source: Caselaw Access Project

author: KEM THOMPSON FROST, Justice.

license: Public Domain

text:
    Michael J. REARDON, Albert E. Raizner, John Abukhalil, Richard A. Goldfarb, Milton Nirken, Osama Mikhail, Weldon Guest, Mordechaj Blankfeld, James T. Fox, Norman Rappaport, Mark Berger, Carol Sue Finkelstein, Gregorio Casar, Randolph W. Evans, Martin Barrash, Richard M. Barrett, M.D., P.A., Daniel Barrett, Cynthia A. Barrett, Robert Gordon, As Trustee of the Alan J. And Sherri Gordon Eisenman Family Trust, Larry I. Lipshultz, Goldfam, Ltd., William Lipsky, Tobias Samo, Gene Landon, Michael Munday, Deborah Brand-Fainstein, Harold L. Harris, Geoffrey D. Harris, Adrienne Harris, Ralph G. Harris, Mazel, Inc., Sheldon Harris, Harvey Fuson, Richard D. Klausmeier and Kay L. Klausmeier, As Trustees of the R.D. & K.L. Klausmeier Trust, Richard D. Klausmeier, Richard H. Stein, Edgar Goldberg, Boguslaw Godlewski, Christopher Godlewski, Ronald Golden, James Alexander, Robert K. Zurawin, Mohamed O. Jeroudi, and Thomas J. Mims, Appellants, v. LIGHTPATH TECHNOLOGIES, INC. and D.H. Blair Investment Banking Corp., Appellees.
    No. 14-03-01208-CV.
    Court of Appeals of Texas, Houston (14th Dist.).
    Oct. 20, 2005.
    Rehearing Overruled Dec. 22, 2005.

      Byron C. Keeling, Jeffrey L. Raizner, Houston, for appellants.
    J. Clifford Gunter III, Tracy C. Temple, Warren W. Harris, Houston, for appellees.
    Panel consists of Justices ANDERSON, HUDSON, and FROST.
   OPINION

KEM THOMPSON FROST, Justice.

In this complex securities fraud case, forty-five plaintiffs appeal from an adverse summary judgment. Appellants, shareholders in a technology company, brought suit against the company and others asserting a number of fraud-based claims, including common law fraud, statutory fraud under section 27.01 of the Texas Business and Commerce Code, securities fraud under the Texas Securities Act, and negligent misrepresentation, as well as a claim for breach of fiduciary duty. The trial court disposed of all claims by granting summary judgment on both traditional and no-evidence grounds. We affirm.

I. Introduction

The shareholders challenge the trial court’s disposition of their fraud-based claims. They assert that the company’s representations fraudulently induced them to consent to a transaction that dispossessed them of a part of their ownership in the company in exchange for a type of share, “the E share,” the value of which depended upon the company’s achievement of certain milestones based on the company’s stock price and pretax income. The shareholders allege that the company misrepresented and failed to disclose material facts that would have shown the shareholders that the E shares were highly unlikely to convert to shares of Class A common stock because LightPath was highly unlikely to achieve the necessary milestones. The trial court found, among other things, that the shareholders failed to produce evidence that they suffered damages. We, too, conclude there is no genuine issue of material fact as to whether the shareholders suffered recoverable damages.

II. Factual and Procedural Background

Appellants/plaintiffs Michael J. Reardon, Albert E. Raizner, John Abukhalil, Richard A. Goldfarb, Milton Nirken, Osama Mikhail, Weldon Guest, Mordechaj Blank-feld, James T. Fox, Norman Rappaport, Mark Berger, Carol Sue Finkelstein, Gregorio Casar, Randolph W. Evans, Martin Barrash, Richard M. Barrett, M.D., P.A., Daniel Barrett, Cynthia A. Barrett, Robert Gordon, as trustee of the Alan J. and Sherri Gordon Eisenman Family Trust, Larry I. Lipshultz, Goldfam, Ltd., William Lipsky, Tobias Samo, Gene Landon, Michael Munday, Deborah Brand-Fainstein, Harold L. Harris, Geoffrey D. Harris, Adrienne Harris, Ralph G. Harris, Mazel, Inc., Sheldon Harris, Harvey Fu-son, Richard D. Klausmeier and Kay L. Klausmeier, as trustees of the R.D. & K.L. Klausmeier Trust, Richard D. Klausmeier, Richard H. Stein, Edgar Goldberg, Bogus-law Godlewski, Christopher Godlewski, Ronald Golden, James Alexander, Robert K. Zurawin, Mohamed O. Jeroudi, and Thomas J. Mims (referred to collectively hereinafter as the “Investors”) are shareholders in appellee/defendant LightPath Technologies, Inc. (hereinafter “Light-Path”), whose written materials describe it as a manufacturer and marketer of optical glass and other products used in the telecommunications industry. Appellee/defen-dant D.H. Blair Investment Banking Corporation (“D.H. Blair”) is a New York investment banking firm that served as the underwriter for the recapitalization and initial public offering (“IPO”) at issue in this case.

In the 1980s, Leslie Danziger created a type of optical glass she named “Gradi-um.” This glass, Danziger believed, would make it possible to do with one léns, or fewer lenses, what it takes conventional glass multiple lenses to do. Danziger founded LightPath, a company incorporated in Delaware, to design, develop, manufacture, and market Gradium to the optics and related industries. However, Gradium was a new product that presented many challenges, one of which was that it had never been produced commercially. From 1985 through 1994, LightPath solicited private funding from investors for research and development. During this period, investors were advised that LightPath had limited capitalization and significant debts, and that the commercialization of LightPath’s technology was a “highly speculative venture.” By 1994, it became apparent to the company that it could not survive without a major infusion of capital. At that time, LightPath had generated no significant revenue. • Despite continual undercapitalization, the company made progress with its technology. In 1994, LightPath brought a single type of lens to market. Anticipating a production scale-up, LightPath sought to expand the number and type of lenses the company was creating.

To. generate much-needed capital, Light-Path pursued the idea of an IPO with a number of investment banking firms, ultimately settling on D.H. Blair. In August 1995, D.H. Blair executed a letter of intent to underwrite an IPO for LightPath. D.H. Blair proposed an - offering that initially would raise $8 million through the sale of stock and up to an additional $63 million through future warrant sales.

Recapitalization Plan

As a condition of the IPO, LightPath sought to recapitalize. In proposing this transaction to its existing shareholders, LightPath presented a two-part recapitalization plan in a proxy statement seeking approval of the transaction:

(1) Reverse Stock Split. The number of shares of existing LightPath stock (including those allocated for debt conversion and stock options) would be reduced through a l-to-5.5 reverse stock split, which would effectively reduce the number of outstanding shares from 5.5 million to 1 million. If a majority of LightPath shareholders approved the reverse split, Class A common stock (“A shares”) would be issued to effect this stock split.
(2) E Shares. LightPath would distribute, as a “non-taxable stock dividend,” escrow shares — called “E shares” — to pre-IPO shareholders. All holders of A shares were to receive four E shares for every post-split A share. The E shares would retain voting power, but they would be non-tradeable unless and until LightPath reached certain performance milestones. These milestones would be triggered should LightPath achieve certain targets for the price of it’s a shares and/or for its pretax income. The E shares would be redeemed for nominal value unless they converted to A shares by 2000.

