KAY v. YOSOWITZ LLC (2025)

OPINION ON REHEARING

We withdraw our opinion and vacate our judgment of July 10, 2025, grant appellee Laura Elizabeth Yosowitz's motion for rehearing in part, affirm the trial court's judgment in part, and reverse and remand in part.

This is a legal-sufficiency appeal from the judgment rendered after a jury trial on plaintiff Laura Yosowitz's individual claims against her ex-husband Martin Kay, as well as her derivative claims against him for breach of fiduciary duties he owed to a foreign limited-liability company. In our original opinion, we affirmed the judgment as to Yosowitz's direct claims, reversed the judgment regarding her derivative claims, and remanded for reassessment of attorneys’ fees, costs, and interest.

Yosowitz moved for rehearing, asking the Court to re-analyze the legal sufficiency of the derivative-damages evidence and accept her offer of voluntary remittitur. In the alternative, she asked that we expand the scope of remand by instructing the trial court that Yosowitz is permitted “to re-elect her remedy” based on other favorable jury findings that were not challenged on appeal.

Our analysis remains the same, and we continue to affirm the judgment as to Yosowitz's direct claims, and to reverse the judgment as to her derivative claim. Because no evidence supports any part of the derivative damages awarded in the judgment, we reject the remittitur Yosowitz offered in her motion for rehearing. However, we partially grant Yosowitz's alternative request. Yosowitz obtained favorable jury findings on multiple claims and she elected those claims on which she chose to recover. In light of our reversal of the judgment on the particular derivative claim she originally elected, Yosowitz may elect to recover under an alternative claim. Because she has asked to make her election on remand rather than on rehearing in this Court, we leave it to the trial court to address issues arising from Yosowitz's alternative election.

I. Background

Prior to their divorce, Martin Kay and Laura Yosowitz owned, as community property, a 78% membership interest in the Nevada limited-liability company Greenlet LLC (“the Y-K Greenlet Interest”), and Robert Salmons Jr. owned the remaining 22% membership interest. Greenlet operated a traditional real estate “Brokerage Business” and a “Software Business.”

Kay and Yosowitz's divorce decree incorporated an Agreement Incident to Divorce (the AID), which in turn incorporated a Memorandum of Agreement (MOA) signed by Kay, Yosowitz, and Salmons, and having an effective date of October 18, 2016. The effect of the MOA would be to segregate Greenlet's Brokerage Business from its Software Business.

A. The Memorandum of Agreement

The MOA required Kay and Yosowitz to form a new holding company, identified in the MOA by the placeholder “Holdco,” and required Kay, Yosowitz, and Salmons to form an additional new company, referred to in the MOA by the placeholder “IP Newco.”

Kay, Salmons, and Yosowitz agreed that the “Y-K Greenlet Interest” would be transferred to “Holdco,” and Kay would own a 76.65% interest in Holdco and all voting rights, while Yosowitz would own a 23.35% interest in Holdco and no voting rights. Salmons would continue to own his 22% membership interest in Greenlet.

The parties further agreed that they and Greenlet would contribute all of their intellectual property and assets related to Greenlet's Software Business to IP Newco, which would be owned 95% by Holdco and 5% by Salmons.

By these transactions, Kay and Yosowitz would cease to be members of Greenlet but would become members of Holdco, which would own a majority of two companies that operated, respectively, a Brokerage Business (Greenlet) and a Software Business (IP Newco).

At any time before the fifth anniversary of the MOA, Holdco could redeem Yosowitz's shares at the specified redemption price of $3.75 million. After that date, the redemption price was the lesser of $3.75 million or the amount that Yosowitz would receive for her 23.35% interest in Holdco if all interests of both Greenlet and IP Newco were sold to an independent third party for fair market value.

