relying on the representation. Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 217 (Tex. 2011). Fraud exists if the speaker knew the representation was false when made, or made it recklessly without knowledge of the truth. Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 526 (Tex. 1998).
A promise of future performance constitutes an actionable misrepresentation if the promise was made with no intention of performing at the time the promise was made. See Nwokedi v. Unlimited Restoration Specialists, Inc., 428 S.W.3d 191, 199 (Tex. App.—Houston [1st Dist.] 2014, pet. denied) (citing Formosa, 960 S.W.2d at 48 and Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434-35 (Tex. 1986)). The speaker's intent at the time of the representation may be inferred from the speaker's acts after the representation was made. Nwokedi, 428 S.W.3d at 199 (citing Spoljaric, 708 S.W.2d at 434).
2. Analysis
IMC and Rensimer argue on appeal that "Appellees," i.e., ScoNet and Hurley, falsely misrepresented during contract negotiations that ScoNet would provide a minimum of two hours of "proactive" maintenance to IMC each week, and that such "proactive" maintenance included security updates. According to IMC and Rensimer, "[e]ach invoice [sent by ScoNet pursuant to the contract] was an affirmative representation that IMC got its money's worth for the 2 hours a week retainer, when the evidence shows that was not the case." IMC and Rensimer further contend that one can reasonably infer from the evidence that ScoNet knew that its representation of proactive maintenance was false, or was made recklessly in light of the circumstances.
Although IMC and Rensimer generally alleged that Hurley was liable for fraud, there is no evidence that Hurley was involved in the fraudulent conduct alleged by IMC and Rensimer. Specifically, there is no evidence that Hurley was involved in the negotiation of the Service Agreement, the invoicing of charges pursuant to that agreement, or that Hurley ever made a false or misleading representation to either IMC or Rensimer. Therefore, Hurley was entitled to a directed verdict on IMC's and Rensimer's fraud claims against him. See City of Keller, 168 S.W.3d at 810.
With respect to Rensimer's fraud claim against ScoNet, Rensimer testified that he was not involved in the negotiation of the Service Agreement and that he did not receive or rely on any representations regarding the content of that agreement, or the services to be provided pursuant to that agreement. Rensimer also testified that he did not know about the Service Agreement until after the DROBO incident in June 2011. There is also evidence that ScoNet's invoices were sent to an IMC employee who paid them—not Rensimer. Therefore, ScoNet was entitled to a directed verdict on Rensimer's fraud claim because there was conclusive evidence that ScoNet did not make a false, misleading representation to Rensimer regarding the services ScoNet would provide, or had provided, pursuant to the Service Agreement. See id.
With respect to IMC's fraud claim against ScoNet, the record reflects that Baker testified that she informed Guerra that the contract's retainer provision would require IMC to pay for a minimum number of hours a week for "network service and support" and would entitle IMC to "proactive" service. When Guerra inquired about the nature of the retainer provision prior to the execution of the agreement, Baker informed her that, "Whatever [minimum] hours [a week] you commit to, that will be the minimum we charge and you will need to use the hours or lose them." Baker described such "proactive" service at trial, stating "we're doing the maintenance and looking at that and checking on them every week." Baker also testified that typically the two hours a week of network service and support includes about an hour of "proactive maintenance."
As previously discussed, the trial court admitted this email exchange into evidence, over IMC and Rensimer's parole evidence objection. IMC and Rensimer are not challenging the trial court's evidentiary ruling on appeal.
Baker, however, did not testify that the phrase "network service and support," as used in the pricing provision, included the installation of any security updates, or that she had told Guerra that such proactive maintenance included weekly updates. Furthermore, there is no evidence that Baker or anyone else with ScoNet represented to IMC during the negotiation of the Service Agreement that the retainer, or any other contract provision, required ScoNet to perform weekly security updates as part of its "proactive" service. The evidence also establishes that Baker specifically told IMC's representative that IMC had to use the weekly hours of network service and support covered by the retainer, or else they would "lose them." See generally Gonzalez v. United Bhd. of Carpenters & Joiners of Am., Local 551, 93 S.W.3d 208, 211 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (stating parole evidence may be admitted to show that contract was induced by fraud). With respect to misrepresentations as evidenced by the invoices, the record reflects that the invoices sent to IMC stated that IMC was being charged "2 hours minimum per week @ $95/hour," and these invoices were accompanied by service tickets identifying the services actually provided, and the time ScoNet spent on each service. Therefore, ScoNet was entitled to a directed verdict on IMC's fraud claim because there was no evidence that ScoNet made a false, misleading representation to IMC regarding the nature of the retainer or the services that ScoNet would provide, or had provided, pursuant to the Service Agreement. See City of Keller, 168 S.W.3d at 810.