LightPath, through Danziger, who was then its President and Chairman of the Board, told the Investors that the company could not effectively market and sell GRADium products or fund the planned expansion of its manufacturing operations without the IPO. In September 1995, a majority of shareholders approved the proposed recapitalization plan, and the reverse stock split was accomplished. Every 5.5 shares of Class A stock were redeemed for one share, and LightPath distributed E shares to its existing shareholders.

The IPO offered 1.6 million units. A single unit in the IPO was sold for $5.00. Purchasers received one A share and two warrants per unit, and all 1.6 million units, plus 240,000 in over allotment, were sold. The IPO raised $9.2 million in capital for LightPath. After the IPO, shareholders exercised their warrants, and the IPO raised more than $65 million. Despite the success of the IPO, LightPath did not achieve the E share financial milestones set forth in the proxy statement. Consequently, the E shares did not convert to A shares. The Investors filed suit in June 2000.

The Investors’ Claims

The Investors asserted claims of fraud, statutory ft-aud under Section 27.01 of the Texas Business and Commerce Act, securities fraud under the Texas Securities Act, negligent misrepresentation, and breach of fiduciary duty. The Investors alleged that LightPath misrepresented and failed to disclose material information that the Investors would have found important in approving the recapitalization and IPO transaction, fraudulently inducing the Investors to consent to a transaction that decreased their interest in LightPath. The Investors assert that LightPath misrepresented and failed to disclose facts that would have shown the Investors that the E shares were highly unlikely to convert to A shares because LightPath was highly unlikely to achieve the necessary milestones. The Investors also alleged that LightPath made a material misrepresentation that the post-IPO value of the E shares would be five dollars per share.

In addition to suing LightPath, the Investors also sued D.H. Blair, Danziger, Donald Lawson, LightPath’s former President and Chief Executive Officer, and Milton Klein, a former director of LightPath. D.H. Blair, Danziger, and Lawson all filed special appearances, which the trial court denied. On interlocutory appeal, this court affirmed the trial court’s order denying Danziger’s and Lawson’s special appearances, but reversed the trial court’s order denying D.H. Blair’s special appearance. See D.H. Blair Inv. Banking Corp. v. Reardon, 97 S.W.3d 269 (Tex.App.Houston [14th Dist.] 2002, pet. dism’d w.o.j.). The Investors subsequently non-suited their claims against Danziger, Lawson, and Klein. Under this court’s mandate from the interlocutory appeal, the trial court dismissed the claims against D.H. Blair, leaving only the Investors’ claims against LightPath.

LightPath’s Motions for Summary Judgment

LightPath moved for traditional and no-evidence summary judgment, asserting the following grounds:

• LightPath did not make any material misrepresentations or omissions.
• The Texas Securities Act does not apply because any alleged material misrepresentations or omissions by LightPath did not occur in the context of a sale of securities.
• The Investors cannot recover because they have suffered no. damages.
• LightPath did not owe the Investors a fiduciary duty.

The trial court granted this motion and rendered a final judgment dismissing all of the Investors’ claims against LightPath. The trial court specifically based its judgment on all of the above-stated summary-judgment grounds.

III. Issues Presented

The Investors raise the following issues for appellate review:

Misrepresentation
• Did the trial court err in granting summary judgment in favor of Light-Path on the ground that LightPath conclusively disproved the making of a material misrepresentation or omission?
• Did the trial court err in granting summary judgment in favor of Light-Path on the ground that the Investors failed to produce evidence that Light-Path made a material misrepresentation or omission?
Texas Securities Act
• Did the trial court err in granting summary judgment in favor of Light-Path against the Investors’ securities fraud claim on the ground that Light-Path conclusively disproved that an alleged material misrepresentation or omission occurred in the context of a sale of securities?
• Did the trial court err in granting summary judgment in favor of Light-Path against the Investors’ securities fraud claim on the ground that the Investors failed to produce evidence that an alleged material misrepresentation or omission occurred in the context of a sale of securities?
Damages
• Did the trial court err in granting summary judgment in favor of Light-Path on the ground that LightPath conclusively disproved that the Investors suffered damages?
• Did the trial court err in granting summary judgment in favor of Light-Path on the ground that the Investors failed to produce evidence that they suffered damages?
Personal Jurisdiction
• Did the trial court properly conclude that it could exercise personal jurisdiction over D.H. Blair?

The Investors do not challenge the trial court’s dismissal of their breach-of-fiduciary-duty claim.

IY. Standards of Review

In reviewing a traditional motion for summary judgment, we take as true all evidence favorable to the nonmovant, and we make all reasonable inferences in the nonmovant’s favor. Dolcefino v. Randolph, 19 S.W.3d 906, 916 (Tex.App.-Houston [14th Dist.] 2000, pet. denied). If the movant’s motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. Id.

In reviewing a no-evidence motion for summary judgment, we ascertain whether the nonmovant pointed out summary-judgment evidence of probative force to raise a genuine issue of fact as to the essential elements attacked in the no-evidence motion. Id.; Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 206-08 (Tex.2002). We take as true all evidence favorable to the nonmovant, and we make all reasonable inferences therefrom in the nonmovant’s favor. Dolcefino, 19 S.W.3d at 916. A no-evidence motion for summary judgment must be granted if the party opposing the motion does not respond with competent summary-judgment evidence that raises a genuine issue of material fact. Id. at 917.

V. Analysis

If the trial court was correct in its determination that summary judgment on all of the Investors’ claims is appropriate because the Investors suffered no damages, then it would not be necessary for this court to reach most of the Investors’ other issues. Therefore, we will focus on the issue of whether the evidence raises a genuine issue of material fact regarding the Investors’ alleged damages, after first addressing a liability issue.

A. Is there a genuine issue of material fact as to whether LightPath represented that the post-IPO value of the E shares would be five dollars per share?

The Investors assert that there is a genuine issue of material fact as to whether LightPath represented that the post-IPO value of the E shares would be five dollars per share. The Investors base this argument on the proxy solicitation letter that LightPath sent the Investors regarding the IPO (“Proxy Letter”) and alleged admissions by Danziger at her deposition that LightPath made such a representation. The Proxy Letter states:

We are pleased to inform you that LightPath has entered into a Letter of Intent for a “firm commitment” underwriting with New York City-based D.H. Blair Investment Banking Corporation for a public offering of LightPath Units. Each Unit will consist of one share of Class A Common Stock and two warrants, as explained in detail in the enclosed Notice and Proxy Statement....
The Board of Directors is very enthusiastic about this proposed [IPO]. The deal structure as proposed by the Letter of Intent, which is described in the enclosed Proxy Statement, with A shares and E shares and a $5.00 Unit Offering price, is not unusual for this type of “early stage company” financing. The Board is pleased with the small reduction in the aggregate number of shares held by current LightPath shareholders (10% from 5,500,000 to 5,000,000) and that, following the Offering and until warrants are exercised, the current shareholders as a group retain voting control over the affairs of our Company
The structure of this financing, as proposed by the Letter of Intent, is detailed in the enclosed Notice and Proxy Statement. The following summarizes the terms:
1.) 1.6 Million Units, consisting of one share of Class A Common Stock and two warrants, will be offered for a Unit price of $5.00 for a total of $8,000,000, with an option to the underwriter to sell an over-allotment of up to an additional 15% of the Units offered, or an additional 240,-000 Units. If the over-allotment is sold in full, the gross proceeds will be $9,200,000. Based on the $5.00 Unit price, the post-IPO market valuation is estimated at $33-34.2 Million depending upon the sale of the over-allotment.
6.) The Class E-l, E-2, and E-3 shares will automatically convert to Class A Common shares (on a one-for-one basis) upon the achievement by the Company of specific performance milestones (described in the enclosed Proxy Statement) which have been set by the underwriter and agreed to by the Company; they are based on discounted net profit targets from our Business Plan. The E shares may not be sold, assigned or transferred until converted to A shares. If certain milestones are not met, the corresponding Class E stock is subject to redemption in September, 2000.