The MOA also provided for Yosowitz to be paid a “One-Time Bonus Distribution” if, before the fifth anniversary of the MOA, the aggregate value of Greenlet's and IP Newco's equity and assets exceeded certain targets, measured before a material outside investment or sale of all, or substantially all, of either or both companies’ equity or assets. The maximum bonus was $500,000 to be paid to Yosowitz and an additional $750,000 to be put in trust for Kay and Yosowitz's two children. These bonus amounts were due if the aggregate value of either or both of Greenlet and IP Newco reached at least $40 million. Kay agreed that for twelve months from the date of the MOA, he would “use commercially reasonable efforts to raise outside investment funding and commercialize IP Newco and Greenlet.”

Kay informed Yosowitz that he had formed Holdco in the form of Greenlet Brokerage, LLC, and had formed IP Newco in the form of Greenlet Technology, LLC. But in fact, neither company ever existed. Holdco was never formed, so the Y-K Greenlet Interest was never transferred. Kay did form the Texas limited liability company Kiva Technologies, LLC, ostensibly to fulfill the role of IP Newco, but he did not transfer Greenlet's Software Business to it.

B. The Agreement Incident to Divorce

In the AID, section 2.5, titled “Disposition of Jointly Held Property Interests,” addresses the disposition of specific real property, including eight rental homes owned by Greenlet Property, LLC (not to be confused with Greenlet, LLC).

The AID specified how the “net proceeds” from these properties were to be distributed. “Net proceeds” is defined as the rent or sales price received for the property, minus specifically defined “Permitted Expenses” and “Recurring Expenses.”

After deducting those expenses, Greenlet Property would retain 15% of the net proceeds for repairs to any of the eight rental homes still remaining. Of the remaining net proceeds, 46.8% was to be distributed to Yosowitz and 31.2% was to be distributed to Kay.¹

C. Realtech and the Entera Companies

Immediately after the divorce, Kay formed a Wyoming company, Realtech, LLC, later known as Entera Technology, LLC, a wholly-owned subsidiary of Entera Holdings, Inc. To differentiate between Entera Technology and its parent company Entera Holdings, Inc., we will refer to Entera Technology by its original name of Realtech. Entera Holdings also owns a brokerage business, Entera Realty, LLC.

In 2018, Entera Realty, LLC, filed an assumed name certificate to conduct business under the name Greenlet LLC, but it abandoned the name a year later. According to Yosowitz, Kay actually or effectively dissolved Greenlet,² but first, he caused Greenlet to license its software to Realtech.

Greenlet's software was never updated after the MOA, but using some of the same software developers who created the software for Greenlet, Realtech began updating the software and expanding its functionality. These improvements made Realtech far more successful than Greenlet had been, and its parent company Entera Holdings was able to raise around $38 million from institutional investors based largely on the success of that technology.

D. The Lawsuit

Yosowitz received only a single check from Greenlet, and its amount was less than $39,000—a smaller amount than she expected under the terms of the MOA. Yosowitz, both individually and on behalf of Greenlet, sued Kay, Salmons, and a number of Kay's companies. Against Kay, Yosowitz asserted her own claims for failure to comply with the MOA, failure to comply with section 2.5 of the AID, breach of an informal fiduciary duty he owed to her after the effective date of the MOA regarding the Y-K-Greenlet Interest, and fraud. On behalf of Greenlet, she sued Kay for breach of fiduciary duties he owed to Greenlet as its manager.

The jury found for Yosowitz on all of her direct and derivative claims. For certain of Kay's breaches of fiduciary duties to Greenlet, the jury found that Kay proximately caused Greenlet damages of $138,207,643.56. In the judgment, however, the trial court wrote, “The Court further finds that due to equitable considerations and the interests of justice, Plaintiff Laura Elizabeth Yosowitz shall recover directly her allocable share of the derivate damages Defendant Martin Kay caused to Greenlet LLC by breaching his fiduciary duties to Greenlet LLC.” Although no findings were made or requested concerning Yosowitz's “allocable share,” the trial court awarded Yosowitz $53,900,980.99 on this claim, that is, 39% of the amount found by the jury. It seems likely that the trial court used this figure because it is half of 78%, and prior to the Memorandum of Understanding, the Agreement Incident to Divorce, and the divorce decree, the Y-K Greenlet Interest was community property, and it constituted 78% of the membership interest in Greenlet.³

On her direct claims, Yosowitz asked the trial court to render judgment on her claim for Kay's failure to comply with section 2.5 of the AID, for which the jury assessed damages of $378,470.08. The trial court awarded Yosowitz this amount as well, together with “investigation costs” associated with the derivative claim, attorney's fees on Yosowitz's contract and derivative claims, and costs and interest. Kay's timely motion for new trial was overruled by operation of law.