We overrule IMC's and Rensimer's second issue challenging the trial court's granting of a directed verdict on their fraud claims.
Sufficiency of Evidence Supporting Damage Awards
IMC and Rensimer argue that there is legally and factually insufficient evidence to support the jury's damage awards for their breach of contract and negligence claims.
A. Standard of Review and Applicable Law
When a party attacks the legal sufficiency of an adverse finding on an issue on which he has the burden of proof, he must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001); see also Powell Elec. Sys., Inc. v. Hewlett Packard Co., 356 S.W.3d 113, 125-26 (Tex. App.—Houston [1st Dist.] 2011, no pet.). In conducting a legal sufficiency review, we review the evidence presented below in the light most favorable to the jury's verdict, crediting favorable evidence if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Del Lago Partners, Inc. v. Smith, 307 S.W.3d 762, 770 (Tex. 2010); City of Keller, 168 S.W.3d at 827. Thus, IMC and Rensimer's legal sufficiency challenge will be sustained only if their position is conclusively established by the evidence. Francis, 46 S.W.3d at 241. Evidence is conclusive only if reasonable people could not differ in their conclusions. See City of Keller, 168 S.W.3d at 816.
When a party attacks the factual sufficiency of an adverse finding on an issue on which he had the burden of proof, he must demonstrate on appeal that the adverse finding was against the great weight and preponderance of the evidence. Francis, 46 S.W.3d at 242. As a court of appeals, we must consider and weigh all of the evidence, and we "can set aside a verdict only if the evidence is so weak or if the finding is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust." Id. As the finder of fact, the jury is given broad discretion to award damages within the range of evidence presented at trial. Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 713 (Tex. 2016); see also Powell Elec. Sys., 356 S.W.3d at 126.
In both legal and factual sufficiency cases, the fact finder is the sole judge of the credibility of the witnesses and the weight to give their testimony. City of Keller, 168 S.W.3d at 819 (legal sufficiency); Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003) (factual sufficiency). The fact finder may choose to believe one witness over another. City of Keller, 168 S.W.3d at 819. A reviewing court must assume that the fact finder resolved all conflicts in the evidence in accordance with its decision if a reasonable fact finder could have done so. See Id. at 820. A reviewing court may not "impose [its] own opinions to the contrary" or "substitute its judgment for that of the jury." Id. at 820, 822; Golden Eagle Archery, 116 S.W.3d at 761. A fact finder "may disregard even uncontradicted and unimpeached testimony from disinterested witnesses," so long as the decision to disregard is reasonable. City of Keller, 168 S.W.3d at 820.
B. Breach of Contract Damages
In their third issue on appeal, IMC and Rensimer argue that the jury's award of $1.00 for their breach of contract claim is legally insufficient because the evidence presented at trial conclusively established that they paid $5,920 for security updates that were promised but never performed.
The only witness to testify at trial regarding the amount of IMC's breach of contract damages was Rensimer, and his testimony was based almost exclusively on a one-page exhibit that did no more than summarize three categories of IMC's alleged damages:
| Damages Incurred | $ 23,506.00 |
| Charging for Services Not Performed | $ 5,920.00 |
| Attorney's Fees | $ 152,382.26 |
Rensimer testified that a portion of the damages he and IMC were seeking in this case was based on the "amount of money that an expert has advised or allocated to the security updates that [IMC] paid for that the experts said were not provided." The exhibit Rensimer relied on stated, "Charging for Services Not Performed $ 5,920.00." No lay or expert witness, however, explained how this amount was calculated. In fact, Rensimer testified that he did not know how to calculate the amount of damages with regard to the "security updates amount."