The proxy statement enclosed with the proxy letter accurately stated the milestones that had to be met before any of the E shares would convert into A shares. It also stated that on September 30, 2000, all E shares not previously converted into A shares would be redeemed by LightPath for $.00001 per share.

After reviewing the record under the applicable standard of review, we conclude that there is no genuine issue of material fact as to whether the Proxy Letter contains a representation that E shares would have a five dollar per share value after the IPO. The Proxy Letter does not contain such a representation. The Proxy Letter states that the units to be sold in the IPO will consist of one A share and two warrants to purchase A shares, priced at five dollars per unit. The Proxy Letter states that the anticipated IPO would generate $8 million to $9.2 million depending on sale of the over-allotment. In the sentence that the Investors claim constitutes a representation that the E shares would have a value of five dollars per share, the Proxy Letter states that, based on an IPO price of five dollars per unit, “the post-IPO market valuation is estimated at $33 — 34.2 Million depending upon the sale of the over-allotment.” As a matter of law, this statement is not a representation that the E shares will be worth five dollars per share. The Proxy Letter does not state a value for the A shares or for the E shares. The Proxy Letter does not state who estimated “the post-IPO market valuation” of Light-Path to be $33 — 34.2 million. Using a five dollar per unit price, the sale of 1.6 million units would generate $8 million. The underwriter also had an option to sell an over-allotment of up to 240,000 more units, which would generate up to an additional $1.2 million. Even if one subtracts from this range the range of amounts that might be raised in the IPO, that would only indicate that, other than this amount, “the post-IPO market valuation” is estimated to be $25 million. The Proxy Letter and enclosed Proxy Statement state that the E shares may not be sold or assigned until converted into A shares and that they will not convert to A shares unless specific milestones are achieved. As a matter of law, the Proxy Letter does not contain a representation that the E shares would be worth five dollars a share.

The Investors assert that Danziger admitted at her deposition that LightPath made such a representation. At the time of her deposition, Danziger was no longer an officer of LightPath, although she was a director. First, the testimony in question consists of Danziger’s answers to questions from the Investors’ counsel regarding the Proxy Letter. Danziger does not testify regarding any allegation of the post-IPO value of the E shares not contained in the Proxy Letter. Second, Danziger states that she is not sure how the calculation of $38 — 34.2 million was done and that she does not remember the basis for it. Dan-ziger also states that the E shares were clearly not tradeable. In a series of leading questions, counsel for the Investors elicited affirmative answers from Danziger as to the following propositions:

• The old shareholders in the reverse stock split were going to get one million A shares at five dollars per share, which totals $5 million.
• $5 million of the $33 million valuation comes from the value of the old shareholders’ stock.
• $8 million would be generated from the IPO.
• Subtracting $5 million and $8 million from $33 million leaves $20 million, which divided by four million E shares is five dollars per E share.

Danziger then testified, in answer to leading questions, that the Proxy Letter stated that the E shares would have a value of five dollars per share. Although Danziger signed the Proxy Letter, her testimony more than five years later does not add words to the document. The Investors base their argument on deductions and inferences from the $33 — 34.2 million market valuation mentioned in the letter; however, at her deposition, Danziger stated she did not remember the basis of the calculation of $33 — 34.2 million. Furthermore, her admissions are not binding on LightPath as a judicial admission, and they are conclusory statements about the Proxy Letter that do not raise a genuine issue of material fact. See Coastal Transport Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex.2004) (stating that even unobjected-to conclusory testimony does not raise a fact issue); United States Fid. & Guar. Co. v. Carr, 242 S.W.2d 224, 228 (Tex.Civ.App.-San Antonio 1951, writ ref'd) (explaining that mere testimony is not intended as a waiver, stipulation, or judicial admission and that testimony is not a judicial admission). Therefore, the trial court correctly granted summary judgment as to the alleged misrepresentation by LightPath in the Proxy Letter that the E shares would have a post-IPO value of five dollars per share. In addressing the Investors’ arguments that they raised a genuine issue of material fact as to damages, we presume for the sake of argument that they raised a genuine issue of material fact as to their other allegations of fraud.

B. Is there a genuine issue of material fact regarding the Investors’ alleged rescission damages based on the testimony of Otto Meyers?

The Investors also assert that the deposition testimony of their expert Otto Meyers raises a genuine issue of material fact as to their alleged damages under the remedy of rescission. In his deposition, Meyers testified as follows:

• His calculations presume that there is a legal remedy of rescission under which the Investors would receive the payment for the number of E shares they tendered to LightPath based on the closing price of LightPath A shares the day before the tender.
• Under this model, Meyers testified that the holders of 483,593 E shares that were tendered to LightPath on September 27, 2000 would be entitled to rescission damages of $30,424,045 based on the closing price for A shares the previous day of $44,938 per share and based on an addition of 40 percent for attorney’s fees.
• Under this model, Meyers testified that the holders of 18,299 E shares that were tendered to LightPath on February 22, 2001 would be entitled to rescission damages of $ 458,061 based on the closing price for A shares the previous day of $17.88 per share and based on an addition of 40 percent for attorney’s fees.
• The Investors’ aggregate rescission damages are $30,882,105.

The remedy of rescission is supposed to return the Investors to their position before the alleged fraud. See Texas Capital Sec., Inc. v. Sandefer, 58 S.W.3d 760, 773-74 (Tex.App.-Houston [1st Dist.] 2001, pet. denied). Meyers does not calculate or otherwise account for the consideration, if any, that the Investors gave to receive the E shares. We conclude that, as a matter of law, the damages calculated by Meyers would not return the Investors to the positions they held before the IPO. Therefore, Meyers’ testimony does not raise a genuine issue of material fact as to the Investors’ alleged damages under a rescission remedy.

C. Is there a genuine issue of material fact regarding the Investors’ alleged rescission damages based on the testimony of William Nicoletti?

