In Michael D. Heatley v. Red Oak 86, L.P. & Charles Johnson, investors in a limited partnership sued the managing member for breach of fiduciary duty. No. 05-18-01083-CV, 2020 Tex. App. LEXIS 6592 (Tex. App.—Dallas August 17, 2020, no pet. history). The jury found that the defendants owed a fiduciary duty, breached the duty, but that the plaintiffs did not incur any damages. The trial court then, after trial, entered an award of equitable forfeiture and awarded the plaintiffs over $250,000, which accounted for the defendants’ total contributions to the partnership. The defendants appealed.
The defendants argued that the plaintiffs waived any right to equitable forfeiture by failing to submit a question as to the level of the defendants’ intent in breaching duties. The court of appeals first discussed equitable forfeiture:
A trial court may order fee forfeiture as equitable relief when normal damages measures may not adequately address a breach of fiduciary duty. In ruling on a request for forfeiture, a trial court must determine three elements: [1] whether a “violation is clear and serious, [2] whether forfeiture of any fee should be required, and [3] if so, what amount.” In making that determination, the court must consider non-exclusive factors: “[t]he gravity and timing of the breach of duty”; “the level of intent or fault”; “whether the principal received any benefit from the fiduciary despite the breach”; “the centrality of the breach to the scope of the fiduciary relationship”; “any threatened or actual harm to the principal”; “the adequacy of other remedies”; and “[a]bove all” whether “the remedy fit[s] the circumstances and work[s] to serve the ultimate goal of protecting relationships of trust.” These “several factors embrace broad considerations which must be weighed together and not mechanically applied.” Thus, for example, “the ‘willfulness’ factor requires consideration of the [fiduciary’s] culpability generally; it does not simply limit forfeiture to situations in which the [fiduciary’s] breach of duty was intentional.” Nor would “the adequacy-of-other-remedies factor . . . preclude forfeiture in circumstances where the principal could be fully compensated by damages.” The Heatley parties correctly note that, in the fee-forfeiture context, “when contested fact issues must be resolved before equitable relief can be determined, a party is entitled to have that resolution made by a jury.” And “a dispute concerning an agent’s culpability—whether he acted intentionally, with gross negligence, recklessly, or negligently, or was merely inadvertent—may present issues for a jury.”
Id. (internal citations omitted). The court then looked to whether the defendants had preserved their complaint about the missing findings on intent. The court held that the plaintiffs had the burden to plead, prove, and obtain jury findings on fee forfeiture. The court state that Texas Rule of Civil Procedure 278 states that “[f]ailure to submit a question shall not be deemed a ground for reversal of the judgment, unless its submission, in substantially correct wording, has been requested in writing and tendered by the party complaining of the judgment.” Id. The court held that the defendants waived their objection by failing to request any question on the plaintiff’s claim or by failing to object to the omission:
The Heatley parties argue that because there was a fact issue requiring jury determination on their level of intent or fault, the lack of a jury question and answer is fatal to the trial court’s conclusion to order fee forfeiture. We cannot reverse on this basis because they neither objected nor submitted a question “in substantially correct wording.” In the absence of a submitted question, an objection will preserve error where, as here, the party seeking reversal did not have the burden of proof with respect to the question at issue...
