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Radiant Financial, Inc. v. Bagby

Court of Appeals of Texas, Fifth District, Dallas

July 10, 2017

RADIANT FINANCIAL, INC., Appellant
v.
FAYE BAGBY, BAGBY INVESTMENTS, LP, AND AMERICAN FINANCIAL & RETIREMENT SERVICES, LLC, Appellees

         On Appeal from the 191st Judicial District Court Dallas County, Texas, Trial Court Cause No. DC-13-06046

          Before Justices Bridges, Evans, and Schenck.

          MEMORANDUM OPINION ON REHEARING

          DAVID J. SCHENCK JUSTICE.

         Before the Court is Radiant Financial, Inc.'s May 17, 2017 Motion for Rehearing. We deny the motion. On our own motion, we withdraw our opinion issued on April 18, 2017, and vacate our judgment of that same date. The following is now the opinion of the Court.

         Radiant Financial, Inc. ("Radiant") appeals from a judgment in favor of appellees Faye Bagby ("Ms. Bagby"), Bagby Investments, LP ("Bagby Investments"), and American Financial & Retirement Services, LLC ("AFRS") (collectively, "appellees"), which the trial court entered notwithstanding the verdict. Radiant contends the trial court erred because the evidence was legally sufficient to support a judgment, including injunctive relief, on the jury's findings of breach of contract, tortious interference with contract, violation of the Texas Theft Liability Act, [1]misappropriation of trade secrets, and conspiracy. Appellees respond the evidence was legally insufficient to support the jury's findings and argue by cross-points of appeal (1) that the evidence was factually insufficient to support the jury's findings and (2) that even assuming Radiant is entitled to some damages, the award should be no more than the percentage the jury found appellees responsible less the settlement credit. We affirm the trial court's judgment. Because all issues are settled in law, we issue this memorandum opinion. Tex.R.App.P. 47.4.

         Factual Background

         Radiant is in the business of structuring and selling fractional interests in life settlements, an investment product derived from life-insurance policies. To aid in its business, Radiant created several documents including its Life Settlement Interests Purchase and Sale Agreement ("PSA"), a form an investor is required to execute. Once Radiant accepts the proposed investment, the investor deposits funds into an escrow account and may elect during the ensuing twelve-month period to invest in a life-insurance policy or policies from Radiant's inventory as they become available.

         To market its life-settlement products to potential investors, Radiant contracts with independent financial professionals as its sales representatives. The sales representatives then offer the product to investors and assist the investors with making the investment decision, completing investment documents, and finishing their investments with Radiant. The sales representatives are paid a commission after the completion of each transaction they facilitate. The sales representatives are not barred from doing business with other investment providers, but under the governing Radiant Sales Representative Agreement ("SRA"), they agree they will only reveal Radiant's confidential information and trade secrets to people who need to see it "for the purpose of discussing, evaluating or effect" an investment transaction with Radiant. Sales representatives agree to "take all necessary and appropriate precautions to avoid [its] unauthorized disclosure."

         Ms. Bagby had been involved in the life-settlement business for many years before 2011 when she became a sales representative for Radiant and executed an SRA as owner of Bagby Investments. In February 2013, Ms. Bagby reached out to Mosaic Management Group, Inc. ("Mosaic") to purchase fractional interests in life policies. At that time, Mosaic was not in the business of selling fractional interests in life-insurance policies, but its representatives had been contemplating setting up a Texas corporation in order to do so. Jon Lippard, Mosaic's general counsel, asked Ms. Bagby to send him redacted documents from a sample closed transaction to see how the transactions were structured, to understand what forms were necessary to comply with applicable laws, and to determine whether there were requirements unique to Texas. Ms. Bagby responded by sending Mosaic a package of Radiant's documents.

         In April 2013, fifty-nine investors who had been introduced to Radiant by Ms. Bagby, had executed PSAs with Radiant, and placed funds in escrow were interested in placing their funds in a particular policy offered by Radiant and valued at $8 million. But on the day of the planned closing, the seller backed out of the deal. Ms. Bagby approached Radiant about letting the investors out of their PSAs early, which Radiant agreed to do. Ms. Bagby informed Radiant she was considering pursuing investments for these investors from other sources, at which point Radiant sent an email to Ms. Bagby reminding her of her confidentiality obligations. Ms. Bagby forwarded to Mosaic the forms the fifty-nine investors had completed for Radiant. On April 25, 2013, Mosaic launched Paladin, a Texas life-settlement company. Nineteen of the fifty-nine investors Radiant released from their PSAs chose to invest in Paladin.

         In May 2013, Radiant learned of Paladin and that it was using documents that looked much like its own. Radiant suspected Ms. Bagby had provided Paladin with Radiant's documents, so it terminated her SRA and demanded that she return "all written and tangible Radiant Financial Proprietary Information" pursuant to the SRA.

         Procedural Background

         Radiant filed suit against Ms. Bagby, Bagby Investments, AFRS, Mosaic, and Paladin, asserting, among other claims, breach of contract, violation of the Texas Theft Liability Act, misappropriation of trade secrets, and conspiracy.[2] Ms. Bagby brought counterclaims against Radiant for breach of contract and attorney's fees, fraud by nondisclosure, and negligent misrepresentation. Mosaic and Paladin entered into a settlement agreement with Radiant before trial. Before trial, Ms. Bagby nonsuited her claim for breach of contract and attorney's fees.

         After the close of the evidence but before submitting the case to the jury, the trial court directed a verdict dismissing Radiant's claim for breach of fiduciary duty and dismissing Ms. Bagby's counterclaims for fraud by nondisclosure and negligent misrepresentation. The trial court submitted the remaining claims to the jury who found appellees had misappropriated Radiant's trade secrets and engaged in a conspiracy, found Ms. Bagby and Bagby Investments breached their contract with Radiant, and awarded $152, 916 in damages to Radiant. The jury further found appellees were likely to use or disclose Radiant's trade secrets or confidential information in the future without permission. Finally, the jury unanimously found Ms. Bagby and Bagby Investments acted with malice. After a second charge was submitted to the jury, the jury awarded Radiant $600, 000 in attorney's fees for trial, plus appellate fees, and-based on its malice finding-awarded $150, 000 in exemplary damages against Ms. Bagby.

         Radiant moved for judgment on the jury's verdict and a permanent injunction based on the jury's finding that appellees were likely to misuse Radiant's trade secrets or confidential information in the future. Appellees moved for judgment notwithstanding the verdict, which the trial court granted. The trial court entered a take-nothing judgment against Radiant in appellees' favor.

         On appeal, Radiant argues legally sufficient evidence supports the jury's findings in accordance with the verdict and seeks a judgment awarding Radiant damages, exemplary damages, and attorney's fees. Radiant also contends it is entitled to a permanent injunction based on the jury's finding that Ms. Bagby and Bagby Investments violated the SRA. Appellees counter that the evidence is not legally sufficient to support the jury's findings and raise cross-issues arguing alternatively that the evidence was factually insufficient to support the jury's findings and that even assuming Radiant is entitled to damages, the award should be no more than the percentage the jury found appellees responsible less the settlement credit.

         Discussion

         I. Jury's Finding of ...


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