II. Issues Presented

Kay lists three issues for review, but he has briefed four issues. In his first issue, he argues that the MOA caps Yosowitz's damages at $4.25 million, this being the redemption price for Yosowitz's shares in Holdco ($3.75 million), plus the maximum value-based bonus recoverable by Yosowitz individually ($500,000).

Kay's second and third issues are directed toward Yosowitz's derivative claims on behalf of Greenlet. Kay contends in his second issue that Yosowitz lacks standing to bring a derivative claim on Greenlet's behalf because she has never been a member of the limited-liability company. In his third issue, Kay argues that even if Yosowitz has standing to sue on Greenlet's behalf, we must reverse the award to Yosowitz of over $56 million on Greenlet's behalf because, inter alia, the award is based on an improper measure of damages and legally insufficient evidence.

In his unlisted fourth issue, Kay argues that legally insufficient evidence supports the damages awarded on Yosowitz's direct claim for breach of the AID.

III. Standard of Review

Addressing Kay's issues requires us to construe statutes and contracts and to determine whether the proper measure of damages for breach of fiduciary duty was submitted to the jury. These are all questions of law, which we review de novo. See, e.g., N. E. Indep. Sch. Dist. v. Riou, 598 S.W.3d 243, 253 (Tex. 2020) (statutes); Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 479 (Tex. 2019) (contracts); Signature Indus. Servs., LLC v. Int'l Paper Co., 638 S.W.3d 179, 187 (Tex. 2022) (proper measure of damages).

We also must review the legal sufficiency of the evidence to support certain of the jury's findings. To determine whether the evidence is legally sufficient to support the jury's verdict, we consider whether the evidence at trial, viewed in a light favorable to the verdict, would have enabled reasonable jurors to make the challenged finding. Am. Honda Motor Co., Inc. v. Milburn, 696 S.W.3d 612, 627 (Tex. 2024). We assume that jurors resolved all conflicts in the evidence in a manner that supports the verdict, and we defer to the jury's reasonable credibility determinations. City of Keller v. Wilson, 168 S.W.3d 802, 820 (Tex. 2005).

IV. The “Damage Cap”

Kay first contends that the MOA caps Yosowitz's damages. For several reasons, we disagree.

By its unambiguous language, the MOA purports to cap only (a) the Redemption Price of Yosowitz's interest in Holdco, and (b) a One-Time Bonus Distribution based on the aggregate value of IP Newco and Greenlet. Because Holdco was never formed, there was neither an interest to be redeemed nor an entity capable of redeeming it. Thus, there is nothing to which the cap applies.

Moreover, the MOA itself requires payments other than the Redemption Price and the One-Time Bonus Distribution. For example, unless and until Holdco redeemed Yosowitz's shares, Kay was required to cause Holdco to make mandatory yearly distributions to Yosowitz of at least 25% of Holdco's taxable income allocated to her for that year. Because the MOA specifies that those distributions are not to be credited toward the Redemption Price, the MOA itself tacitly acknowledges that the total amount Yosowitz might receive as a result of her interest in Holdco (which she never received in any event) may permissibly exceed the sum of the capped Redemption Price and the One-Time Bonus Distribution.

We additionally note that on her individual claims, Yosowitz chose to recover for breach of section 2.5 of the AID, which directs the distribution of net proceeds from the sale of specific properties, none of which are addressed in the MOA. Thus, even if payments under the MOA were capped, payments under the AID are not.

Further still, the MOA addresses amounts that Holdco must pay, not amounts recoverable from Kay.

For each of these independent reasons, we overrule Kay's first issue.