Furthermore, there is evidence in the record that ScoNet installed security updates on one of IMC's servers during the term of the Service Agreement, and disputed evidence as to whether ScoNet installed all of the required security updates on IMC's two other servers. The record also reflects that IMC's new IT provider installed forty-six updates on one of IMC's servers when the Service Agreement terminated, but there is no evidence as to when, or whether, those updates should have been installed. Furthermore, although IMC presented some evidence that the difference in value between the security updates that were promised but never performed is $5,920 (i.e., the one-page exhibit and Rensimer's testimony), it would not be unreasonable for the jury to disregard or disbelieve all or some of IMC's evidence on this issue, given the lack of detail and documentation supporting IMC's damages calculations. See generally id., 168 S.W.3d at 816 (stating evidence conclusive only if reasonable people could not differ in their conclusions). IMC did not conclusively establish the amount of its breach of contract damages. See Powell Elec. Sys., 356 S.W.3d at 126-27. Accordingly, we hold that there is legally sufficient evidence supporting the jury's damages award with respect to IMC's breach of contract claim. See Francis, 46 S.W.3d at 241.
Further, there is undisputed evidence that no security breaches occurred during the term of the Service Agreement, i.e., between February 2010 and July 2011. Thus, the range of evidence presented to the jury could reasonably allow it to find that the security updates required by the Service Agreement were intended to protect IMC's data from security breaches, and that because ScoNet's breach of the contract did not result in any security breaches, the difference in value between the services allegedly required under the contract and the services performed by ScoNet was nominal. See generally Powell Elec. Sys., 356 S.W.3d at 126 (stating that evidence corresponding to exact amount of jury's damages finding is not essential); cf. Ctr. Equities, Inc. v. Tingley, 106 S.W.3d 143, 154 n.7 (Tex. App.—Austin 2003, no pet.) ("When a plaintiff fails to prove actual damages resulting from a breach of contract, nominal damages are available upon proof of a contract and a breach thereof."). Therefore, after considering all of the evidence, we cannot say that the jury's finding of $1.00 in nominal damages "is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust." Francis, 46 S.W.3d at 242.
We overrule IMC and Rensimer's challenge to the sufficiency of the evidence supporting the jury's finding of $1.00 in breach of contract damages.
C. Negligence Damages
IMC and Rensimer argue that there is legally and factually insufficient evidence to support the jury's award of $11,250 for future damages because the only evidence of the amount of its negligence damages is the testimony of IMC's expert that a third party estimated that it would cost $22,500 to recover the DROBO's data. IMC alleged that Hurley and, by extension his employer, ScoNet, negligently connected the DROBO directly to Jane's computer and initialized the DROBO and that this negligent conduct resulted in the total loss of the DROBO's data. The jury was asked, "What sum of money, if any, if paid now in cash, would fairly and reasonably compensate [IMC] for their damages, if any, that were proximately caused by [ScotNet's] negligence?" With regard to IMC's future damages, the jury answered $11,250.
The record reflects that neither Cooper nor Jane could access the DROBO for ten days before Hurley connected the DROBO directly to Jane's computer and initialized the device. There is conflicting testimony regarding whether the initialization of the device erased all of the data stored on the DROBO or only some of the data. There is also conflicting testimony regarding whether the inaccessibility of the data was caused by a pre-existing hardware failure, as opposed to Hurley's and ScoNet's negligence. Although IMC's expert testified that a third-party vendor estimated that it would cost $22,500 to recover all of the DROBO's data, he also acknowledged that third-party software or another provider might be able to recover the data for less money.
Thus, the range of evidence presented to the jury could reasonably allow it to find that the DROBO's data could be recovered for less than the $22,500 estimate, and that, because the DROBO was damaged before Hurley worked on it, ScoNet and Hurley were the proximate cause of only some, but not all, of IMC's damages. See Powell Elec. Sys., 356 S.W.3d at 127; see also City of Keller, 168 S.W.3d at 819-20 (stating fact finder may choose to believe one witness over another and courts assume fact finder resolved conflicting evidence in accordance with its decision if reasonable fact finder could have done so).
IMC and Rensimer also argue that because the jury's award of $11,250 for future damages is exactly half of the $22,500 in damages they sustained, the jury must have improperly apportioned damages between the parties, despite the jury charge's lack of a contributory negligence instruction. Evidence corresponding to the exact amount of the jury's damages finding is not essential. See Powell Elec. Sys., 356 S.W.3d at 126. Furthermore, because the jury's award falls within the range of damages presented, "[w]e are not permitted to disregard the jury's damages award on the basis that the jury's reasoning in arriving at its figure is unclear." Id. at 127 (quoting Duggan v. Marshall, 7 S.W.3d 888, 893 (Tex. App.—Houston [1st Dist.] 1999, no pet.)); see also Adams v. Petrade Int'l, Inc., 754 S.W.2d 696, 710 (Tex. App.—Houston [1st Dist.] 1988, writ denied) (holding appellate courts cannot "disregard the jury's answers to the issues merely because the jury's reasoning in arriving at its figure may be unclear").