The Investors also assert that the deposition testimony of their expert William Nicoletti raises a genuine issue of material fact as to their alleged damages under the remedy of rescission. In his deposition, Nicoletti testified as follows:

• If the LightPath shareholders had known that there was no real chance that the E shares would convert or that D.H. Blair had valued the business at $5 million before the IPO, then they would not have approved the proposed recapitalization involving the IPO.
• If the LightPath shareholders failed to approve this transaction, then they would have renegotiated the terms of LightPath’s recapitalization with LightPath, and then LightPath would have to have renegotiated with D.H. Blair.
• Nicoletti does not know that it would have been practical for LightPath to have negotiated with all of its shareholders, but he believes LightPath would have negotiated with some of the influential shareholders. Other than Dr. Michael Reardon, Nicoletti does not know who the influential shareholders of LightPath were, but he knows that LightPath knew who they were.
• It is reasonable to assume that an appropriate compromise in this renegotiation would have been for Light-Path and D.H. Blair to agree that one Class A warrant would be issued for each A share held prior to the IPO.
• Nicoletti bases his damage calculation on the presumption that each Investor would have received a Class A warrant in the renegotiated IPO. Then, he calculates the value of that warrant by presuming that the Investors would have exercised the warrant just before the redemption date of February 9, 2000, when LightPath A shares were trading at $33 per share.
• Based on an exercise price of $6.50 per warrant, each warrant holder would realize a profit of $26.50 per warrant, plus, under the terms of the Class A warrant, they also would receive a Class B warrant.
• Nicoletti presumes the Investors would have exercised their Class B warrant just before the June 13, 2000 redemption date for these warrants.
• Under this calculation, Nicoletti determined that each holder of an A share should be awarded $50.25 based on the value of the Class A warrant that he believes they would have received in the renegotiated transaction.

As noted, the remedy of rescission is supposed to return the Investors to their position before the alleged fraud. See Texas Capital See., Inc., 58 S.W.3d at 773-74. Nicoletti does not calculate or otherwise account for the consideration, if any, that the Investors gave to receive the E shares. We conclude that, as a matter of law, the damages calculated by Nicoletti would not return the Investors to the positions they held before the IPO. See id. Therefore, Nicoletti’s testimony does not raise a genuine issue of material fact as to the Investors’ alleged damages under a rescission remedy.

Furthermore, Nicoletti piles speculation upon speculation. He presumes that the LightPath shareholders would have rejected the proposed IPO absent the alleged fraud, yet he testified that, at the time of his deposition, he had not yet talked to any LightPath shareholder or to any of the Investors. There is no evidence in our record that Nicoletti ever talked to any of the LightPath shareholders at any time. Nicoletti also speculates that some of the influential LightPath shareholders would have negotiated with LightPath for a transaction involving the receipt of Class A warrants and that D.H. Blair would have agreed. Again, there is no evidence that Nicoletti talked to any LightPath shareholder, and he testified that the only influential shareholder he knew of was Dr. Michael Reardon. Nicoletti continues his speculation by presuming that, over a five-year period during which, under his analysis, the Investors could have exercised their warrants, the Investors, in fact, would have exercised their warrants at the end of this period in February 2000. He further speculates that the Investors would have exercised their Class B warrants in June 2000. Nicoletti’s testimony rests on one fragile assumption after another. It would be speculative as a matter of law to award the Investors the damages calculated by Nicoletti. See Formosa Plastics Corp. USA v. Presidio Eng’rs and Contractors, Inc., 960 S.W.2d 41, 49-50 (Tex.1998).

The Investors also cite different calculations by Nicoletti of purported rescission damages. These calculations are substantially similar to Meyers’s testimony. They presume that all of the Investors’ E shares would have converted to A shares and values these shares based on the date in 2000 on which the Investors demanded rescission. This testimony does not raise a genuine issue of material fact for all of the reasons stated in section V. B., above, as to Meyers’s testimony.

Nicoletti also testified regarding a damage calculation based on the highest intermediate value of the A shares — $65.31 in the first quarter of 2000. Nicoletti himself testified that it would not be reasonable to presume that the Investors would have exercised their warrants and then sold their A shares at the highest price. On appeal, the Investors do not rely on this damage testimony, although they urge the applicability of the highest intermediate value in an equitable rescission remedy. To the extent the Investors rely on a highest-intermediate-value theory as part of their alleged equitable rescission remedy, there is no sound basis to apply such a theory. The Texas cases cited by the Investors which allegedly apply the “highest intermediate value” theory of damages are conversion cases and are not applicable to the facts of this case. See Gallagher v. Jones, 129 U.S. 193, 200, 9 S.Ct. 335, 336, 32 L.Ed. 658 (1889) (holding that the measure of damages action against- a broker for conversion of his principal’s stocks is the highest intermediate value reached by the stocks between the time of sale and a reasonable time after the owner has received notice of it to enable him to replace the stocks); Reed v. White, Weld & Co., Inc., 571 S.W.2d 395, 397-98 (Tex.Civ.App.-Texarkana 1978, no writ) (holding that damages for wrongful sale of stocks or bonds is highest intermediate value of stock or bonds between time of its conversion and reasonable time after owner has received notice of conversion to enable him to replace stock).

We have found no Texas case applying “highest intermediate value” theory as part of a rescission remedy in a securities fraud case. The federal securities fraud case that the Investors cite does not apply a “highest intermediate value” theory; rather, it allows the jury to determine a reasonable time in the future when the claimants would have sold their stock, not necessarily the highest value of the stock. See Dupuy v. Dupuy, 551 F.2d 1005, 1024-25 (5th Cir.1977) (holding that in a Rule 10b-5 case, a defrauded seller of corporate stock may generally recover difference between price for which he sold his stock and price he would have received absent misrepresentation or omission; if the jury decides he would not have consummated sale, it may then award difference between sale price and value of stock at a reasonable time in the future). In any event, in light of the Texas Supreme Court’s analysis in Miga v. Jensen, we decline to embrace the “highest intermediate value” theory of rescission advocated by the Investors. See 96 S.W.3d 207, 213-17 (Tex.2002).

In Miga, defendant Jensen gave his employee, plaintiff Miga, an option to buy stock in Pacific Gateway Exchange (“PGE”). See id. at 209. The relationship between Jensen and Miga deteriorated, and Miga signed a “termination agreement.” Id. For nine months after his termination, Miga tried to exercise the PGE option. Id. Each time, Jensen refused and stated that Miga had released the option. See id. Miga then sued to recover for damages resulting from Jensen’s refusal to honor the option. Id. Jensen argued that contract damages must be limited to the value of the PGE stock at the time Miga “resigned.” Id. The jury found for Miga on all issues and awarded Miga “lost profits.” The court of appeals upheld the “lost profits” award, reasoning that the Texas Supreme Court’s decisions in Randon v. Barton and Calvit v. McFadden support measuring Miga’s damages as the option’s highest market value between the date of the breach and trial because Miga could not easily obtain PGE stock elsewhere at the time of the breach. See Randon v. Barton, 4 Tex. 289, 293 (1849) (applying an exception to the general rule and allowing damages for the highest value of the article between the time of trial and the time of breach because the purchasers had paid the contract price in advance); Calvit v. McFadden, 13 Tex. 324, 325-26 (1855) (applying the exception to the general rule to the sale of personal property when the purchase price was paid in advance).