V. Yosowitz's Derivative Claim

In his second issue, Kay argues that Yosowitz lacks standing to sue on Greenlet's behalf because she has never complied with the requirements necessary for her to become a member. Kay contends in his third issue that even if Yosowitz has standing to pursue Greenlet's breach-of-fiduciary duty claim, the jury's finding that his breach of certain duties proximately caused Greenlet damages of $138,207,643.56 cannot stand. We address each of these issues in turn.

A. Kay's Standing to Sue on Greenlet's Behalf

Under Texas law, derivative proceedings brought on behalf of a foreign limited liability company are governed by the law of the jurisdiction where the company was formed. See Tex. Bus. Orgs. Code § 101.462(a). Greenlet is a Nevada limited liability company, and under Nevada law, a plaintiff has standing to bring a derivative action only if the plaintiff was a member or noneconomic member of the company “at the time of the transaction of which the plaintiff complains.” Nev. Rev. Stat. § 86.485.

Unless otherwise provided in the company's articles of organization or operating agreement, the transferee of a membership interest does not become a member unless a majority in interest of the other members approve the transfer. Id. § 86.351(1). If the transfer is so approved, then the transferee becomes a member “as of the time set forth in and upon compliance with the operating agreement, or if the operating agreement does not so provide ․, as of the time of such person's admission as reflected in the records of the company.” Id. § 86.326(2)(b). The operating agreement does not provide otherwise, but Kay did not object that the charge fails to include a requirement that Yosowitz's membership be reflected in the company's records.

In Question 14 of the charge, the jury was asked, “Since the date the MOA was signed, has Yosowitz been a member or a noneconomic member of Greenlet, LLC?” The instructions to this charge included the following:

“Member” means the owner of a member's interest in a limited-liability company or a noneconomic member.

“Member's interest” means a share of the economic interests in a limited-liability company, including profits, losses and distributions of assets.

“Noneconomic member” means a member of a limited-liability company who: (a) Does not own a member's interest in the company; (b) Does not have an obligation to contribute capital to the company; (c) Does not have a right to participate in or receive distributions from the company or an obligation to contribute to the losses of the company; and (d) May have voting rights and other rights and privileges given to noneconomic members of the company by the articles of organization or operating agreement.

A transferee of a member's interest is not a member unless a majority in interest of other members approve the transfer. In the absence of approval, the transferee is only entitled to receive the share of profits or other compensation by way of income, and the return of contributions, to which the transferor would otherwise be entitled.

Kay objected that the question should not be submitted because it is a question of law and no evidence supported its submission. On appeal, he argues that Yosowitz lacks standing to bring a derivative action on Greenlet's behalf because she was never a member of Greenlet, inasmuch as there is no evidence that (a) she was made a member by unanimous consent of Greenlet's other members, (b) her membership was reflected in writing, and (c) she signed Greenlet's operating agreement. Kay argues that these prerequisites to membership are imposed by Greenlet's operating agreement, and that Nevada law allows the operating agreement to impose such additional requirements.

But the jury was not instructed that these were prerequisites for membership, or that membership was governed by the operating agreement.⁴ When a party does not object to the language of the charge, then we measure the legal sufficiency of the evidence by the language of the charge as submitted. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). Kay admits he “has not challenged the language of the charge because it accurately quotes the applicable Nevada law.” We accordingly measure the legal sufficiency of the evidence by the charge as submitted.

There is legally sufficient evidence that Yosowitz has been a member of Greenlet since at least the date of the MOA on October 18, 2016. Greenlet issued K-1 forms for the 2014 tax year identifying Kay and Yosowitz as members, with Kay entitled to 99% of Greenlet's profit, loss, and capital, and Yosowitz entitled to 1%.⁵ From this, jurors could reasonably infer that Yosowitz was a 1% member of Greenlet as early as 2014. Kay does not contend that Yosowitz ever transferred that interest.

Although the evidence is conflicting, the applicable standard of review requires us to disregard the contrary evidence if a reasonable juror could do so. There is at least some evidence to support the jury's finding that Yosowitz was a member of Greenlet, and as a member, Yosowitz would have standing to bring a derivative action on Greenlet's behalf.

