ACCEPTED 03-14-00738-CV 5643512 THIRD COURT OF APPEALS AUSTIN, TEXAS 6/11/2015 3:29:35 PM JEFFREY D. KYLE CLERK 03-14-00738-CV In the Court of Appeals FILED IN 3rd COURT OF APPEALS For the Third District of Texas at Austin AUSTIN, TEXAS 6/11/2015 3:29:35 PM JEFFREY D. KYLE Elness, Swenson, Graham Architects, Inc., Clerk Appellant and Cross-Appellee, v. RLJ II-C Austin Air, LP, RLJ II-C Austin Air Lessee, LP, and RLJ Lodging Fund II Acquisitions, LLC, Appellees and Cross-Appellants.

On Appeal from the 200th Judicial District Court of Travis County, Texas Cause Number: D-1-GN-002325 The Honorable Stephen Yelenosky, Presiding Judge

CROSS-APPELLEE’S RESPONSE BRIEF

Attorneys for Appellant and Cross-Appellee Gregory N. Ziegler Texas Bar No. 00791985 MACDONALD DEVIN, PC [email protected] 3800 Renaissance Tower Weston M. Davis Dallas, Texas 75270 Texas Bar No. 24065126 214.744.3300 telephone [email protected] 214.747.0942 facsimile Steven R. Baggett Texas Bar No. 01510680 [email protected]

Oral argument requested STATEMENT REGARDING ORAL ARGUMENT Cross-Appellee respectfully requests the opportunity to present oral argument, and has so noted on the cover of this Brief. 2 Although the facts and legal arguments at issue are thoroughly represented in this Brief and the record, oral argument will significantly aid the decision in this case because it addresses complex issues of common law and contractual interpretation, as well as evidentiary issues.

See Tex. R. App. P. 39.7. i 895484 402/122 TABLE OF CONTENTS Statement on Oral Argument .................................................................................i Table of Contents ................................................................................................... ii Index of Authorities ...............................................................................................iv Statement of Additional Facts ................................................................................2 Summary of the Argument ....................................................................................5 Argument .................................................................................................................5 I. Standard of Review .............................................................................. 5 II. Texas law does not require joint and several liability for application of the one-satisfaction rule. (Issue No. A.1) .................. 6 III. RLJ admitted its damages were indivisible and presented only evidence of indivisible damages. (Issue No. A.2) ............................14 IV. Texas law unequivocally holds that the one-satisfaction rule applies to breach of contract claims. (Issue No. A.3) .....................20 V. Application of the one-satisfaction rule in this case cannot violate any constitutional right to freedom of contract. (Issue No. A.4) . 23 VI. ESG did not waive or otherwise fail to preserve its right to settlement credits. (Issue No. A.5)...................................................25 VII. The trial court properly excluded attorney’s fees attributable to EBCO and Terracon from the fee award issued to RLJ. (Issue No. B) ..................................................................................................29

Prayer .....................................................................................................................31 Certificate of Service .............................................................................................33 ii 895484 402/122 Certificate of Compliance .....................................................................................33

iii 895484 402/122 INDEX OF AUTHORITIES Cases All Saints Catholic Church v. United Nat’l Ins. Co., 257 S.W.3d 800 (Tex. App. – Dallas 2008, no pet.) .................................... 27 Allen v. Nersesova, 307 S.W.3d 564 (Tex. App.–Dallas 2010, no pet.) ........................................ 8 Allison v. Fire Ins. Exch., 98 S.W.3d 227 (Tex. App. – Austin 2002, no pet.) ...................................... 27 Alvord v. Waggoner, 32 S.W. 872 (Tex. 1895)(cited in Section II, supra , n.2) ........................6, 21 Amalgamated Transit Union, Local Div. 1338 v. Dallas Pub. Transit Bd., 430 S.W.2d 107 (Tex. Civ. App.-Dallas 1968, writ ref’d n.r.e.) ................ 24 AMX Enterprises, Inc. v. Bank One, N.A., 196 S.W.3d 202 (Tex. App.–Houston [1st Dist.] 2006, pet. denied) .............22 Andrews v. Harvey, 39 Tex. 123 (Tex. 1873) ...........................................................................6, 21 Bradshaw v. Baylor Univ., 84 S.W.2d 703 (1935) .................................................................................. 20 Brown v. American Transfer and Storage Co., 601 S.W.2d 931 (Tex. 1980) ........................................................................13 Bullock v. Regular Veterans Ass’n., 806 S.W.2d 311 (Tex. App.—Austin 1991, no pet.) ................................... 29 Burke v. Union Pacific Resources Co., 138 S.W.3d 46 (Tex. App.–Texarkana 2004, pet. denied) ......................... 8-9 B&W Supply, Inc. v. Beckman, 305 S.W.3d 10 (Tex. App. – Houston [1st Dist.] 2009, pet. denied .............. 26 iv 895484 402/122 Byer Custom Builders v. Franks, 389 S.W.3d 880 (Tex. App.–Houston ([14 Dist.] 2012, no pet.) ........... 17-18 City of San Benito v. Rio Grande Valley Gas Co., 109 S.W.3d 750 (Tex. 2003) ......................................................................... 6 Coastal Transport Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227 (Tex. 2004) ....................................................................... 28 Cunningham v. Haroona, 382 S.W.3d 492 (Tex. App.–Fort Worth 2012, pet. denied) .........................22 CTTI v. Priesmeyer, 164 S.W.3d 675 (Tex. App.–Austin 2005, no pet.) ................................ 12-13 Dalworth Restoration, Inc. v. Rife-Marshall, No. 02-12-00381-CV, 2014 Tex. App. LEXIS 5271 (Tex. App.– Fort Worth May 15, 2014, no pet.) ...................................................................................26 Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex. 1984) ........................................................................19 El Paso Natural Gas Co. v. Berryman, 858 S.W.2d 362 (Tex. 1993) ....................................................................... 21 Emerson Electric Co. v. Am. Permanent Ware Co., 201 S.W.3d 301 (Tex. App.–Dallas 2006, no pet.) ......................................22 Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433 (Tex. 2009) ....................................................................... 23 First Title Co. of Waco v. Garrett, 860 S.W.2d 74 (Tex. 1993) ................................................................... 10-11 Galle, Inc. v. Pool, 262 S.W.3d 564 (Tex. App.—Austin 2008, pet. denied) ......... 7, 9-12, 18-19

