A Houston appellate court has reversed a 2019 jury verdict that awarded European cosmetics distributor Benelux Cosmetics $2.7 million against Houston-based gel nail polish manufacturer GHP Nail Systems and its parent company.
In a 22-page ruling issued last week, Houston’s Fourteenth Court of Appeals ruled that the evidence did not substantiate the damages awarded to Benelux because there was no testimony at trial over whether the expenses Benelux incurred in its deal with GHP (the damages sought) were reasonable.
“Parties generally have the freedom to choose to pay unreasonably high prices for goods and services,” Justice Randy Wilson wrote in the unanimous opinion. “In light of this freedom, evidence merely of the amounts charged or paid, the amount of the expense incurred, the nature of the expense, the character of and need for the expense is not legally sufficient evidence that an expense is reasonable; instead, separate evidence must be offered that raises a fact issue regarding the reasonableness of the expense in question.”
Hicks Thomas partner Robin Harrison, who represents GHP, told The Texas Lawbook that on appeal the GHP legal team highlighted that their client established at trial during cross-examination of Benelux’s damages expert that he had not evaluated the reasonableness of the expenses claimed as damages.
In addition to the damages reversal, the court also made a liability reversal when it found the trial evidence “legally insufficient” to prove Benelux’s alter ego theory against GHP parent Je Matadi, whom the jury found jointly and severally liable for GHP’s fraud. The court affirmed the jury’s ruling that GHP take nothing. The three-judge panel also included justices Kevin Jewell and Charles Spain.
“The decision reversing the jury’s alter ego award confirms that holding an alter ego finding on appeal is a challenge because of the requirement of proof of a benefit received by the parent company from the claimed wrongdoing,” Harrison said. “But these are issues that are unusual to most jurors’ experience.”
Benelux’s lawyers at Yetter Coleman declined to comment. So did Je Matadi’s lawyers at Wright Close Barger.
GHP, which does business as Haute Polish, sued Benelux in 2015 after Benelux terminated a contract to distribute GHP’s at-home gel polish kits in Belgium, the Netherlands and Luxembourg. GHP accused Benelux of breach of contract, conversion and disparagement since Benelux allegedly failed to pay for its product. GHP later claimed in the litigation that Benelux misappropriated GHP’s trade secrets when Benelux sold a different nail polish after terminating the contract.
At the time of the verdict, lawyers for Benelux said their client terminated the contract, entered in September 2013, after customers began reporting problems with the product: polish curing inside the bottles, empty bottles, strong smells and severe damages to customers’ nail beds.
Benelux countersued, arguing breach of contract and warranty, fraud and violations of the Texas consumer protection statute.
GHP was also represented by Hicks Thomas associate Amanda Goldstein. The Yetter Coleman team representing Benelux included Collin Cox (now at Gibson Dunn), Reagan Simpson, Elizabeth Wyman and Heaven Chee (who, according to her LinkedIn page, began clerking for U.S. District Judge Yvonne Ho in April). The Wright Close Barger team representing Je Matadi included James Marrow and Tom Wright.