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Gillet v. Zupt, LLC

Court of Appeals of Texas, Fourteenth District

February 23, 2017

JOEL GILLET, Appellant
v.
ZUPT, LLC, Appellee

         On Appeal from the 295th District Court Harris County, Texas Trial Court Cause No. 2010-34306

          Panel consists of Justices Boyce, Christopher, and Brown.

          OPINION

          William J. Boyce, Justice

         Joel Gillet sued appellee ZUPT, LLC - of which Gillet is a part-owner - seeking to force a buyout of his interest in ZUPT. In a counterclaim, ZUPT contended that Gillet disclosed ZUPT's trade secrets to a competitor that employed Gillet. An arbitrator awarded each party damages but declined to offset the damages in the award. The trial court confirmed the award, and ZUPT sought a turnover order and appointment of a receiver to collect the judgment.

         Gillet appeals from the trial court's order appointing a receiver and ordering turnover. Gillet contends that the trial court lacked evidence of non-exempt assets subject to turnover; that a charging order was the exclusive remedy to collect against his membership interest in a limited liability company; and that the turnover order was inconsistent with the court's final judgment because it required turnover of his membership interest in a manner contradicting the final judgment.

         We reverse the trial court's turnover order for two reasons. First, the trial court's turnover order requires Gillet to turn over his membership interest in ZUPT but does not mandate that Gillet receive a dollar credit equal to his judgment for his interest. This potentially could lead to a situation in which the receiver values Gillet's membership interest in ZUPT at less than the value the final judgment mandates Gillet receive for the interest; as a result, the receiver could execute the turnover order in a manner inconsistent with the final judgment. Second, the turnover order requires turnover of a number of categories of assets without evidence that such non-exempt assets exist. We remand to the trial court to revise the turnover order consistent with this opinion.

         Background

         ZUPT is a limited liability company that develops and sells subsea surveying services to customers in the oil and gas industry. Gillet owns 45 percent of ZUPT.

         Gillet gave notice in March 2009 of his intent to force ZUPT and its members to purchase his interest in ZUPT in accordance with a Buy-Sell Agreement. Unbeknownst to the other members of ZUPT, Gillet already had accepted an offer at that time to work for one of ZUPT's competitors.

         Gillet resigned his employment at ZUPT in June 2009 and went to work for the competitor. Gillet did not resign as a member of ZUPT and still owns 45 percent.

         An appraisal conducted as a result of Gillet's buy-out demand valued ZUPT at $1, 600, 000; 45 percent of $1, 600, 000 is $720, 000. The appraiser's $1, 600, 000 valuation was based on a presumption that the entirety of ZUPT would be sold, not just Gillet's 45 percent. It also was based on a presumption that Gillet would sign an industry standard non-compete agreement. After learning that Gillet refused to sign a non-compete agreement and after applying a valuation discount to Gillet's minority interest, the appraiser revised his appraisal of Gillet's 45 percent interest to $229, 000.

         Gillet sued ZUPT and its other individual owners in June 2010 for oppression and subsequently added a claim for breach of contract based on ZUPT's alleged breach of the Buy-Sell Agreement.

         ZUPT and its other individual owners counterclaimed; among other things, they asserted that Gillet misappropriated ZUPT's confidential information and trade secrets and breached his fiduciary duty by disclosing that confidential information for the benefit of his new employer.

         The parties arbitrated the case in late 2012 and the arbitrator rendered an arbitration award on January 29, 2013. In her award, the arbitrator determined that ZUPT owed Gillet $499, 050 for the value of his 45 percent interest.[1] She determined that upon payment of the $499, 050 by ZUPT, Gillet "shall surrender all of his certificates, shares or other indicia of his ownership interest in ZUPT" and Gillet's ownership interest in ZUPT would cease. The arbitrator awarded Gillet $70, 060 for his reasonable and necessary attorney's fees.

         The arbitrator also determined that Gillet breached his fiduciary duty to ZUPT by disclosing ZUPT's trade secrets, entitling ZUPT to recover actual damages of $1, 869, 164 plus an additional $1, 000 permitted by the Texas Theft Liability Act. The arbitrator awarded ZUPT $169, 612.25 for its reasonable and necessary attorney's fees.

         The arbitrator awarded pre- and post-judgment interest and costs of court to each party.

         ZUPT requested that the amount it owed Gillet for his ownership interest in ZUPT be offset by the amount Gillet owed to ZUPT for his breach of fiduciary duty. The arbitrator denied the request for offset.

         ZUPT moved in the trial court to confirm the arbitration award. The trial court signed a final judgment on June 15, 2015, confirming the award. The final judgment awarded each party amounts consistent with the arbitrator's award.

         ZUPT applied for turnover and appointment of a receiver in July 2015. The trial court held two hearings on the application. The trial court ordered turnover and appointed a receiver to collect non-exempt property to satisfy the judgments against Gillet ...


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