v 895484 402/122 GE Capital Comm., Inc. v. Washington Nat’l Bank, 754 F.3d 297 (5th Cir. 2014) ................................................................... 10-11 Gevinson v. Manhattan Constr. Co. of Okla., 449 S.W.2d 458 (Tex. 1969) .........................................................................14 Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887 (Tex. 2000) ......................................................................... 28 Houston Unlimited, Inc. v. Mel Acres Ranch, 443 S.W.3d 820 (Tex. 2014) ................................................................. 16, 28 Howell v. Texas Workers’ Comp. Comm’n, 143 S.W.3d 416 (Tex. App. – Austin 2004, pet. denied) ............................ 24 Hunt v. Ellisor & Tanner, 739 S.W.2d 933 (Tex. App.—Dallas 1987, pet. denied) ............................ 18 Hunt v. Ziegler, 271 S.W. 936 (Tex. App. 1925, aff’d 280 S.W. 546 (Tex. 1926) ......... 20-21 In re Day, 342 S.W.3d 193 (Tex. App.—Beaumont 2011, pet. denied) ...................... 16 In re Laibe Corp., 307 S.W.3d 314 (Tex. 2010) ....................................................................... 29 Kizer v. Meyer, Lytton, Alen & Whit-Aker, Inc., 228 S.W.3d 384 (Tex. App. – Austin 2007) ........................................ 8-9, 12 Knesek v. Witte, 754 S.W.2d 814 (Tex. App. – Houston [1st Dist.] 1998, writ denied) .......... 29 Lewis v. Exxon Co., 786 S.W.2d 724 (Tex. App. – El Paso 1989, no pet.) ..................................20 Lewis v. Taylor, 17 Tex. 57 (Tex. 1856) ............................................................................ 6, 21

vi 895484 402/122 Marquis Acquisitions, Inc. v. Steadfast Ins. Co., 409 S.W.3d 808 (Tex. App. – Dallas 2013, no pet.) ................................... 26 Matthews v. P.D. Sohn, No. 13-12-00302-CV, 2013 Tex. App. LEXIS 7277 (Tex. App.—Corpus Christi June 13, 2013, no pet.) ........................................................................8 McGinty v. Hennen, 372 S.W.3d 625 (Tex. 2012) ....................................................................... 16 Mobil Oil Corp. v. Ellender, 968 S.W.2d 917 (Tex. 1998) ....................................................................... 17 Metal Bldg. Components, LP v. Raley, No. 03-05-00823, 2007 Tex. App. LEXIS 186 (Tex. App.–Austin Jan. 10, 2007, no pet.) ....................................................................................... 8-9, 11 National City Bank of Indiana v. Ortiz, 401 S.W.3d 867 (Tex. App.–Houston [14 Dist.] 2013, pet. denied) ....................................................................................... 25-27, 29 Osborne v. Jauregui, Inc., 252 S.W.3d 70 (Tex. App. – Austin 2008, pet. denied) (en banc) ....... 7, 9, 12 Oyster Creek Fin. Corp. v. Richwood Investments II, Inc., 176 S.W.3d 307 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) ....................................................................................................... 5, 8 Price Pfister, Inc. v. Moore & Kimmey, Inc., 48 S.W.3d 341 (Tex. App. – Houston [14 Dist.] 2001, pet. denied)............. 25 Regions Bank v. Bay, No. 05-12-00531, 2013 Tex. App. LEXIS 11811 (Tex. App.–Dallas Sept.

