In Longview Energy v. Huff, the Texas Supreme Court determined that Longview’s evidence of revenue that others received due to an alleged breach of fiduciary duty did not entitle Longview to recover. Longview needed to prove ill-gotten profit, not just ill-gotten revenue. Instead of the nearly $100 million found by the jury, Longview gets nothing.
Revenue and Profit Are Not the Same
The jury found that Huff and others (“Huff”) improperly used for Huff’s own benefit information obtained through being on Longview’s board of directors. The jury determined that Huff used the information to lease certain oil and gas wells that generated almost $100 million in revenue.
The Texas Supreme Court assumed, without deciding, that Huff breached a fiduciary duty so that any profit from that breach should be awarded to Longview. The Court determined that Longview failed to prove that Huff received any profit. While Longview provided evidence of revenue to Huff, Longview did not provide evidence of the expense that Huff incurred to get that revenue. While profit need not be proved with absolute certainty, reasonable evidence of the expense that should be deducted from the revenue is necessary to establish profit.
Longview Had the Burden to Prove Ill-Gotten Profit
Longview argued that once it showed Huff obtaining revenue from a breach of fiduciary duty, Huff had the burden to prove that some amount should be offset due to expenses. Huff’s failure to provide evidence of expense precluded any offset, according to Longview.
The Court rejected that argument, holding that Longview had the burden to prove Huff’s ill-gotten profit, which required proof of revenue minus expenses. Proving only revenue was fatal.
Longview Could Not Prove that any Huff Leases Could Be Traced to a Breach of Duty
In a separate analysis, the Court determined that Longview could not prove that Huff acquired any specific lease due to a breach of duty, largely because Longview did not pursue specific lease opportunities in the geographic area of the Huff leases.
For a copy of the Court’s opinion click here.