We overrule Kay's second issue.

B. The Jury's Finding of “the Value Greenlet Would Have Received Had Kay Complied with His Fiduciary Duties, Minus the Value It Did Receive.”

In Question 15, the jury found that Kay failed to comply with his fiduciary duties to Greenlet by (1) failing to act in the utmost good faith and exercising the most scrupulous honesty towards Greenlet; (2) failing to place the interests of Greenlet before his own and not using the advantage of his position to gain any benefit for himself at Greenlet's expense;⁶ (3) misappropriating Greenlet's funds; or (4) exploiting Greenlet's business opportunity or opportunities. The jury answered “yes” to each.

In Question 25, the jury was asked to find the amount that would fairly and reasonably compensate Greenlet for its damages, if any, that were proximately caused by Kay's breach of fiduciary duties, but the damages were to be measured differently depending on which fiduciary duties were breached.

For breach of fiduciary duty, a plaintiff can recover actual damages for economic injuries proximately caused by the breach. These might be out-of-pocket losses, benefit-of-the-bargain damages,⁷ lost profits,⁸ or lost business value.⁹ Even without proof of causation, equitable remedies such as a constructive trust,¹⁰ fee forfeiture, or profit disgorgement may be available.¹¹

Some parts of the damages question rely on such permissible measures of actual damages. For breach of fiduciary duty by misappropriating Greenlet's funds, the jury was asked to find the amount misappropriated, which is an out-of-pocket loss. For breach by exploiting Greenlet's business opportunities, the jury was asked to find the amount of Greenlet's lost profits. To measure Greenlet's damages proximately caused by Kay's breach of his fiduciary duties to act in the utmost good faith, to exercise scrupulous honesty, to place Greenlet's interests before his own, and to refrain from using the advantage of his position as Greenlet's manager to gain any benefit for himself at Greenlet's expense, the jury was instructed to find “the value Greenlet would have received had Kay complied with his fiduciary duties, minus the value it did receive.” The jury answered, “$138,207,643.56.” Kay argues that this damage finding cannot stand because it is an improper measure of damages ¹² and is based on legally insufficient evidence.

Yosowitz asserts that we cannot permissibly reach the merits of Kay's challenges to this damage finding because Kay invited error by proposing the language used in submitting the issue to the jury, but this does not bar appellate review of Kay's complaint. Kay moved for an instructed verdict on the ground that there was no evidence of damages, and that “the alleged equity value of Entera” is “not a proper measure of damages.” Later, in the charge conference, Yosowitz's counsel sought as damages for Kay's breach of fiduciary duties to Yosowitz “[t]he value Yosowitz would have received had Kay complied with his fiduciary duties, minus what she actually received.” Yosowitz's position was that her damages were related to Entera's value, and Kay's counsel pointed out that the price of Entera's stock pertained to Entera's value, not to Greenlet's value. But, this was the damage model used by Yosowitz's expert, and Yosowitz's counsel responded, “[T]his is the damage element that we want to submit,” later adding, “we'll rise and fall on this later, but we'd like to submit what we have the evidence of.” When the parties later conferred on the way in which damages for Kay's breach of fiduciary duties to Greenlet should be submitted, Kay's attorney simply stated that the question should mirror the earlier damage question for breach of fiduciary duty by asking for the value Greenlet would have received if Kay had complied with his fiduciary duty, minus the value it did receive. In sum, Yosowitz chose the measure of damages it wanted to submit; Kay's counsel merely asked for this measure to be described using consistent language. Doing so did not waive Kay's preserved objections that this was an improper measure of damages and lacked legally sufficient evidence to support it.

Turning the merits of Kay's complaints, it appears that Kay's “improper measure of damages” complaint is simply another way of phrasing his legal-insufficiency complaint, because Yosowitz argued that the jury should determine “the value Greenlet would have received had Kay complied with his fiduciary duties, minus the value it did receive” by determining the value of shares in Entera Holdings. We agree with Kay that there is no evidence that, but for Kay's breach of general fiduciary duties, Greenlet would have received “value” determinable from the value of shares in Entera Holdings.