18, 2012, no pet.) ..........................................................................................22 Roberts v. Grande, 868 S.W.2d 956 (Tex. App.—Houston [14th Dist.] 1994, no pet.) .............. 20

vii 895484 402/122 Robertson v. ADJ Partnership, Ltd., 204 S.W.3d 484 (Tex. App.-Beaumont 2006, pet. denied) ......................... 17 Safety Cas. Co. v. Wright, 160 S.W.2d 238 (Tex. 1942) ................................................................. 13, 30 Snyder v. Eanes Indep. Sch. Dist., 860 S.W.2d 692 (Tex. App.-Austin 1993, writ denied) ........................ 15, 26 Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) ............................................................................19 Tesfa v. Stewart, 135 S.W.3d 272 (Tex. App.–Fort Worth 2004, pet. denied) ....................... 18 Tex. Capital Sec. Inc. v. Sandefer, 108 S.W.3d 923 (Tex. App.—Texarkana 2003, pet. denied) ........................ 5 Texas Standard Oil & Gas, L.P. v. Frankel Offshore Energy, Inc., 394 S.W.3d 753 (Tex. App.–Houston [14 Dist.] 2012, no pet. ................... 14 Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) ........................................................................ 30 Utts v. Short, No. 03-03-00512, 2004 Tex. App. LEXIS 2874 (Tex. App.—Austin Apr. 1, 2004, pet. denied) .......................................................................................... 6 Utts v. Short, 81 S.W.3d 822 (Tex. 2002) ....................................................................... 6-7 Wayne v. A.V.A.Vending, Inc., 52 S.W.3d 412 (Tex. App. – Corpus Christi 2001, pet. denied) .......................................................................................................... 29 Woods v. State, 301 S.W.3d 327 (Tex. App.—Houston [14 Dist.] 2009, pet. ref’d) .................................................................................................... 16

viii 895484 402/122 Statutes Tex. Civ. Prac. & Rem. Code § 32.001 ........................................................... 22-23 Tex. Civ. Prac. & Rem. Code § 33.001 ........................................................... 22-23 Tex. Civ. Prac. & Rem. Code § 38.001 ...................................................................29 Tex. R. Civ. P. 94 ....................................................................................................29

Rules Tex. R. App. P. 39.7....................................................................................................i

ix 895484 402/122 03-14-00738-CV In the Court of Appeals For the Third District of Texas at Austin

Elness, Swenson, Graham Architects, Inc., Appellant and Cross-Appellee, v. RLJ II-C Austin Air, LP, RLJ II-C Austin Air Lessee, LP, and RLJ Lodging Fund II Acquisitions, LLC, Appellees and Cross-Appellants.

On Appeal from the 200th Judicial District Court of Travis County, Texas Cause Number: D-1-GN-002325 The Honorable Stephen Yelenosky, Presiding Judge

TO THE HONORABLE JUSTICES OF THE COURT OF APPEALS: Cross-Appellee Elness, Swenson, Graham Architects, Inc. (“ESG”) provides the following response to the Brief of Cross-Appellants RLJ II-C Austin Air, LP, RLJ II-C Austin Air Lessee, LP, and RLJ Lodging Fund II Acquisitions, LLC (collectively, “RLJ”):

As a result of the breaches of contract, breach of fiduciary duties, breach of warranty, tort/negligence breaches, and negligent acts alleged above, Plaintiffs have sustained damages in excess of the minimal jurisdictional requirements of this court. The appropriate measure of damages for the breach of contract and breach of warranty claims is the difference in value between the building as constructed, and the value of the building had it been designed and constructed pursuant to the respective contracts. In the alternative, the measure of damages is the cost to fully and completely repair the Project.

CR:195; 200-01 (¶¶49, 73) (emphasis added).1 RLJ did not allocate or differentiate between the alleged damages caused by ESG and those of the settling parties at issue, Terracon Consultants, Inc. (“Terracon”) and EBCO General Contractor, Ltd., EBCO Advanced Building Systems, Ltd., and EBCO Warrior Management LLC (collectively “EBCO”). CR:195; 200-02. Confirming this fact, ESG adopts the format for citation to the record identified on pages 1-2, notes 1 and 3 of RLJ’s Brief.

At trial, counsel for ESG asked RLJ’s expert witness on market value damages if he had allocated any damages to any particular party’s breach or conduct. RR:V.7, 159:8-20. RLJ’s witness stated that he was unable to allocate or “parse out” any damages to any particular party. Id. RLJ’s appellate brief admits it did not present evidence of allocation of damages, stating “RLJ was not given the opportunity to segregate or apportion damages to satisfy the trial court’s reasoning before the case was submitted to the jury.” RLJ Brief at 13, n.4. The record does not contain any request from RLJ to the trial court for an “opportunity” to present evidence segregating or apportioning its damages.

After the jury issued its verdict, ESG presented evidence that the damages award contained indivisible damages by referencing RLJ’s complaint. CR:1173- 1178. ESG also submitted RLJ’s settlement agreements with Terracon and EBCO, which did not allocate damages to any particular claim. CR:1461-1488. RLJ agreed to release EBCO from the following: any and all actions, causes of actions, claims, demands, costs, loss of services, expenses, and compensation on account of or in any way growing out of any known and unknown damages which Releasors may now or hereafter have against Releasees resulting, existing or alleged to result from, related to or arising out of, the Project, the Contract, repair/remediation of the Project, allegations asserted against Releasees described in any of 3 895484.2 402/122 Releasors’ pleadings filed in the above-referenced lawsuit, involving any services, work or materials provided by Releasees, or any claim(s) against Releasees involving the Project.

