Opinion
CIVIL ACTION NO. 3:00-CV-0800-G
March 15, 2001
MEMORANDUM ORDER
Before the court is the motion of the plaintiff, Century Products Company ("Century" or "the plaintiff"), for summary judgment on its claim against the defendant, Cosco, Inc. ("Cosco" or "the defendant"). For the reasons discussed below, the summary judgment motion is granted in part and denied in part.
I. BACKGROUND
On August 19, 1998, Century and Cosco entered into an asset purchase agreement (the "Agreement"), whereby Cosco acquired from Century substantially all of the assets of the Okla Homer Smith Manufacturing Company (the "OHS Unit"), a business unit of Century. See Appendix to Century Products Company's Brief in Support of Motion for Summary Judgment ("Plaintiff's Appendix") at 6-53. The transaction evidenced by the Agreement closed on August 31, 1998 (the "Closing Date"). See id. at 140. Pursuant to Section 3.1(d) of the Agreement, Cosco expressly assumed all of the liabilities and obligations of the OHS Unit relating to injury, death, or damages to persons or property resulting from the ownership, possession, or use of products sold or manufactured by the OHS Unit before the Closing Date (the "Assumed Liabilities"), other than the Retained Liabilities (as defined in the Agreement). See id. at 18-19. Section 3.2(e) of the Agreement defines "Retained Liabilities" as including only those Pending Claims (as defined in the Agreement) set forth on Schedule 3.2(e). See id.
Among the Retained Liabilities set forth on Schedule 3.2(e) was a case styled Brown v. Sears Roebuck, et al., No. 97-CA-839-A, in the United States District Court for the Western District of Texas (the "Brown Claim"). See id. at 68. The Brown Claim involved an infant who was killed when a dresser tipped over on him. See id.; see also Century Products Company's Brief in Support of Motion for Summary Judgment ("Plaintiff's Summary Judgment Brief") at 3. In connection with the Brown Claim, on July 16, 1998, Harry Bates, counsel for the Brown Claim plaintiffs, took the deposition of Century's corporate representative, Dave Galambos. See Plaintiff's Appendix at 115-24. During Galambos' deposition, Bates referred to an alleged incident involving the death of another infant as a result of a chest of drawers falling on top of and suffocating him. See id. at 116-17. Specifically, Bates asserted that he had reviewed injury data provided by the Consumer Products Safety Commission ("CPSC"), and had found therein "a case that involves a four-drawer chest of drawers that fell over on an 11-month-old boy about 30 days before Andreas Brown was killed, and it killed him, and it involves one of your chest [sic] of drawers. . . ." Id. at 116. Galambos denied any knowledge of the alleged incident (the "Todtenbier Accident"). Id. When Bates asked Galambos if he could identify, from a photograph, the chest of drawers allegedly involved in the Todtenbier Accident, Galambos testified that he could not identify the chest of drawers in question as one manufactured by the OHS Unit. See id. at 117.
The record contains conflicting testimony on the question of when George Smith ("Smith"), the president of the OHS Unit at the time, became aware of and initiated an investigation into the Todtenbier Accident. Paula Reed ("Reed"), an OHS Unit employee responsible for monitoring customer complaints, testified in her affidavit that on or about July 16, 1998, Smith asked her if she was aware of an alleged incident involving the death of an infant in Arizona resulting from a chest of drawers "tip over." Affidavit of Paula Reed, attached as Exhibit 6 to Plaintiff's Appendix at 155. According to Reed, she told Smith that she was not aware of — and had not received any correspondence regarding — the alleged incident. See id. Reed testified that Smith asked her approximately two weeks later to review what appeared to be a CPSC report (the "CPSC Report") and a police report from the Chandler, Arizona Police Department (the "Police Report") (CPSC Report and Police Report collectively, the "Reports"). Id.
Reed testified in her affidavit that after reviewing the Reports she did not believe that the chest involved in the Todtenbier Accident was manufactured by the OHS Unit, because the dimensions were not consistent with a chest of drawers manufactured by the OHS Unit and because, according to the CPSC Report, the chest of drawers had been assembled by the owners. See id. at 126, 155-56. Reed further testified in her affidavit that she advised Smith that she did not believe the chest of drawers involved in the Todtenbier Accident had been manufactured by the OHS Unit. See id. at 156. In her deposition, however, Reed testified at one point that she told Smith that she " could not say for sure [whether] it [the chest of drawers] was ours or not because it was not the right size." See Transcript of Deposition of Paula Reed ("Reed Deposition") at 36, lines 1-5 (emphasis added), attached as Exhibit B to Cosco, Inc.'s Supplemental Response to Century Products Company's Motion for Summary Judgment and Sur-Reply to Century Products Company's Reply to Cosco's Response to Century's Motion for Summary Judgment ("Defendant's Supplemental Response"). Reed also testified in her deposition that the only way to determine with certainty whether the Todtenbier chest was manufactured by the OHS Unit was to look at the model number imprinted on the back of the chest of drawers. See id. at 49, lines 7-18; 50, lines 16-17.