Yosowitz argues that the jury arrived at this finding by considering her expert's testimony about the value of certain of Entera Holdings’ shares and multiplying that price by the total number of Entera Holdings’ outstanding shares. Yosowitz stated in closing argument that the jury should calculate Greenlet's damages by multiplying Kay's eight million shares of Entera by a share price of $7.25 per share. This would result in a total of $58 million, and Yosowitz asked the jury to find that Greenlet's damages were $60 million. Because the jury instead assessed damages of over $138 million, the parties theorize that the jury calculated the value of all shares of Entera.

Although this was a finding of Greenlet's damages, Yosowitz argued in her motion for entry of judgment that, in the interests of justice, the trial court should award directly to her an amount equal to her interest in Greenlet. Because she and Kay had owned 78% of Greenlet as community property, she asked the trial court to multiply the damage finding by 78% and award her half of that amount (that is, 39% of the damages assessed by the jury). The trial court did so, awarding her $53,900,980.99. In her motion for rehearing, Yosowitz offers to treat Greenlet's damages as reduced to $60,004,425.25 and to accept 39% of that amount, remitting the derivative damages that exceed $23,401,725.85.

We cannot accept the offer of remittitur for the same reason that we cannot affirm the existing derivative-damages award: the difference between Greenlet's value and “the value Greenlet would have received had Kay complied with his fiduciary duties” cannot be measured as some multiple of the value of a share of Entera Holdings. Entera Holdings is distinct from Greenlet. There is no evidence that, but for Kay's breach of fiduciary duties, Greenlet would have received some or all of Entera Holdings’ shares, or that Greenlet would have become equal in value to some or all of Entera Holdings’ shares.¹³ The two companies are not at all comparable. Yosowitz's damages expert, chartered financial analyst Tobin Reiff, characterized Entera Holdings as “a start-up company based on unique technology.” It owns the real estate brokerage Entera Realty and the technology company Realtech. But although Greenlet operated both a Brokerage Business and a Software Business prior to the effective date of the MOA on October 18, 2016, Greenlet's members unanimously agreed in the MOA that all of the intellectual property and assets of Greenlet's Software Business would be transferred—not sold or licensed—to “IP Newco.” Yosowitz does not contend that Kay breached fiduciary duties to Greenlet by agreeing to the MOA, and as Greenlet's manager, Kay was required to comply with the agreement by transferring Greenlet's entire Software Business to another entity.¹⁴ Yosowitz did not seek a finding that Kay caused Greenlet's Software Business to be transferred, in whole or in part, to Entera Holdings, and there is no evidence that the institutional investors who chose to invest in “a start-up company based on unique technology” would invest equal amounts (or even lesser amounts) in an established company that was required to transfer its own technology to another company free of charge, leaving it only its Brokerage Business.

We sustain Kay's third issue and reverse the portion of the judgment awarding Yosowitz actual damages of $53,900,980.99 for Kay's breach of fiduciary duties to Greenlet. Our disposition of this issue also affects the trial court's award of attorneys’ fees and investigation costs.

Although derivative proceedings on behalf of a foreign limited-liability liability are generally governed by the laws of the state in which the company was formed, the Texas Business Organizations Code makes an exception, applying to the company certain specific provisions of the Code that “are procedural provisions and do not relate to the internal affairs of the foreign limited liability company.” Tex. Bus. Orgs. Code § 101.462(a). In particular, the Code makes section 101.461 applicable in a derivative proceeding on behalf of a foreign limited-liability company. Section 101.461 provides that upon the termination of a derivative proceeding, the trial court “may order ․ the limited liability company to pay expenses the plaintiff incurred in the proceeding if the court finds the proceeding has resulted in a substantial benefit to the limited liability company.” Id. § 101.461(b)(1). “Expenses” are defined to include attorneys’ fees and “costs in pursuing an investigation of the matter that was the subject of the derivative proceeding.” Id. § 101.451(a). Because we have reversed the part of the judgment awarding Yosowitz damages in connection with her derivative proceeding, we must also reverse the trial court's award of investigation costs and attorneys’ fees.