After reviewing the evidence in the light most favorable to the jury's verdict, we conclude that IMC did not conclusively establish that its negligence damages were $22,500 because, based on the conflicting evidence, the jury could reasonably have determined that ScoNet's and Hurley's negligence proximately caused a fraction of IMC's damages or that the cost of recovering all of the DROBO's data was less than $22,500. See Powell Elec. Sys., 356 S.W.3d at 126-27; see also City of Keller, 168 S.W.3d at 816 (stating evidence conclusive only if reasonable people could not differ in their conclusions). Accordingly, we hold that there is legally sufficient evidence supporting the jury's damages award with respect to IMC's negligence claim. See Francis, 46 S.W.3d at 241. After considering and weighing all of the evidence, including evidence conflicting with and supporting the jury's verdict, we cannot say that the evidence is so weak or that the jury's finding of $11,250 for future damages "is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust." Id. at 242. Accordingly, we hold that there is factually sufficient evidence supporting the jury's damages award with respect to IMC's negligence claim. See id. at 241.
We overrule IMC's and Rensimer's issue challenging the sufficiency of the evidence supporting the jury's award of $11,250 for future damages.
IMC's and Rensimer's Attorney's Fees and Costs
IMC and Rensimer argue that the trial court abused its discretion by refusing to award them their costs and attorney's fees because they prevailed on their breach of contract and negligence claims.
A. Attorney's Fees
ScoNet and Hurley argue that the trial court did not abuse its discretion by declining to award IMC and Rensimer their attorney's fees because IMC was only awarded nominal damages on its breach of contract claim, and Rensimer was awarded no damages, and therefore, neither IMC nor Rensimer was a prevailing party under Texas Civil Practices and Remedies Code section 38.001.
We review a trial court's decision to award attorney's fees for an abuse of discretion. Ridge Oil Co., Inc. v. Guinn Invs., Inc., 148 S.W.3d 143, 163 (Tex. 2004). Civil Practice and Remedies Code section 38.001(8) provides that "[a] person may recover reasonable attorney's fees . . . in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract." TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (West 2015). To recover attorney's fees under section 38.001, a party must prevail on the underlying claim and recover damages. Ventling v. Johnson, 466 S.W.3d 143, 154 (Tex. 2015) (citing Intercontinental Grp. P'ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 653 (Tex. 2009)).
Nominal damages are damages in name only. Lucas v. Morrison, 286 S.W.2d 190, 191 (Tex. Civ. App.—San Antonio 1956, no writ). They are a trivial amount. See id. at 191-92. They are given, not as an equivalent for the wrong, but to recognize a technical right. Van de Putte v. Cameron Cty. Water Control & Improvement Dist. No. 7, 35 S.W.2d 471, 474 (Tex. Civ. App.—San Antonio 1931, no writ). Nominal damages, traditionally the sum of $1 or $10, are not the type of damages which will entitle a litigant to also recover its attorney's fees under section 38.001. See ITT Commercial Fin. Corp. v. Riehn, 796 S.W.2d 248, 257 (Tex. App.—Dallas 1990, no writ).
Although the jury found that ScoNet failed to comply with the Service Agreement, the jury awarded only $1.00 in breach of contract damages to IMC. The $1.00 award is a "trivial amount" intended to send a message that IMC was "technically right" in this case. Because we conclude the $1.00 awarded by the jury was nominal damages, it cannot support an award of attorney's fees. See Riehn, 796 S.W.2d at 257; see generally Harkins v. Crew, 907 S.W.2d 51, 61 (Tex. App.—San Antonio 1995, writ denied) (concluding jury's award of $1.00 for emotional distress was "nominal" damages and could not support punitive damage award).