The Texas Supreme Court rejected this position and found that the Randon damages measure (assuming that it is viable today) was inapplicable to the facts in Miga. See Miga, 96 S.W.3d at 215. For example, Miga did not pay in advance for his stock interest. The Miga court held that the value of stock should be measured at the time of breach, rather than sometime in the future. Id. The Texas Supreme Court opined:

It was far from certain in December 1994 that the value of the stock would appreciate as it did. While Jensen ultimately benefitted from this appreciation, he also assumed the risk that the investment would be lost, just as any stockholder does. To award Miga damages based on the appreciated value of the stock would be to make him better off than he would have been had the agreement been honored by giving him an investment free of the risks other shareholders undertook. More importantly, however, trying to determine what part of the stock’s appreciation Miga would have realized had he obtained the stock in December 1994 is to speculative.

Id. at 216-17. Similarly, to award Investors the alleged “highest intermediate value” of the E shares as if they had been converted to A shares is too speculative. See id. Nicolleti’s damage calculations based on stock prices in 2000 would provide the Investors with the windfall yielded from a riskless investment in a high-risk field. See id.

In sum, we conclude that the Nico-letti evidence does not raise a genuine issue of material fact as to the Investors’ alleged damages. The Investors’ claims for fraud, statutory fraud under Section 27.01 of the Texas Business and Commerce Act, securities fraud under the Texas Securities Act, and negligent misrepresentation all have the essential element of damages, and LightPath attacked this essential element in a no-evidence ground. After viewing the evidence under the applicable standard of review, we conclude that the trial court correctly determined that the summary-judgment evidence does not raise a genuine issue of material fact as to this essential element of damages. There can be no recovery for damages that are speculative or conjectural. A.B.F. Freight Sys., Inc. v. Austrian Import Serv., Inc., 798 S.W.2d 606, 615 (Tex.App.-Dallas 1990, writ denied). Ignoring the legally insufficient damage testimony from Meyers and Nicoletti, there is no genuine issue of material fact as to whether the Investors sustained damages. See Cohen v. Arthur Andersen, L.L.P., 106 S.W.3d 304, 305-07 (Tex.App.-Houston [1st Dist.] 2003, no pet.) (holding that trial court correctly granted summary judgment based on no-evidence ground in fraud case). Accordingly, we overrule the Investors’ issue in this regard, and we need not reach their other issues, except for the issue of the trial court’s ability to exercise personal jurisdiction over D.H. Blair.

D. Have the Investors’ waived their issue as to the trial court’s ability to exercise personal jurisdiction over D.H. Blair?

In their final issue, the Investors assert that the trial court correctly denied the special appearance of defendant D.H. Blair. The Investors note that this court already has held to the contrary in the prior interlocutory appeal. See D.H. Blair Inv. Banking Corp., 97 S.W.3d at 278-79. However, the Texas Supreme Court determined that it did not have jurisdiction over that interlocutory appeal, and the Investors want to preserve error in this court so that they can seek review of this jurisdie-tional issue in the Texas Supreme Court following our decision in this case.

In response, D.H. Blair argues that the Investors have waived their appellate issue by failing to provide any argument or authorities. See Tex.R.App. 38.1(h). The Investors, however, already have briefed these very issues in their prior interlocutory appeal involving the same parties and jurisdictional arguments. Moreover, they assert that, for purposes of economy, they have incorporated by reference their trial court briefing on this issue. The appellate record in this case contains the jurisdictional briefing in the trial court, as well as this court’s mandate and opinion from the prior interlocutory appeal, in which the Investors provided argument and authorities on these jurisdictional issues. We construe briefing rules reasonably yet liberally, so that the right to appeal is not lost by imposing requirements not absolutely necessary to effect the purpose of a rule. See Republic Underwriters Ins. Co. v. Mex.-Tex Inc., 150 S.W.3d 423, 427 (Tex.2004); Tex. Mexican Ry. Co. v. Bouchet, 963 S.W.2d 52, 54-55 (Tex.1998). Under the unusual circumstances of this case and given that the Investors simply seek to preserve their ability to seek review in the Texas Supreme Court, we conclude that the Young v. Neatherlin case is not on point and that the Investors have not waived their issue regarding the trial court’s ability to exercise personal jurisdiction over D.H. Blair. See 102 S.W.3d 415, 423 (Tex.App.-Houston [14th Dist.] 2003, no pet.) (indicating that parties cannot incorporate by reference briefing from another case into their appellate brief).

Nevertheless, because we conclude that this court’s prior opinion as to this issue was not clearly erroneous, we overrule this issue under the law-of-the-case doctrine. See Briscoe v. Goodmark Corp., 102 S.W.3d 714, 716-17 (Tex.2003).

VI. Conclusion

The trial court correctly granted summary judgment as to the alleged misrepresentation by LightPath in the Proxy Letter that the E shares would have a post-IPO value of five dollars per share. Therefore, that alleged misrepresentation cannot provide a basis for the Investors’ alleged damages. Under the applicable standard of review, the damage evidence upon which the Investors rely is speculative, conclusory, and does not raise a genuine issue of material fact as to the essential element of the Investors’ alleged damages. Having concluded that the Investors did not establish a genuine issue of material fact as to damages, we overrule the Investors’ issue in this regard. Under the law-of-the-case doctrine, we overrule the Investors’ issue regarding the trial court’s ability to exercise personal jurisdiction over D.H. Blair. Given these rulings, it is not necessary to reach the Investors’ remaining issues. We affirm the trial court’s judgment.

      . Following a l-to-5.5 reverse stock split, a shareholder with ninety-nine pre-split shares would have eighteen post-split shares, but both her share of ownership of the company and the total worth of her investment would remain the same. See Reiss v. Fin. Performance Corp., 97 N.Y.2d 195, 738 N.Y.S.2d 658, 764 N.E.2d 958, 960 (2001).

      . Therefore, we need not address the Investors’ argument that the trial court erred in granting a no-evidence summary judgment as to their damages based on their alleged benefit-of-the-bargain damages arising from this alleged misrepresentation.

      . Our record contains no affidavit or expert report from Meyers.

      . LightPath argues the Investors gave no consideration; whereas, the Investors claim the consideration was their consent to have their percentage ownership in LightPath diluted by the IPO transaction. We need not address these arguments.

      . The Investors do not assert that Meyers's testimony raises a genuine issue of material fact as to any alleged benefit-of-the-bargain damages; however, even if this argument were before us, we would reject it. It would be speculative as a matter of law to award the Investors damages as if all of their E shares had converted. Formosa Plastics Corp. USA v. Presidio Eng’rs and Contractors, Inc., 960 S.W.2d 41, 49-50 (Tex.1998). The Investors do not allege that LightPath induced them to approve the IPO transaction by representing that the E shares were certain to convert to A shares. Rather, in their live petition they allege LightPath "represented that if, after the IPO, LightPath achieved certain financially related milestones, the old shareholders would receive a share of common stock for each E-share, on a one-to-one basis.” The Investors further allege LightPath represented that "the E shares, although contingent, had a real and certain value and were not just a speculative gamble in the future.” Although the Investors do allege that, after the IPO had been consummated, Danziger told an E shareholder that the milestones were sure to be met, this alleged statement could not have induced any of the Investors to approve the transaction. Although the Investors allege that LightPath represented that the chances of conversion were much higher than LightPath allegedly knew they were, a very high chance of conversion is not the same as a certainty of conversion. Therefore, even under a benefit-of-the-bargain measure of damages, it would be inappropriate to award the Investors damages as if all of their E shares had converted to A shares.