CR:1468-69 (emphasis added). Likewise, RLJ agreed to release Terracon from the following: all Claims and Causes of Action arising out of or relating to the Occurrence in Question as defined above, including but not limited to, all Claims and Causes of Action which have been asserted, could have been asserted, or may accrue in the future or otherwise become known to Releasor as claims that could be asserted against the Released Parties by Releasor based upon the Occurrence in Question.

CR:1479. The “Occurrence in Question” is defined to include the allegations in RLJ’s petition. CR:1477. ESG’s evidence of common damages and indivisible injury shifted the burden to RLJ to provide evidence of allocation of damages.

CR:1173-78. RLJ did not provide any allocation evidence and subsequently admitted in pleadings to the trial court that RLJ’s injuries in this case are “indivisible.” CR:1266 (“In a case involving indivisible injury, such as this . . .”) (emphasis added).

Based on RLJ’s pleadings and evidence at trial, the trial court properly entered a judgment applying the full amounts of the EBCO and Terracon settlements to the jury’s verdict. CR:1437-41; 1708-12.

ARGUMENT I. Standard of review The trial court’s determination regarding the amount of the settlement credit is reviewed for an abuse of discretion. See Oyster Creek Fin. Corp. v. Richwood Invs. II, Inc., 176 S.W.3d 307, 328 (Tex. App.—Houston [1st Dist.] 2004, pet. denied); Texas Cap. Sec. Inc. v. Sandefer, 108 S.W.3d 923, 925 (Tex. App.— Texarkana 2003, pet. denied). The test for abuse of discretion is whether the court acted without reference to any guiding rules and principles or, stated another way,

II. Texas law does not require joint and several liability for application of the one-satisfaction rule. (Issue No. A.1) RLJ has scant authority for its position that the one-satisfaction rule does not apply in this case. Attempting to craft an argument where precedent does not exist, RLJ argues that the one-satisfaction rule was created only to apply to contribution claims and never intended to apply outside of tort claims. RLJ Brief at 19-21. To the contrary, the Texas Supreme Court began enforcing the one-satisfaction rule as early as 1856, with the only requisite being that the claimant may not recover twice for the same injury. 2 The Supreme Court has explained that Texas’ statutory contribution scheme for tort claims upholds the broader one-satisfaction rule. Utts Lewis v. Taylor, 17 Tex. 57 (Tex. 1856) (“in an action or actions against several persons for the same trespass, the plaintiff can have judgment separately against each of them, and separate executions; but he can have but one satisfaction”); Andrews v. Harvey, 39 Tex. 123 (Tex. 1873) (“The liability of the appellant and McGrew may exist at the same time, although there can be but one satisfaction”); Alvord v. Waggoner, 32 S.W. 872, 873 (Tex. 1895) (“Alvord had the right to sue Fosdick or Eustis upon the warranties contained in these deeds, or he might have sued each of them, but he could have but one satisfaction of his damages.”) (emphasis added in each).

RLJ seeks to inhibit the simple application of the one-satisfaction rule by introducing a new requirement—joint and several liability. RLJ’s description of joint and several tort liability and Texas’ statutory contribution scheme is a straw man intended to deflect attention from Texas’ common law one-satisfaction rule.

RLJ Brief at 21-22. The authority contrary to RLJ’s position is overwhelming— neither this Court nor any other appellate jurisdiction in Texas holds that the one- satisfaction rule is limited by the particular cause of action asserted by the plaintiff: Galle, Inc. v. Pool, 262 S.W.3d 564, 573 (Tex. App.— Austin 2008, pet. denied) (“if the plaintiff has suffered only one injury, even if based on ‘overlapping and varied theories of liability,’ the plaintiff may only recover once”) (emphasis added); Osborne v. Jauregui, Inc., 252 S.W.3d 70, 75 (Tex. App.—Austin 2008, pet. denied) (en banc) (application of the one-satisfaction rule “is not limited to tort claims, and whether the rule may be applied depends not on the cause of action asserted but rather the injury sustained”) (emphasis added);

Kizer v. Meyer, Lytton, Alen & Whit-Aker, Inc., 228 S.W.3d 384, 392, n.3 (Tex. App.—Austin 2007) (“some or all of his potential recovery on a breach of contract claim in a later district court lawsuit might well be barred due to the application of the one-satisfaction rule which prohibits more than one recovery for a given harm”) (emphasis added); Allan v. Nersesova, 307 S.W.3d 564, 574 (Tex.App.— Dallas 2010, no pet.) (“The one-satisfaction rule prohibits a plaintiff from recovering twice for a single injury . . .

