Cindi to v. David Funkhouser, Personally and on Behalf of Powershift Energy, LLC

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-24-00298-CV
___________________________

CINDI TO, Appellant

V.

DAVID FUNKHOUSER, PERSONALLY AND ON BEHALF OF POWERSHIFT
ENERGY, LLC, Appellee

On Appeal from the 348th District Court
Tarrant County, Texas
Trial Court No. 348-318252-20

Before Sudderth, C.J.; Birdwell and Womack, JJ.
Memorandum Opinion by Justice Birdwell
MEMORANDUM OPINION

This is an appeal from a judgment entered in a lawsuit centered around a

business dispute. Appellant Cindi To, Appellee David Funkhouser, and The BK

Energy, LLC—an entity owned by Brian Kennedy—were the “[i]nitial [m]embers” of a

company known as PowerShift Energy, LLC. After Funkhouser was fired as

PowerShift’s Vice President of Business Development, he filed suit against the other

two initial members,1 alleging that they had committed various bad acts and had

breached the company’s Operating Agreement by, among other things, firing him

without his consent. Following a bench trial, the trial court found in Funkhouser’s favor

on many of his claims and awarded him damages. As relevant to this appeal, the trial

court found that To and BK Energy had breached the Operating Agreement and

signed a judgment awarding Funkhouser lost-wage damages in the amount of

$506,000.00.2

On appeal, To argues that the trial court erred by awarding Funkhouser a

judgment against her for lost wages because the Operating Agreement does not

provide for the payment of any wages and because PowerShift—not To—was

1
Although Kennedy is not an initial member of PowerShift in his individual
capacity, Funkhouser asserted claims against both BK Energy and Kennedy
individually.
2
These were the only damages awarded against To.

2
Funkhouser’s employer.3 Because we agree that the trial court applied an improper

measure of damages, we reverse the trial court’s judgment against To and render a

take-nothing judgment as to her.4

I. BACKGROUND

In November 2019, PowerShift was formed. Shortly thereafter, Funkhouser,

BK Energy, and To signed the Operating Agreement, which listed each of the

signatories as one of PowerShift’s initial members. 5 The Operating Agreement

provided that each member would make a $100,000.00 capital contribution to the

company to fund its initial operations. It further provided that although the business

would be operated by managers, the managers were required to “notify and receive

unanimous approval from all [i]nitial [m]embers” before making certain “key

decisions,” including (1) hiring or firing “[k]ey [e]mployees” such as the president or

3
To also argues that the trial court improperly calculated the amount of
Funkhouser’s lost wages over a forty-four-month timeframe, but because we conclude
that the lost-wages award itself was improper, we need not address this issue. See Tex.
R. App. P. 47.1.
4
The remaining defendants—BK Energy and Kennedy—did not file notices of
appeal in the trial court; therefore, they are not parties to this appeal. See, e.g., Dick v.
Bateman, No. 03-05-00783-CV, 2006 WL 2589270, at *1 n.2 (Tex. App.—Austin Sept.
8, 2006, no pet.) (mem. op.). Accordingly, we do not alter the trial court’s judgment as
it pertains to them. See Tex. R. App. P. 25.1(c).
5
The Operating Agreement reflects that BK Energy and Funkhouser each own
a forty percent membership interest in PowerShift and that To owns the remaining
twenty percent.

3
vice president or (2) altering the “[c]ompensation structure” of anyone “receiving

[c]ompensation” from the company.

Prior to the execution of the Operating Agreement, PowerShift and

Funkhouser entered into an agreement (the Employment Agreement) setting forth the

terms of Funkhouser’s employment as the company’s Vice President of Business

Development. Under the Employment Agreement’s terms, Funkhouser was to receive

an annual base salary of $138,000.00. The agreement made clear that Funkhouser’s

employment would be “on an ‘at-will’ basis,” not for an agreed-upon term.