VI. Yosowitz's Direct Claim

Kay challenges the legal sufficiency of the evidence of Yosowitz's damages from Kay's breach of AID section 2.5, which addresses the disposition of jointly held property. The jury was asked to assess the damages for Kay's failure to comply, measured as “[t]he difference between the net proceeds [Yosowitz] would have received for each property listed pursuant to section 2.5 of the AID had Kay complied with the AID and the net proceeds she actually received.” The jury assessed damages of $378,470.08.

Kay does not address the amount of the damages assessed; rather, he argues that the evidence is legally insufficient to support an award of any damages because “the value Yosowitz would have received” is the fair market value of the property, and Yosowitz offered no evidence of the properties’ fair market value.

But Kay's premise is incorrect: Yosowitz's complaint was not that the properties were undervalued, but that Kay improperly reduced the net proceeds by claiming offsets and expenses to which he was not entitled.

Section 2.5 of the AID does not require Yosowitz to be paid the properties’ fair market value, or to be paid any figure based on fair market value. It requires Yosowitz to be paid a portion of the “net proceeds,” defined as “the rent received and the sale price received on such property,” minus “Permitted Expenses” and “Recurring Expenses.” “Permitted Expenses” are those paid for “future Minor Repairs and future Major Repairs,” and “closing costs customarily paid by a seller (owner's title policy, 6% or less in third-party broker fees, 50% of escrow fee, home warranty).” “Minor Repairs” are “those repairs costing, in the aggregate, on a project by project basis, less than $500.00.” “Major Repairs” are those repairs that are not Minor Repairs and “are first consented to in writing” by Yosowitz. “Recurring Expenses” consist of expenses paid by Yosowitz, Kay, or Greenlet Property, LLC, for property taxes, homeowner-association fees, third-party property-management fees, property insurance, and utilities.

Yosowitz argued that Kay improperly reduced the net proceeds from the sale of the properties by claiming impermissible offsets and expenses that reduced her share. She disputed deductions for construction costs and repairs to which she had not consented, to a “rebate” paid to a buyer almost two weeks after closing on a property, and to principal and interest payments paid in connection with a revolving line of credit to Greenlet Property from Sterrett Capital, LLC, a company that Yosowitz later learned is affiliated with Kay. The jury needed no evidence of a given property's fair market value to determine whether these disputed payments constituted “Permitted Expenses” or “Recurring Expenses” as those terms are defined in section 2.5 of the AID.

We overrule this issue. Because we affirm the part of the judgment awarding Yosowitz $378,470.08 on her individual claim for breach of the AID, an award of her attorneys’ fees in prosecuting that breach-of-contract claim is mandatory. See Tex. Civ. Prac. & Rem. Code § 38.001(8); Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998). However, the trial court's award of attorneys’ fees includes fees for prosecuting Yosowitz's derivative claim on Greenlet's behalf. At this point, she is entitled to recover attorneys’ fees only in connection with her individual breach-of-contract claim, but the award is not segregated by claim. We accordingly reverse the award of attorneys’ fees and remand the fee issue for further proceedings consistent with this opinion.

VII Conclusion

As in our original opinion, we affirm the portion of the judgment awarding Yosowitz $378,470.08 for Kay's breach of section 2.5 of the Agreement Incident to Divorce, and we reverse the portions of the judgment (a) awarding Yosowitz actual damages of $53,900,980.99 for Kay's breach of fiduciary duties to Greenlet; (b) investigation costs; and (c) attorneys’ fees. We partially grant Yosowitz's motion for rehearing, and we remand the case for Yosowitz to make a new election of remedies from among the alternatives to the derivative claim we have reversed, and for the trial court to render judgment consistent with its resolution of such issues as may arise from Yosowitz's new election of remedies.¹⁵

FOOTNOTES

1.   The amounts to be distributed to Kay and Yosowitz add up to only 78% of the net proceeds left after paying Greenlet Property, because Salmons owned 22% of that company, just as he owned 22% of Greenlet, LLC.