Whether the rule applies is determined not by the cause of action, but by the injury.”) (citations omitted) (emphasis added); See Oyster Creek, 176 S.W.3d at 328 (allowing settlement credit and finding one injury even though causes of action against separate defendants included one for tort and one for contract); Matthews v. Sohn, 13-12-00302-CV, 2013 Tex. App. LEXIS 7277, at *14 (Tex. App.—Corpus Christi June 13, 2013) (“The one satisfaction rule applies when ‘there is only one injury, even if it is based on several overlapping and varied theories of liability.’”) (citations omitted) (emphasis added); Burke v. Union Pac. Res. Co., 138 S.W.3d 46, 70 (Tex. App.—Texarkana 2004, pet. denied) (applying settlement credit to breach of contract claim without

This Court’s opinion in Galle, Inc. v. Pool is directly on point and holds that the application of the one-satisfaction rule “is not limited to tort claims, and whether the rule may be applied depends not on the cause of action asserted but rather the injury sustained.” 262 S.W.3d at 573. RLJ attempts to distinguish Galle by stating that the plaintiff in the trial court elected negligent misrepresentation damages rather than breach of contract. RLJ Brief at 28. RLJ incorrectly asserts that this supports the argument that the one-satisfaction rule only applies to tort claims. Id. This Court directly confronted the argument RLJ makes here and refuted it, plainly holding that the one-satisfaction rule applied to the breach of contract claim. 262 S.W.3d at 573-74. This Court has confirmed the rule stated in Galle on numerous occasions. See Osborne, 252 S.W.3d at 75; Metal Bldg., 2007 Tex. App. LEXIS 186 at *58, n.22; Kizer, 228 S.W.3d at 392, n.3.

RLJ’s tortured interpretation of the one-satisfaction rule is wrong but, even according to RLJ’s standards, the trial court properly applied the settlement credits in this case. RLJ pled that ESG, EBCO, and Terracon were jointly and severally liable for RLJ’s breach of contract claims. CR:202. RLJ now runs from this allegation and seeks to explain why there cannot be joint and several contractual liability. RLJ Brief at 31-32. Even where joint and several liability is addressed in

RLJ points to a recent decision in the United States Court of Appeals for the Fifth Circuit 3 to argue that, where the one-satisfaction rule applies to contractual claims, it only applies if there is a finding of joint and several liability between the defendants. RLJ Brief at 23-34. The GE Capital decision, however, holds only that the one-satisfaction rule requires an allegation by the plaintiff of joint and several liability between the defendants. 754 F.3d at 308-309. In GE Capital, the plaintiff never alleged joint liability or indivisible injury. Id. at 308. Based on the lack of any such allegations, the Fifth Circuit determined that the two defendants “did not ‘commit the same act’ or ‘commit technically different acts that result in a single injury.’” Id. at 309 (citation omitted). In reaching its ruling, the Fifth Circuit examined the Galle, Inc. v. Pool decision and the Texas Supreme Court’s decision in First Title Co. of Waco v. Garrett, 860 S.W.2d 74 (Tex. 1993). In Garrett, the Supreme Court applied the one-satisfaction rule “although not adjudicated to be joint tortfeasors, [the defendants] cannot reasonably be said to have caused separate injuries” and “reaffirmed” that the one-satisfaction rule “prohibits a plaintiff from recovering twice from the same injury.” 860 S.W.2d at 79.

GE Capital Comm., Inc. v. Washington Nat’l Bank, 754 F.3d 297, 306 (5th Cir. 2014).

GE Capital, 754 F.3d at 306-07, n.9 (emphasis added). The Fifth Circuit stated that, unlike the pleadings in GE Capital, the pleadings in Garrett and Galle both included allegations that the defendants at issue were jointly liable. Id. The court reasoned that the presence of allegations of joint liability allowed application of the one-satisfaction rule. Id. Unlike GE Capital, RLJ admitted and pled that (1) RLJ’s damages were “indivisible” (CR:1266) and (2) ESG, EBCO, and Terracon were jointly and severally liable for those damages (CR:202). The GE Capital analysis is consistent with Texas’ one-satisfaction case law, which provides that a settlement credit is applicable where the plaintiff alleges joint liability and/or indivisible damages and settles with one party but not another. See Galle, 262 S.W.3d at 572; Garrett, 860 S.W.2d at 79.

RLJ also relies on CTTI v. Priesmeyer to argue that the one-satisfaction rule requires a finding of joint and several contractual liability. RLJ Brief at 32-33. To the contrary, this Court in CTTI explained the burden shifting procedure that occurs for credits under the one-satisfaction rule to mean “Where there are at least some damages for which there could be joint and several liability,” the burden

Absent such an allocation, it is presumed that all settlement amounts are joint damages, even if it is “theoretically” possible that some damages are separable.

Galle, 262 S.W.3d at 572-73.

In this case, ESG satisfied the initial burden to show that there are “at least some damages for which there could be joint and several liability.” CTTI, 164 S.W.3d at 685, n.3. RLJ sought joint and several damages from ESG, EBCO, and Terracon both in their pleadings and at trial. CR:202; RR:V.7, 159:8-20. Thus, the burden shifted to RLJ to show allocation of damages applicable only to ESG.

Galle, 262 S.W.3d at 572-73. RLJ did not satisfy that burden and admitted that the damages against ESG were “indivisible” from those alleged against EBCO and Terracon. CR:1266.