Eventually Kennedy and To became dissatisfied with Funkhouser’s job

performance and decided to fire him as vice president. In response, Funkhouser filed

a lawsuit in which he asserted both personal and derivative claims against To,

BK Energy, and Kennedy, including claims for fraud, conspiracy to defraud,

negligence, violations of the Texas Deceptive Trade Practices Act (DTPA), and

breach of contract. Funkhouser’s breach-of-contract claim alleged that To and

BK Energy had breached the Operating Agreement by, among other things,

“withholding [Funkhouser’s] bi-weekly pay, making decisions that require unanimous

[m]ember approval without [Funkhouser’s] approval, removing all [c]ompany funds

from the [c]ompany bank account, . . . blocking and restricting [Funkhouser’s] access

to company files and accounts[,] . . . attempting to terminate [Funkhouser’s]

employment as if [he were] an employee and not a member,” and reimbursing

Kennedy for certain expenses “that were not accrued for the [c]ompany.”

4
In April 2024, the trial court held a bench trial at which To represented herself

pro se.6 After considering the evidence, the trial court signed a judgment awarding

Funkhouser and PowerShift damages against BK Energy and Kennedy, jointly and

severally, in the amount of $98,704.23 plus treble damages of $296,112.69 for fraud,

DTPA violations, and breach of contract and an additional $54,981.00 in damages for

conspiracy to defraud. The trial court also awarded Funkhouser $506,000.00 in

damages against To and BK Energy, jointly and severally, for breach of contract. This

breach-of-contract award was for Funkhouser’s unpaid wages based on To’s and

BK Energy’s firing him without his consent in violation of the Operating Agreement.7

To filed a motion for new trial, which was denied after a hearing. This appeal

followed.

6
Although To, BK Energy, and Kennedy were initially represented by counsel,
their attorney filed a motion to withdraw in October 2023, and the trial court signed
an order granting the withdrawal motion in January 2024. Kennedy appeared at the
trial, but he arrived late, left early, and did not testify.
7
Even though the Employment Agreement made clear that Funkhouser’s
employment was “on an ‘at-will’ basis,” because the Operating Agreement required
unanimous member approval for the termination of key employees, including a vice
president, Funkhouser effectively could not be fired without his consent.

5
II. DISCUSSION

On appeal, To argues, among other things,8 that the trial court applied an

improper measure of damages to Funkhouser’s breach-of-contract claim against her.

We agree.

1. Standard of Review

“Damages must be measured by a legal standard, and that standard must be

used to guide the factfinder in determining what would compensate the injured

party.” TeleResource Corp. v. Accor N. Am., Inc., 427 S.W.3d 511, 523 (Tex. App.—Fort

Worth 2014, pet. denied) (citing Jackson v. Fontaine’s Clinics, Inc., 499 S.W.2d 87, 90

(Tex. 1973)). The proper measure of damages is a question of law that we review de

novo. Signature Indus. Servs., LLC v. Int’l Paper Co., 638 S.W.3d 179, 187 (Tex. 2022). “If

the legal theories underlying the damages awarded do not conform to the law

governing damages, we may reverse the award as a matter of law.” Id. (citing Whiteside

v. Trentman, 170 S.W.2d 195, 196 (Tex. [Comm’n Op.] 1943)).

2. Analysis

As noted, Funkhouser’s breach-of-contract claim against To was based on her

alleged breach of the Operating Agreement, not the Employment Agreement. The

only breach-of-contract damages that Funkhouser alleged in his petition were

8
To’s brief enumerates three appellate issues, but they are multifarious and
overlapping, and we need not address all of the various arguments raised therein to
resolve this appeal. See Tex. R. App. P. 47.1. Because the measure-of-damages issue is
dispositive, we limit our discussion to this argument. See id.

6
(1) $148,000.00 in unpaid initial contributions from To and BK Energy and (2) the

recoupment of (i) $15,000.00 in unjustified reimbursements paid to Kennedy, (ii) the

“bi-weekly pay” received by Kennedy and To after the occurrence of the alleged

breach, and (iii) certain other “amounts paid out during the life of the [c]ompany.”