      . The Investors do not assert that Nicoletti’s testimony raises a genuine issue of material fact as to any alleged benefit-of-the-bargain damages; however, even if this argument were before us, we would reject it. Benefit-of-the-bargain damages seek to compensate the defrauded party for the profits that would have been made if the bargain had been performed as expected. Formosa, 960 S.W.2d at 50. There is no evidence that LightPath represented to the Investors that they would -receive warrants as part of the IPO transaction. Therefore, Nicoletti’s testimony does not raise a genuine issue of material fact as to any alleged benefit-of-the-bargain damage theory.

      . In the trial court, the Investors cited other conversion cases. See De Shazo v. Wool Growers Central Storage Co., 139 Tex. 143, 162 S.W.2d 401, 404 (1942) (holding in a wrongful conversión of wool, the measure of damages is the highest market value of such property between the dates of conversion and the filing of the suit); Patterson v. Wizowaty, 505 S.W.2d 425, 427 (Tex.Civ.App.-Houston [14th Dist.] 1974, no writ) (finding that the appropriate measure of damages in a fraudulent stock conversion suit is the highest market value between the date of the conversion and the filing of the suit).

      . The Texas Securities Act provides a specific civil liability for those who fraudulently sell securities. See Tex.Rev.Civ. Stat. Ann. art. 581, § 33 (Vernon Supp.2004). Under this statute, a defrauded party "may sue either at law or in equity for rescission, or for damages if the buyer no longer owns the security.” Id., § 33(a)(2). The damages that a defrauded buyer may recover consist of the consideration paid for the security plus interest from the date of payment, less the greater of the value or the actual consideration received from the security when the buyer disposed of it. Id. § 33(d)(3).

      . Although the Investors also have asserted claims for statutory fraud and negligent misrepresentation, these fraud-based claims do not expand their potential recovery of damages or change the above analysis.

      . LightPath did not attack, and we do not address, any essential element of causation or reliance. Likewise, we do not base our opinion on any argument as to the admissibility of the expert testimony of Meyers or Nicoletti.


text:
    The STATE of Texas, Appellant, v. James Clive BELCHER, Appellee.
    Nos. 14-04-00968-CR, 14-04-00969-CR.
    Court of Appeals of Texas, Houston (14th Dist.).
    Oct. 27, 2005.
    Rehearing Overruled Jan. 19, 2006.

      Joel H. Bennett, Galveston, for appellant.
    Louis McCarnes, Galveston, for appel-lee.

      Panel consists of Chief Justice HEDGES and Justices FOWLER and FROST.
   OPINION

KEM THOMPSON FROST, Justice.

This is an appeal by the State of the trial court’s order granting appellee James Clive Belcher’s motion for new trial. The State’s only argument on appeal is that the trial court erred in granting Belcher’s motion for new trial because Belcher allegedly did not show properly preserved error that would have entitled him to reversal of his conviction on appeal had the trial court not granted a new trial. Because this argument is premised on an incorrect standard of review and otherwise lacks merit, we overrule the State’s only challenge on appeal and affirm the trial court’s order.

I. Factual and Procedukal Background

Belcher was charged with aggravated robbery and aggravated kidnapping. At his trial on these charges, the trial court shuffled the jury panel before voir dire began. Prior to the jury shuffle, Belcher informed his counsel that he knew panel member David Elliott. Belcher’s counsel made a notation on his prospective juror list to strike Elliott from the panel. During voir dire, Belcher’s counsel asked the panel if anyone knew Belcher. One prospective juror, Melinda Bahr, raised her hand and was then asked specific questions regarding her acquaintance with Bel-cher. Elliott did not raise his hand, and Belcher’s counsel did not ask him any specific questions. Belcher’s counsel unsuccessfully moved to strike Bahr for cause and then requested an additional peremptory challenge to use against her. The trial court denied both requests.

After both sides concluded questioning of the venire members, the trial court ordered a recess to allow the parties and their counsel to decide how to exercise their peremptory strikes and to present these strikes to the court. As sheriffs deputies were escorting Belcher and his counsel to a location where Belcher could confer with his counsel about the peremptory strikes, Belcher and one of the deputies had a confrontation. The deputy with whom Belcher had the confrontation obtained a stun belt and attached it to Belcher’s body. Although Belcher did not act in an aggressive or threatening manner, shortly after the stun belt was attached, one of the deputies accidentally activated the stun belt and stunned Bel-cher. Because he had been stunned, Bel-cher was not able to confer with his counsel in deciding how to exercise his peremptory strikes.

Venire member Elliott was not stricken either for cause or peremptorily. When the jury was seated, the judge asked if there were any objections to the jury being sworn, and Belcher’s counsel did not object. At some point at the beginning of trial, Belcher informed his counsel that Elliott was on the jury. Because he had been stunned, Belcher did not notice that his counsel had failed to exercise a peremptory strike against Elliott until the jury had been sworn and the first witness had been called. Belcher’s counsel thereafter informed the trial court that Belcher and Elliott knew each other. Belcher’s counsel told the court that he had failed to notice that Elliott was going to be seated on the jury until after he was actually seated on the jury. The following morning, the trial court permitted defense counsel to question Elliott outside the presence of the jury. Elliott denied that he knew Belcher. Belcher and Belcher’s girlfriend both testified that Belcher and Elliott had gone to school together and knew each other. Belcher’s counsel requested to continue the trial with eleven jurors, but the trial court denied this request.

Trial proceeded, and the jury convicted Belcher of both aggravated robbery and aggravated kidnapping. On May 17, 2000, the trial court sentenced Belcher to thirty years’ confinement in the Institutional Division of the Texas Department of Criminal Justice. On May 24, 2000, Belcher filed a motion for new trial. On June 16, 2000, he filed an amended motion for new trial. Belcher filed both of these pleadings timely.

On July 27, 2000, the trial court held an evidentiary hearing on this motion for new trial in which all of the facts and cireum-stances surrounding the motion for new trial were addressed. On August 1, 2000, the trial court attempted to grant Bel-cher’s motion for new trial; however, the court no longer had authority to do so because the motion had been overruled by operation of law the day before, which was the seventy-fifth day after the trial court imposed sentence. See Tex.R.App. P. 21.8(a), (c). The State appealed this order, and this court vacated it based on the trial court’s lack of authority. See State v. Belcher, Nos. 14-00-01197-CR & 14-00-01198-CR, 2001 WL 306181 (Tex.App.-Houston [14th Dist.] Mar. 29, 2001, pet. ref'd) (not designated for publication).

On Belcher’s first appeal, this court, in a plurality decision, held that, based on the ineffective assistance of Belcher’s trial counsel, Belcher was entitled to a new hearing on his motion for new trial. See Belcher v. State, 93 S.W.3d 593, 600-01 (Tex.App.-Houston [14th Dist.] 2002 pet. dism’d) (order based on plurality decision).