Despite pleading joint and several liability (CR:202), RLJ argues in its brief that ESG’s contractual duties were distinct from EBCO’s and Terracon’s, so joint and several liability could not apply. RLJ Brief at 25-31. This argument must fail because RLJ is bound by its own pleadings, which allege joint and several

To the extent that RLJ argues that CTTI stands for the proposition that the one-satisfaction rule only applies to tort claims, ESG asserts that the holding itself acknowledges and allows for the application to breach of contract claims. Further, subsequent opinions of this Court have overruled any such precedent set by CTTI. See Galle, 262 S.W.3d at 572-73; Osborne, 252 S.W.3d at 75; Metal Bldg., 2007 Tex. App. LEXIS 186 at *58, n.22; Kizer, 228 S.W.3d at 392, n.3.

RLJ’s argument regarding the collateral source rule is a non-sequitur, as the collateral source rule applies only to insurance payments, which are not at issue in this case. Brown v. American Transfer and Storage Co., 601 S.W.2d 931, 935-36 (Tex. 1980). RLJ asks this Court to not only stretch the blanket of coverage afforded the collateral source rule, but to sew new patches to broaden its application to serve RLJ’s purposes here. Contrary to RLJ’s argument, application of the one-satisfaction rule in this case cannot “obliterate” the collateral source rule because it does not apply. By the same token, it necessarily follows that RLJ’s request of this Court to make new law extending the collateral source rule should be rejected because doing so would effectively “obliterate” the centuries-old one- satisfaction rule.

Texas law requires RLJ to live with the consequences of their pleading and proof at trial. RLJ chose to present their case as one of joint liability and joint

III. RLJ admitted its damages were indivisible and presented only evidence of indivisible damages. (Issue No. A.2) RLJ argue that, although it presented evidence of indivisible damages, the jury (without any evidence) apportioned the damages only to ESG’s alleged breach of contract and excluded the other alleged breaches. RLJ Brief at 39-47. RLJ’s argument is based solely on the fact that the charge asked the jury to award damages for ESG’s alleged breach of contract and did not include breaches by other parties. Id. RLJ also argue on appeal that its damages are not indivisible.

RLJ Brief at 39-41. RLJ judicially admitted that the damages at issue are “indivisible.” CR:1266 (“In a case involving indivisible injury such as this . . .”); Texas Standard Oil & Gas, L.P. v. Frankel Offshore Energy, Inc., 394 S.W.3d 753, 764-65 (Tex. App.—Houston [14 Dist.] 2012, no pet.); Gevinson v. Manhattan Constr. Co. of Okla., 449 S.W.2d 458, 466 (Tex. 1969).

Even ignoring RLJ’s admission, their argument puts the cart before the horse – the jury can only award damages according to the proof presented at trial.

Because RLJ only presented evidence of joint or “indivisible” damages, the jury’s award necessarily included such damages. RR:V.7, 159:8-20; RLJ Brief at 13, n.4.

According to RLJ, this reduction in the amount RLJ sought to recover necessarily means the jury “allocated” the amount of loss attributable to ESG from the total amount of the lost market value on the Hotel in answering the question on damages. RLJ Brief at 39-47. It means nothing of the sort.

RLJ attempts to point to trial counsel’s closing argument as RLJ’s evidence of apportionment or allocation. RLJ Brief at 45-46. Of course, counsel’s

The only evidence of any alleged lost market value presented at trial was the expert testimony of Paul Hornsby. As discussed in more detail in Appellant’s Brief, Hornsby’s testimony was irrelevant and unreliable, and it failed to satisfy the standards for expert testimony under Texas law. See ESG Appellant’s Brief, pp. 36-56. Because RLJ failed to provide legally sufficient evidence of its alleged lost market value damages, there can be no recovery of such damages.

See Houston Unlimited, Inc. v. Mel Acres Ranch, 443 S.W.3d 820, 838, (Tex. 2014); McGinty v. Hennen, 372 S.W.3d 625, 629 (Tex. 2012).

Because there was no allocation evidence presented, RLJ have no basis to argue there has been any previous allocation of the alleged damages in this case.

See, e.g., Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 928 (Tex. 1998) (imposing burden on plaintiff to show sums received in settlement from other parties were not subject to settlement credit in order to avoid settlement credit in amount of all settlement payments). Further, the case law cited by RLJ is actually consistent with ESG’s position.

For example, in Robertson v. ADJ Partnership, Ltd., the court held that the one-satisfaction rule did not apply and the jury charge limited damages to claims against one party because “nothing in the record” indicated the parties were “jointly liable for the damages awarded by the jury in this case.” 204 S.W.3d 484, 495 (Tex. App.—Beaumont 2006, pet. denied). Likewise, in Byer Custom Builders, the arbitration award at issue was apportioned for specific damages, including “the driveway, framing, pool deck, windows, and paint.” Byer Custom Builders v. Franks, 389 S.W.3d 880, 881 (Tex. App.—Houston [14 Dist.] 2012, no

The case precedent that does apply supports ESG’s position. The breach of contract jury question addressed in Galle was nearly identical to the question in this case. Compare CR:1127 with CR:1213. There, the plaintiffs settled with their insurance company prior to trial against a mold remediation company for damages to their home resulting from mold. Galle, 262 S.W.3d at 566-67. The plaintiffs obtained a verdict against the mold remediation company for negligent RLJ’s quotation to this case omits with brackets the identification of these apportioned damages. RLJ Brief at 43-44.