Funkhouser did not allege that he was owed any unpaid wages; indeed, he specifically

denied that he was an employee of PowerShift. 9 Nevertheless, at trial, Funkhouser

requested that the trial court award him forty-four months’ worth of unpaid wages as

damages for To’s breach of the Operating Agreement, and the trial court did so.

Unpaid wages are a form of consequential damages. See Edinburg Hous. Auth. v.

Ramirez, No. 13-19-00269-CV, 2021 WL 727016, at *5 (Tex. App.—Corpus Christi–

Edinburg Feb. 25, 2021, no pet.) (mem. op.). “From at least the time of Hadley v.

Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854), the widely recognized rule has been

that consequential damages ‘are not recoverable unless the parties contemplated at the

time they made the contract that such damages would be a probable result of the

breach.’” Signature Indus. Servs., LLC, 638 S.W.3d at 186 (quoting Stuart v. Bayless,

9
Because unpaid wages are a form of consequential damages, see discussion
infra, they must be specifically pleaded. See Norwest Mortg., Inc. v. Salinas, 999 S.W.2d
846, 864 (Tex. App.—Corpus Christi 1999, pet. denied); see also Tex. R. Civ. P. 56.
Thus, to the extent Funkhouser sought to recover unpaid wages, his pleading was
defective. See Norwest Mortg., Inc., 999 S.W.2d at 864. However, To waived any
complaint about this pleading defect by failing to raise a timely objection in the trial
court. See, e.g., Retzlaff v. Tex. Dep’t of Crim. Just., 135 S.W.3d 731, 737 (Tex. App.—
Houston [1st Dist.] 2003, no pet.) (op. on reh’g) (observing that objections to an
allegedly defective pleading “must be made in writing before the judgment is signed”
or they are “deemed waived”).

7
964 S.W.2d 920, 921 (Tex. 1998)). “Thus, to be recoverable, consequential damages

must be foreseeable and directly traceable to the wrongful act and result from it.”

Stuart, 964 S.W.2d at 921 (first citing Arthur Andersen & Co. v. Perry Equip. Corp.,

945 S.W.2d 812, 816 (Tex. 1997) (op. on reh’g); and then citing Mead v. Johnson Grp.,

Inc., 615 S.W.2d 685, 687 (Tex. 1981)).

The question we must decide, then, is whether the parties contemplated when

they signed the Operating Agreement that they would probably be liable for damages

in the form of unpaid wages in the event of a breach. See Signature Indus. Servs., LLC,

638 S.W.3d at 186; Stuart, 964 S.W.2d at 921. We conclude that they did not.

Nothing in the Operating Agreement suggests that the parties could have

reasonably foreseen that by signing it, they might become personally liable for the

payment of an employee’s unpaid wages. Although Section 4.3(a) of the Operating

Agreement required unanimous member approval for certain “key decisions,”

including those pertaining to the firing of “[k]ey [e]mployees” (such as the vice

president) or the alteration of the company’s “compensation structures,” it did not

provide for the payment of any wages or other compensation to the members or

managers. Indeed, the Operating Agreement made no mention of wages at all. And it

must be remembered that the Operating Agreement was adopted and signed by

Funkhouser, To, and BK Energy in their capacity as members, not as employees.

With this in mind, it is clear that Section 4.3(a) was designed to ensure that all

members had input regarding important business decisions, not to protect employees

8
from wrongful termination. Thus, we conclude as a matter of law that damages in the

form of unpaid wages were not foreseeable to the Operating Agreement’s signatories

under the facts presented here. See Stuart, 964 S.W.2d at 921. If Funkhouser had

wished to pursue a claim for unpaid wages, he should have sued his employer—

PowerShift—under the Employment Agreement, not his fellow members under the

Operating Agreement.

III. CONCLUSION

Having concluded that the trial court applied an improper measure of damages

with regard to Funkhouser’s breach-of-contract claim, we reverse the trial court’s

judgment against To and render a take-nothing judgment as to her.10

/s/ Wade Birdwell

Wade Birdwell
Justice

Delivered: July 24, 2025

We do not alter the trial court’s judgment as it pertains to the other
10

defendants. See supra note 4.

9