2.   Kay similarly testified that Greenlet was closed at the end of 2022.

3.   If the MOA had been performed, then Kay and Yosowitz's community-property interest in 78% of Greenlet's membership interests would have been transferred to Holdco, and Yosowitz would own 23.35% of Holdco. Thus, if Greenlet made a distribution to its members after the MOA, Yosowitz would have been entitled to no more than 18.213% of it (that is, Holdco's 78% interest in Greenlet multiplied by Yosowitz's 23.35% interest in Holdco).

4.   Moreover, there are two conflicting operating agreements in the record. One was signed by Kay and Salmons and identifies its effective date as April 28, 2014, which was the date of Greenlet's formation. Under that agreement, none of the requirements Kay mentions apply to a partial transfer of membership, as would be the case if Kay transferred part of his membership interest to Yosowitz. The other operating agreement does require the unanimous consent of Greenlet's other members before a new member is admitted, but it is undated and does not identify its effective date. The jury was not asked to identify whether, or when, that agreement became effective.

5.   This was before Salmons was given a 22% membership interest.

6.   Kay argues that Yosowitz failed to adequately plead that he breached these two duties. We disagree. Yosowitz expressly pleaded that Kay owed Greenlet fiduciary “duties of good faith and fair dealing” and that he breached those duties. Kay did not seek further clarification by specially excepting to Yosowitz's pleading.

7.   See, e.g., Combs v. Crepeau, No. 05-23-00088-CV, 2024 WL 4432324, at *8 (Tex. App.—Dallas Oct. 7, 2024, pet. denied) (mem. op.). Out-of-pocket losses are measured by the difference between the value paid and the value received, while benefit-of-the-bargain damages are measured by the difference between the value as represented and the value received. Id.

8.   See, e.g., Salas v. Total Air Servs., LLC, 550 S.W.3d 683, 695 (Tex. App.—El Paso 2018, no pet.).

9.   Nelson v. Vernco Constr., Inc., 566 S.W.3d 716 (Tex. App.—El Paso 2018, pet. denied), judgment set aside, opinion not vacated. The lost value of an ongoing business is its reasonable cash market value at the time it was destroyed, or if not totally destroyed, the difference between the reasonable cash market value of the business immediately before and immediately after it was damaged. Sawyer v. Fitts, 630 S.W.2d 872, 874 (Tex. App.—Fort Worth 1982, no writ).

10.   “The party requesting a constructive trust must establish the following: (1) breach of a special trust or fiduciary relationship or actual or constructive fraud; (2) unjust enrichment of the wrongdoer; and (3) an identifiable res that can be traced back to the original property.” KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 87 (Tex. 2015).

11.   See Longview Energy Co. v. Huff Energy Fund LP, 533 S.W.3d 866, 877–78 (Tex. 2017).

12.   Yosowitz characterizes this as a benefit-of-the-bargain measure of damages.

13.   Yosowitz's damages expert explained that Yosowitz asked him to determine “the fair market value of a number of common shares in Entera [Holdings] on a nonvoting basis and did so to measure damages sustained by Ms. Yosowitz based on allegations of business opportunities of Greenlet that were transferred to Entera.” (Emphasis added.) But the jury was asked to assess damages for Kay's breach of fiduciary duty in “[e]xploiting Greenlet's business opportunity or opportunities,” and the jury answered, “$0.”

14.   The agreements and orders to narrow the scope of Greenlet's business likewise narrowed the scope of Kay's fiduciary duties, for Kay could not have owed a fiduciary duty to Greenlet to develop Greenlet's Software Business, given that Greenlet was required—by the express will of all of its members, the MOA, the AID, and the divorce decree—to transfer all of its Software Business to another company. Kay still had a fiduciary duty to place Greenlet's interests before his own, but Greenlet's interests no longer included the Software Business.

15.   Depending on Yosowitz's election, such issues may include the availability and extent of ancillary relief such as attorneys’ fees and investigation costs.

Tracy Christopher, Chief Justice