RLJ misunderstands or misconstrues the application of the one-satisfaction rule in arguing that ESG somehow received a “double-recovery.” RLJ Brief at 45- 47. After ESG provided evidence, via RLJ’s pleading, of common liability and damages and the settlement agreements were entered in the record, RLJ bore the burden to present “evidence allocating the settlement amounts to separate rather than joint damages.” Galle, 262 S.W.3d at 574. RLJ could not because its damages were admittedly indivisible. 8 CR:202. RLJ cannot present any actual evidence that ESG received a “double recovery” because it did not develop or present evidence at trial to make that determination. That is why the trial court

RLJ’s citation to Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex. 1984), does not apply to this case. RLJ Brief at 47. In Duncan, Texas Supreme Court “created a comparative causation scheme for product liability suits.” See Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 6 (Tex. 1991) (explaining the limited nature of the Duncan holding). No such claims are at issue here.

IV. Texas law unequivocally holds that the one-satisfaction rule applies to breach of contract claims. (Issue No. A.3) Yet again, RLJ asks this Court to create a new rule of law, this time arguing that Texas’ statutory contribution scheme for tort claims should abolish the common law one-satisfaction of judgment rule. RLJ Brief at 48-50. This argument contradicts the history of Texas law. The one-satisfaction rule is a common law creation, separate from any statutory scheme. Roberts v. Grande, 868 S.W.2d 956, 959 (Tex. App. —Houston [14 Dist.] 1994, no pet.) (“even though not adjudicated as joint tortfeasors, appellee and the real estate agent and broker cannot be said to have caused separate injuries.”); Lewis v. Exxon Co., 786 S.W.2d 724, 729 (Tex. App.—El Paso 1989, no pet.) (“It is a rule of general acceptation that an injured party is entitled to but one satisfaction for the injuries sustained by him . . . although not abolished in situations where Section 33.015 does not apply, [the one-satisfaction rule] has been severely modified in its application by the comparative negligence statutes”) (citing Bradshaw v. Baylor Univ., 84 S.W.2d 703, 705 (1935)) (emphasis added); Hunt v. Ziegler, 271 S.W. 936, 938 (Tex. App. 1925, aff’d 280 S.W. 546 (Tex. 1926)) (“when that

RLJ lastly argues that “it must be presumed” that Texas Civil Practice and Remedies Code Chapters 32 and 33 preempt the common law one-satisfaction rule.

RLJ Brief at 50-51. This argument is nonsensical because those statutes do not apply to breach of contract claims. See Tex. Civ. Prac. & Rem. Code § 32.001(a) (“This chapter applies only to tort actions”); § 33.002(a) (chapter applicable only to tort claims and actions under the Texas Deceptive Trade Practice Act). The plain language of those statutes evidences the legislature’s clear intent to limit the scope of those statutes to tort and/or DTPA claims.

V. Application of the one-satisfaction rule in this case cannot violate any constitutional right to freedom of contract. (Issue No. A.4) RLJ next assert that applying the one satisfaction rule to limit recovery of damages to RLJ’s actual loss would somehow violate the Texas Constitutional provision prohibiting laws impairing the obligation of contracts. There is no basis for this assertion.

The Texas Constitution provides that “[n]o bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made.” Tex. Const. art I, § 16. The provision on impairment of contracts (the “Contract Impairment Prohibition”) is based on Article I, Section 10 of the United States Constitution, which was placed in the Constitution primarily “to prevent states from passing laws to relieve debtors of their legal obligation to pay their debts.” Id., interp. commentary (Vernon 2007).

Further, the Contract Impairment Prohibition “forbids only laws which operate retroactively on contracts.” Tex. Const. art I, § 16, interp. commentary (Vernon 2007) (emphasis added). There is also no evidence of any impaired vested rights. A contractual obligation is impaired under the Contract Impairment Prohibition only “when a statute is enacted that releases a part of [the] obligation or to any extent or degree amounts to a material change or modifies it.” Price

RLJ Brief at 19-20. Therefore, application of the one-satisfaction rule cannot violate the Contract Impairment Prohibition. See Price Pfister, 48 S.W.3d at 356 (holding that legislative act governing payment of commissions to sales representatives did not violate Contract Impairment Prohibition because no previously-existing contractual obligations were impaired by act’s application); Tex. Const. art I, § 16.

VI. ESG did not waive or otherwise fail to preserve its right to settlement credits. (Issue No. A.5) RLJ complain that ESG did not object to RLJ’s failure to properly allocate damages among multiple defendants and other settling parties. According to RLJ, ESG is barred from receiving credit for settlement funds RLJ received from other parties because ESG failed to provide “notice” of ESG’s intent to argue such allocation was required. There is no merit to this argument.