After a second hearing on Belcher’s motion for new trial, the trial court granted Belcher a new trial based on the improper seating of Elliott on the jury. In its order, the trial court explained the impropriety in seating Elliott on the jury as follows: (1) the testimony of Curtis Crumby makes it clear that Elliott was not truthful when he failed to respond to Bel-cher’s counsel’s question of whether any of the venire members knew Belcher; (2) Elliott’s failure to be truthful deprived Bel-cher’s counsel of the opportunity to explore any bias Elliott had; (3) Belcher’s counsel, by his own admission, erred in failing to use a peremptory strike against Elliott after being instructed to do so by Belcher; and (4) Belcher was accidentally stunned by a stun belt he was wearing, depriving Belcher of his right to be present at trial while the peremptory strikes were being exercised and preventing him from participating in an important phase of the trial, probably contributing to his lawyer’s error in failing to exercise a peremptory strike against Elliott. The State filed this appeal.

II. STANDARD OF REVIEW

The granting of a new trial rests within the sound discretion of the trial court. Lewis v. State, 911 S.W.2d 1, 7 (Tex.Crim.App.1995); State v. Gonzalez, 855 S.W.2d 692, 696 (Tex.Crim.App.1993) (four-justice plurality op.). An appellate court will reverse the trial court’s decision only when that decision is so clearly wrong as to lie outside the zone in which reasonable persons might disagree. See Gonzalez, 855 S.W.2d at 695 n. 4. An appellate court is not to substitute its judgment for that of the trial court; rather the appellate court’s role is to examine the record to determine whether the trial court granted a new trial without reference to any guiding rules or principles or, in other words, whether the trial court’s decision was arbitrary or unreasonable. See Lewis, 911 S.W.2d at 7. The appellate court is to presume the trial court correctly granted a new trial, and the State has the burden to establish the contrary. See Lee v. State, 167 Tex.Crim. 608, 322 S.W.2d 260, 262 (1958). If no findings of fact or conclusions of law were made or requested by the trial court, the trial court’s judgment granting a new trial must be upheld if any appropriate ground exists to support it. State v. Read, 965 S.W.2d 74, 77-78 (Tex.App.-Austin 1998, no pet.).

III. Analysis

A. For the trial court to have properly granted Belcher’s motion for new trial, did Belcher have to show properly preserved error that would have entitled him to reversal on appeal from his conviction had the trial court not granted a new trial?

The State’s sole argument on appeal is that the trial court erred in granting a new trial because Belcher did not show properly preserved, reversible error under the legal standard enunciated in Gonzales v. State, 3 S.W.3d 915, 916-17 (Tex.Crim.App.1999). In its appellate brief, the State never mentions the abuse-of discretion standard of review that we must apply in favor of the trial court’s granting of a new trial. Further, the State does not cite any cases involving an appeal from a trial court’s granting of a motion for new trial. The State fails to mention that, because Belcher prevailed on his motion for new trial in the court below, we must presume the trial court resolved any disputed fact issues in Belcher’s favor, and we are required to defer to these implied findings of fact, if supported by evidence in the record. See State v. Mu noz, 991 S.W.2d 818, 821 (Tex.Crim.App.1999). None of the cases cited by the State hold that a trial court may grant a new trial only after the movant shows error that would require reversal upon appeal from the conviction in question. The State’s argument misses the mark by equating the standard of review on direct appeal from a conviction with the trial court’s exercise of discretion in determining whether to grant a motion for new trial.

In State v. Gonzalez, the Texas Court of Criminal Appeals affirmed the intermediate court’s affirmance of a new-trial order. See Gonzalez, 855 S.W.2d at 693. In that case Gonzalez did not show error that would require reversal upon appeal from the conviction in question. See id. at 693-94. Rather, Gonzalez simply showed that the testimony of a missing witness — his uncle — could have had a substantial impact on the trial court’s sentencing decision and that his uncle was unable to testify at the original sentencing hearing. See id. The trial court determined that it was in the interest of justice to grant Gonzalez a new trial and to hear the uncle’s testimony at a new sentencing hearing. See id. There is no mention in the Gonzalez opinion that Gonzalez exercised due diligence, was unable to obtain his uncle’s testimony by affidavit or other means, or that Gonzalez sought postponement of the sentencing hearing so that his uncle could be present. See id. In Gonzalez, had the trial court denied the motion for new trial and had Gonzalez appealed, there would have been no reversible error based on the uncle’s failure to testify at the sentencing hearing. See id.

Furthermore, the Gonzalez opinion approves the intermediate court’s reasoning in relying on two civil cases for the proposition that a trial court, in its discretion, may grant a new trial in the interest of justice. See id. at 694 (citing State v. Gonzalez, 820 S.W.2d 9, 11 (Tex.App.-Dallas 1991), aff'd, 855 S.W.2d 692 (Tex.Crim.App.1993) and approving of the intermediate court’s reliance on Champion Int’l Corp. v. Twelfth Court of Appeals, 762 S.W.2d 898, 899 (Tex.1988) and Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 918 (Tex.1985)). In the two civil cases cited in Gonzalez, the trial court granted a new trial without any finding that reversible error had occurred, and there is no indication that the reason for granting the new trial would have constituted reversible error on appeal if a new trial had not been granted. See Champion Int’l Corp., 762 S.W.2d at 899; Johnson, 700 S.W.2d at 918. Other courts of appeals also have held that the existence in the record of reversible error is not a prerequisite for granting a new trial. See State v. Kelley, 20 S.W.3d 147, 155 (Tex.App.-Texarkana 2000, no pet.) (holding that, even though record did not show any harm from trial counsel’s deficient performance in failing to object to seating of juror as to whom counsel had exercised a peremptory strike, trial court still had discretion to grant a new trial based on trial counsel’s deficient performance in this regard); State v. Trevino, 930 S.W.2d 713, 716 (Tex.App.-Corpus Christi 1996, pet. ref'd) (holding reversible error need not be shown as to trial court’s charge, which omitted an accomplice-witness instruction, for the trial court to have discretion to grant a new trial).

It would be improper to analyze this case as if it were an appeal from a conviction, rather than an appeal from the granting of a new trial. Even if on appeal from a conviction Belcher would not have been able to obtain a reversal based on the seating of Elliott on the jury, this does not mean that the trial court abused its discretion in granting a new trial. Therefore, the State’s only argument on appeal lacks merit.

B. Did the trial court abuse its discretion in granting a new trial?

Although we have rejected the State’s only argument on appeal, we note that, even if the State had argued that the trial court abused its discretion in granting Belcher a new trial, the result would not be different. For at least 130 years, Texas trial courts have had the discretion to grant new trials in the interest of justice. See Gonzalez, 855 S.W.2d at 694; Mullins v. State, 37 Tex. 337, 339-40 (1872) (holding of the Texas Supreme Court exercising criminal jurisdiction). The discretion of a Texas trial judge to order a new trial when she concludes the trial over which she has presided has resulted in a miscarriage of justice is an important part of our judicial system. See Gonzalez, 855 S.W.2d at 694 (citing with approval statement by Mullins court that discretion of district courts to grant new trials is a crucial protection that these courts should not hesitate to use whenever justice has not been attained); Trevino, 930 S.W.2d at 716 (stating that, when a trial judge determines that justice has not been done, that judge has not only the power but also the obligation to order a new trial and that, since appellate courts lack this power, it is imperative that the trial judge exercise this power when necessary).