With respect to Rensimer, the record reflects that the trial court rendered judgment in favor of Rensimer on the breach of contract claim, but it did not award Rensimer any damages. Thus, although Rensimer prevailed on his breach of contract claim, he is not entitled to an award of his attorney's fees because he did not recover any damages with respect to this claim. See Ventling, 466 S.W.3d at 154 (stating party must prevail on breach of contract claim and be awarded some amount of damages in order to recover attorney's fees under section 38.001).
Accordingly, we cannot say that the trial court abused its discretion when it denied IMC's and Rensimer's request for attorney's fees. We overrule IMC's and Rensimer's challenge to the trial court's denial of their request for attorney's fees based on their breach of contract claims.
B. Court Costs
An appellate court reviews a trial court's decision to award court costs for abuse of discretion. Henry v. Masson, 453 S.W.3d 43, 50 (Tex. App.—Houston [1st Dist.] 2014, no pet.). Texas Rule of Civil Procedure 131 provides that "a successful party to a suit shall recover of his adversary all costs incurred therein, except where otherwise provided." TEX. R. CIV. P. 131. A court may, however, adjudge the costs otherwise than as provided by law or the rules of civil procedure for good cause stated on the record. TEX. R. CIV. P. 141. Absent a sufficient articulation on the record of good cause for adjudging costs against the mandate of rule 131, the trial court abuses its discretion when it fails to award costs to the successful party. See Furr's Supermarkets, Inc. v. Bethune, 53 S.W.3d 375, 378 (Tex. 2001).
Whether a party is a successful party under rule 131 is "based upon success upon the merits, not upon damages." Perez v. Baker Packers, a Div. of Baker Int'l Corp., 694 S.W.2d 138, 143 (Tex. App.—Houston [14th Dist.] 1985, writ ref'd n.r.e.). Thus, a party who obtains a take-nothing judgment is a "successful party" for purposes of the rule. Imperial Lofts, Ltd. v. Imperial Woodworks, Inc., 245 S.W.3d 1, 8 (Tex. App.—Waco 2007, pet. denied). A plaintiff who is awarded nominal damages may also recover court costs. See Henry S. Miller Co. v. Evans, 452 S.W.2d 426, 428 (Tex. 1970). In fact, "[n]ominal damages are simply a vehicle for taxing the defendant with costs." Riehn, 796 S.W.2d at 257.
Here, the trial court rendered judgment in favor of IMC and Rensimer, awarded IMC damages on its breach of contract and negligence claims, and rendered a take-nothing-judgment in favor of IMC and Rensimer on ScoNet's counterclaims for attorney's fees. Thus, IMC and Rensimer were successful parties under rule 131. See Imperial Lofts, Ltd., 245 S.W.3d at 8; Perez, 694 S.W.2d at 143. The judgment, however, does not award costs to any party. See TEX. R. CIV. P. 131. Although a court may assess costs differently for good cause, good cause must be stated on the record, and the record in this case is devoid of any such statements. See generally TEX. R. CIV. P. 141 ("The court may, for good cause, to be stated on the record, adjudge the costs otherwise than as provided by law or these rules.").
The fact that Rensimer was not awarded any damages, however, is not dispositive with respect to whether he is entitled to recover his court costs. See generally Perez v. Baker Packers, a Div. of Baker Int'l Corp., 694 S.W.2d 138, 143 (Tex. App.—Houston [14th Dist.] 1985, writ ref'd n.r.e.) (stating "determination of a successful party under rule 131 is to be based upon success upon the merits, not upon damages").
Because the trial court did not find or otherwise indicate on the record any cause for failing to award court costs, an award of costs to IMC and Rensimer as "successful" parties under rule 131 was mandated. See Diggs v. VSM Fin., L.L.C., 482 S.W.3d 672, 674-75 (Tex. App.—Houston [1st Dist.] 2015, no pet.). Therefore, the trial court abused its discretion when it failed to award costs of court to IMC and Rensimer. See Bethune, 53 S.W.3d at 378. Accordingly, we modify the trial court's judgment to award costs of court to IMC and Rensimer as required by rule 131. See Diggs, 482 S.W.3d at 675.
ScoNet's Attorney's Fee
ScoNet argues that the trial court erred by not awarding it its reasonable and necessary attorney's fees because it was the prevailing party with respect to: (1) IMC and Rensimer's TTLA claim pursuant to Civil Practices and Remedies Code Chapter 134, and (2) IMC and Rensimer's groundless DTPA claims.