As a matter of law, the one-satisfaction rule does not require that the defendant plead the one-satisfaction rule as an affirmative defense or object to the submission of a jury question that may lead to a verdict that constitutes a double recovery. National City Bank of Indiana v. Ortiz, 401 S.W.3d 867, 888 (Tex. 25 895484.2 402/122 App.—Houston [14 Dist.] 2013, pet. denied); Dalworth Restoration, Inc. v. Rife- Marshall, 02-12-00381-CV, 2014 Tex. App. LEXIS 5271 at *26 (Tex. App.—Fort Worth May 15, 2014, no pet.). RLJ’s waiver argument does not apply here.

Further, the obvious problem with RLJ’s waiver argument is that it is RLJ’s burden – not ESG’s – to allocate RLJ’s alleged damages and recover from ESG only those damages actually caused by ESG’s alleged breach. This Court and other Texas courts have long recognized that a plaintiff must show as a necessary element of its breach of contract claim that the defendant’s breach caused the plaintiff’s injuries. See Snyder, 860 S.W.2d at 695 (“When a cause of action is based on breach of contract, the plaintiff must show that . . . the defendant breached a duty under the contract, and that the plaintiff sustained damages as a result.”); see also Marquis Acquisitions, Inc. v. Steadfast Ins. Co., 409 S.W.3d 808, 813 (Tex. App.—Dallas 2013, no pet); B&W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).

ESG is not required to provide notice to RLJ about the requirements of RLJ’s causes of action, nor is ESG obligated to point out RLJ’s failure to provide evidence supporting the necessary elements of RLJ’s causes of action prior to or during trial. See All Saints Catholic Church v. United Nat’l Ins. Co., 257 S.W.3d 800, 802-03 (Tex. App.—Dallas 2008, no pet.); Allison v. Fire Ins. Exch., 98 S.W.3d 227, 258 (Tex. App.—Austin 2002, no pet.). RLJ cannot shift their burden

Equally unavailing is RLJ’s assertion that ESG was required to object to the jury charge because there was purportedly no reference to allocation of damages in the questions and instructions submitted to the jury. First, there is no requirement for a defendant to make any such objections in order to raise the one satisfaction rule. See Ortiz, 401 S.W.3d at 888 (holding defendant was not required to “object to the submission of more than one acceptable measure of his damages” or “request a limiting instruction” as a prerequisite to application of the one- satisfaction rule).

Second, there was nothing wrong with the form of the damage question submitted to the jury. It properly asked the jury to decide the amount of damages “that resulted from” ESG’s alleged breach of contract. CR:1127. The problem is that RLJ did not offer any evidence to answer that question, instead offering only irrelevant and unreliable expert testimony concerning a loss in market value allegedly resulting from the collective performance of numerous contractors and subcontractors who worked on the Hotel. See Appellant’s Brief, pp. 36-56. ESG properly objected to this inadmissible expert testimony, and is entitled to a take- nothing judgment based on RLJ’s failure to prove up market value damages.

No objection is required to preserve error when expert testimony is speculative or conclusory on its face. Coastal Transport Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 233 (Tex. 2004).

See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 897 (Tex. 2000).

As established in ESG’s opening brief on its appeal, RLJ are not entitled to any fees under Texas Civil Practice and Remedies Code Section 38.001 because they are not prevailing parties as defined by the statute and the Texas Supreme Court. See ESG Appellant’s Brief at 13-17.

RLJ did argue at the trial level that it was entitled to fees attributable to claims against EBCO and Terracon because, if the settlement credits are upheld, there must be a finding of joint and several liability, which would entitle RLJ to fees jointly and severally as well. 3SCR1-16. However, RLJ provides no authority for this argument and there is none. 14 Further, RLJ cannot recover fees attributable to those claims because RLJ expressly settled and released their claims for such fees. RLJ’s settlement agreement with EBCO states that all “fees, costs and expenses related to this lawsuit or the claims related to the investigation and/or defense or pursuit of claims related to the Project will be paid by the party incurring the same.” CR:1472. Likewise, RLJ’s settlement agreement with

As established in Section II, supra, a finding of joint and several liability is not required for the application of the one-satisfaction rule. RLJ failed to identify any authority supporting this argument because it is not a part of Texas law.

RLJ offer no authority to support their position that they are entitled to recover fees from ESG related to other parties or other claims. Accordingly, the trial court did not err in excluding such fees.

PRAYER WHEREFORE, PREMISES CONSIDERED, Cross-Appellee Elness, Swenson, Graham Architects, Inc. prays that this Court deny relief on the issues submitted by Cross-Appellants RLJ II-C Austin Air, LP, RLJ II-C Austin Air Lessee, LP, and RLJ Lodging Fund II Acquisitions, LLC in their entirety; and for general relief.

401 Congress Ave, Suite 3050 Austin, Texas 78701 512.391.6100 512.391.6149 fax /s/ Weston M. Davis Weston M. Davis

CERTIFICATE OF COMPLIANCE Pursuant to Tex. R. App. P. 9.4, I hereby certify that this petition contains 7,580 words. This is a computer-generated document created in Microsoft Word, using 14-point typeface for all text, except for footnotes which are in 12-point typeface. In making this certificate of compliance, I am relying upon the word count provided by the software used to prepare the document.

/s/ Weston M. Davis Weston M. Davis