As detailed above, viewing the evidence in favor of the trial court’s ruling, the trial court was presented with an unusual fact pattern:

• Belcher knew Elliott as a childhood friend, and Elliott would know about Belcher’s past criminal activity. Nonetheless, when Belcher’s counsel asked the venire members if any of them knew Belcher, Elliott did not raise his hand, and later he specifically stated under oath that he did not know Belcher.
• Belcher instructed his counsel to exercise a peremptory strike against Elliott, and Belcher’s counsel, by his own admission, erred in not carrying out his client’s instructions to exercise a strike against Elliott.
• As Belcher was going to confer with his trial counsel about how Belcher should exercise his peremptory strikes, one of the deputies accidentally activated the stun belt that had been attached to Belcher’s body, thus stunning Belcher. Because he had been stunned, Belcher was not able to confer with his counsel in deciding how to exercise his peremptory strikes, and Belcher did not notice that his counsel had failed to exercise a peremptory strike against Elliott until the jury had been sworn and the first witness had been called.

This was not a typical voir dire. Viewing the evidence under the applicable standard of review, Juror Elliott was not truthful, and despite Belcher’s instruction to exercise a peremptory strike against Elliott, Belcher’s counsel mistakenly failed to do so. Furthermore, Belcher was unable to point out his counsel’s mistake or remind his counsel to exercise a peremptory-strike against Elliott because Belcher was stunned just before the peremptory-strike phase of voir dire.

One of the most basic rights guaranteed by the Confrontation Clause is the defendant’s right to be present at every stage of his trial. Illinois v. Allen, 397 U.S. 337, 338, 90 S.Ct. 1057, 1058, 25 L.Ed.2d 353 (1970). Although physically present, Belcher was incapacitated and unable to participate in an important part of his trial — the exercise of his -peremptory strikes. Belcher’s accidental stunning also interfered with his ability to confer with his counsel during the exercise of his peremptory strikes. See United States v. Durham, 287 F.3d 1297, 1305-06 (11th Cir.2002) (noting court’s serious concern regarding stun belt’s capacity to disrupt defendants’ constitutional rights to be present at trial and to participate in their defense). One federal court of appeals has stated that the accidental triggering of a defendant’s stun belt during trial “would be an egregious breach of both appropriate courtroom decorum and [the defendant’s] most fundamental trial rights.” See id. at 1307.

Based on the unusual facts and circumstances that led to the seating of Elliott on the jury, the trial court did not abuse its discretion in granting Belcher a new trial. See Kelley, 20 S.W.3d at 155 (holding that, even though record did not show any prejudice from trial counsel’s deficient performance in failing to object to seating of juror as to whom counsel had exercised a peremptory strike, trial court still had discretion to grant a new trial based on trial counsel’s deficient performance in this regard); State v. Gill, 967 S.W.2d 540, 542-43 (Tex.App.-Austin 1998, pet. ref'd) (holding trial court did not err in granting new trial in interest of justice because evidence showed the integrity and reliability of the trial had been undermined by defense counsel’s health problems, senility, hearing loss, and reduced vision, regardless of whether defense counsel’s conduct violated both prongs of the Strickland test for ineffective assistance of counsel); Trevino, 930 S.W.2d at 716 (holding that trial court did not abuse its discretion in granting new trial based on unobjected-to failure of jury charge to contain accomplice-witness instruction). We overrule the State’s sole issue on appeal.

IV. Conclusion

To prevail on his motion for new trial, Belcher did not have to prove to the trial court that properly preserved error occurred during his trial that would entitle him to reversal on appeal from his conviction. Because the State’s argument is premised on an incorrect standard of review and is without merit, we overrule the State’s sole issue and affirm the trial court’s order granting a new trial. The unusual facts of this case show that the trial court’s decision to grant Belcher a new trial was not so clearly wrong as to lie outside the zone in which reasonable persons might disagree.

      . A stun belt is a device placed around a defendant’s midsection that uses an electric shock to temporarily disable the defendant if his actions pose a security threat. The belt is controlled by a remote device held by a security official in the courtroom. If the belt is activated, the defendant will receive a powerful electric shock sufficient to temporarily incapacitate him. See United States v. Durham, 287 F.3d 1297, 1301 (11th Cir.2002).

      . Because Belcher prevailed in the trial court on his motion for new trial, we must presume the trial court resolved any disputed fact issues in Belcher’s favor, and we are required to defer to these implied findings of fact as long as the record supports them. See State v. Munoz, 991 S.W.2d 818, 821 (Tex.Crim.App.1999). In any event, the State has not asserted in the trial court or on appeal that Belcher was not stunned, and a sheriff’s deputy corroborated Belcher’s testimony by testifying at the new-trial hearing that he saw Belcher being stunned by the stun belt when one of the other deputies accidentally flipped both of the switches on the stun belt’s control box.

      . This court abated Belcher's appeal pending the second new trial hearing; however, after the trial court granted Belcher a new trial, we dismissed Belcher’s appeal as moot. See Belcher v. State, Nos. 14-00-00811-CR & 14-00-00812-CR, 2004 WL 1946073 (Tex.App.Houston [14th Dist.] Sept. 2, 2004, no pet.) (not designated for publication).

      . Curtis Crumby went to the same high school as Belcher and Elliott, and he used to be the next-door neighbor of Belcher in the 1970s.

      . Indeed, several statements the State makes contradict this standard of review. For example, the State mentions an alleged statement by Belcher that he and Elliott were best friends, and the State asks the court to consider how Belcher could have been harmed by having his best friend on the jury. However, Belcher also testified that Elliott was the best friend of Belcher's next-door neighbor during childhood and that Belcher and Elliott were childhood friends. Belcher also testified that Elliott would know about his prior conviction and eight-year sentence for aggravated assault. The State also asserts that, if we believe Elliott, then Belcher and Elliott never knew each other. However, we presume the trial court found the facts in favor of its ruling, and there is evidence to support the trial court’s implied findings. See Munoz, 991 S.W.2d at 821.

      . Elliott’s untruthfulness makes it unlikely that any additional questioning of Elliott during voir dire would have produced evidence sufficient to justify striking him for cause.

      . Having apparently come to the conclusion that Elliott had not been truthful in order to serve on the jury, the trial court reasonably may have concluded that this cast serious doubt on whether Elliot was an unbiased member of the jury.

      . The State has not argued on appeal that the trial court granted a new trial based on a ground not asserted in the motion for new trial, so that issue is not before us. Even if it were, presuming for the sake of argument that a trial court granting a motion for new trial is limited to the grounds stated in the motion, the trial court granted a new trial based on injustice regarding the seating of Elliott on the jury, which was a ground asserted in the motion for new trial. The motion for new trial alleged sufficient grounds to apprise the trial court and the State as to why Belcher believed he was entitled to a new trial. See Gonzalez, 855 S.W.2d at 694-95.