IMC and Rensimer argue that ScoNet waived any complaint about attorney's fees because ScoNet did not file any post-judgment motions raising this issue. ScoNet replies that its post-trial, pre-judgment motions for attorney's fees preserved the appellate review of the trial court's decision to deny attorney's fees.
Assuming without deciding that ScoNet preserved this issue for our review, ScoNet is still not entitled to relief on the merits.
A. TTLA
A party who prevails on a TTLA claim is entitled to recover its court costs and reasonable and necessary attorney's fees. See TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b) (West 2011) ("Each person who prevails in a suit under this chapter shall be awarded court costs and reasonable and necessary attorney's fees."). A defendant who defeats a TTLA claim is a prevailing party and can recover attorney's fees even if it did not recover actual damages. Air Routing Int'l Corp. (Canada) v. Britannia Airways, Ltd., 150 S.W.3d 682, 686 (Tex. App.—Houston [14th Dist.] 2004, no pet.) ("The [TTLA] is unusual in Texas law in that it requires the court to award attorney's fees to a party who successfully defends a [TTLA] claim, without any prerequisite that the claim is found to be groundless, frivolous, or brought in bad faith."); see also Arrow Marble, LLC v. Estate of Killion, 441 S.W.3d 702, 706 (Tex. App.—Houston [1st Dist.] 2014, no pet.) ("Equicap's status defending against a TTLA claim does not prevent recovery of attorney's fees.").
ScoNet argues that it prevailed on IMC's TTLA claim because IMC nonsuited this claim without prejudice prior to trial. A plaintiff's nonsuit without prejudice, however, does not necessarily confer prevailing party status on the defendant. See Epps v. Fowler, 351 S.W.3d 862, 869 (Tex. 2011); see also Bacon Tomsons, Ltd. v. Chrisjo Energy, Inc., No. 01-15-00305-CV, 2016 WL 4217254, at *12 (Tex. App.—Houston [1st Dist.] Aug. 9, 2016, no pet.) (mem. op.) (applying reasoning in Epps to claim for attorney's fees under TTLA). "[A] defendant may be a prevailing party when a plaintiff nonsuits without prejudice if the trial court determines, on the defendant's motion, that the nonsuit was taken to avoid an unfavorable ruling on the merits." Epps, 351 S.W.3d at 870.
The record does not reflect that ScoNet filed a motion asking the trial court to make a finding that IMC nonsuited its TTLA claim in order "to avoid an unfavorable ruling on the merits," or that the trial court made such a finding. Id. In light of the lack of a trial court finding on IMC's motive for nonsuiting its TTLA claim, ScoNet was not entitled to recover its attorney's fees because it did not prevail on this claim. See id.; see also TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b) (attorney's fees only available to party who prevails on TTLA claim).
We overrule ScoNet's first issue.
B. DTPA
ScoNet argues that the trial court erred by not awarding it its reasonable and necessary attorney's fees because it was the prevailing party with respect to IMC and Rensimer's groundless DTPA claims.
The DTPA authorizes a trial court to award a defendant its reasonable and necessary attorney's fees and court costs if the court finds that "an action under this section was groundless in fact or law or brought in bad faith, or brought for the purpose of harassment." TEX. BUS. & COM. CODE ANN. § 17.50(c) (West 2011); see also WWW.URBAN.INC. v. Drummond, 508 S.W.3d 657, 673 (Tex. App.—Houston [1st Dist.] 2016, no pet.). However, attorney's fees are not recoverable under section 17.50(c) without a "finding by the court" that the DTPA claim was groundless and made in bad faith, or groundless and brought for purposes of harassment. See Gonzales v. Am. Title Co. of Hous., 104 S.W.3d 588, 599 (Tex. App.—Houston [1st Dist.] 2003, pet. denied). The record does not reflect that the trial court found that IMC's and Rensimer's DTPA claims were "groundless." Therefore, ScoNet was not entitled to recover its attorney's fees under section 17.50(c).
In fact, the trial court stated on the record that whether such claims are groundless is a "judicial question. I would agree with you that there's some basis for the [DTPA] claim."
We overrule ScoNet's second issue.
Conclusion
We modify the trial court's judgment to award costs of court to IMC and Rensimer as required by Rule of Civil Procedure 131, and affirm the judgment as modified.
Russell Lloyd
Justice Panel consists of Justices Jennings, Keyes and Lloyd.