The OHS Unit apparently did not, at any time, manufacture a chest of drawers that required assembly. See Plaintiff's Appendix at 155-56.
Smith's account of when he first discussed the Todtenbier Accident with Reed diverges considerably from Reed's. Whereas Reed testified that Smith first approached her about the accident on or about July 16, 1998, see Plaintiff's Appendix at 155, Smith maintains that he first spoke with her about the accident sometime on or after August 24, 1998 — barely one week before the closing of the Agreement. See Transcript of Deposition of George S. Smith ("Smith Deposition") at 84, lines 6-12, attached as Exhibit C to Defendant's Supplemental Response. But on whatever date he may have first discussed the Todtenbier Accident with Reed, it is clear that Smith learned of the alleged facts and circumstances surrounding the accident no later than August 4, 1998, when he attended a mediation of the Brown Claim. See Smith Deposition at 103, lines 5-15; 107, lines 9-25; 108; 109, lines 1-18, attached as Exhibit C to Defendant's Supplemental Response. During the mediation, Bates, the plaintiffs' attorney in the Brown Claim, discussed the Todtenbier Accident and the CPSC Report on the accident. See id. Smith's handwritten notes from the mediation session reflect that Bates alleged during the session that there was "another case" involving an 11-month-old boy whose death, on July 2, 1997, was caused by a chest of drawers manufactured by the OHS Unit. See id. at 135, lines 20-25; 136, lines 2-10; and Smith Deposition Exhibit No. 6.
Smith acknowledged in his deposition that he was aware that juvenile products companies such as Century and Cosco were extremely sensitive to product liability claims, and that the death of an infant involves a significant potential liability. See Smith Deposition at 118, lines 5-10, 17-25, attached as Exhibit C to Defendant's Supplemental Response. Although apparently mindful of his industry's sensitivity to product liability claims — especially those involving the deaths of infants — Smith testified that he never spoke with anyone at Century, or with any of Century's agents involved in negotiation of the Agreement, about the information he had received regarding the Todtenbier Accident. See id. at 72, lines 18-25; 73, lines 1-20. Smith also acknowledged that, when asked by one or more individuals at Century prior to the closing of the Agreement whether he knew of any possible liabilities arising out of product matters, he did not inform them that Bates had alleged that there was another case involving the death of a child and an OHS product. See id. at 111, lines 22-25; 112, lines 1-9. Smith asserted in his deposition that he did not disclose information about the Todtenbier Accident to others at Century because, at the time he was asked about any possible liabilities, he either did not know about the accident or he did not know that an OHS product was involved in the accident. See id. at 112, lines 10-12.
On or about August 24, 1998, Boyd H. Ratchye ("Ratchye"), co-counsel for Century in the Brown case, wrote to Thomas L. Toone (the "Ratchye letter") and asked him to obtain a copy of the Police Report and actual photographs of the chest of drawers allegedly involved in the Todtenbier Accident. See Plaintiff's Appendix at 151-52. Ratchye forwarded to Toone a copy of the CPSC Report that he had received in connection with his work on the Brown Claim. See id. Ratchye testified in his affidavit that he was attempting to confirm that the chest of drawers allegedly involved in the Todtenbier Accident was not manufactured by the OHS Unit in order to respond to discovery served on Century in connection with the Brown Claim. See id. at 152.
Ratchye's affidavit gives this date as August 24, 2000, but it is apparent from the context that 1998 is the correct year. Plaintiff's Appendix at 151-52.
In January 19, 1999, Paula Reed traveled to Houston, Texas to view the chest of drawers allegedly involved the Todtenbier Accident. See Plaintiff's Appendix at 156. After viewing the chest in Houston, Reed determined that the information contained in the Police Report was inaccurate and that the chest of drawers allegedly involved in the Todtenbier Accident was in fact manufactured by the OHS Unit. See id.
On or about June 14, 1999, the parents of the 11-month-old child killed in the Todtenbier Accident filed a lawsuit styled Todtenbier v. Sears, Roebuck Co., et al., No. CV-99-010574 (the "Todtenbier Claim"), in the Superior Court of Arizona, Maricopa County. See Defendant's Original Answer ¶ 9. The Todtenbier Claim plaintiffs alleged claims for wrongful death, products liability, breach of implied warranty, and negligence. See Plaintiffs' First Amended Complaint at 1-6, located at Tab A, Defendant's Motion and Memorandum in Support of Motion to Abate.
Century made a proper demand that Cosco assume the defense of the Todtenbier Claim and indemnify Century for any judgment rendered against Century or any reasonable settlement reached in connection with the Todtenbier Claim. See Defendant's Original Answer ¶ 12. Pursuant to Section 9.3 of the Agreement, Cosco is required to indemnify Century for "any claim or Liability that may be asserted against or incurred by" Century resulting from or arising out of any of the Assumed Liabilities. See Plaintiff's Appendix at 39. The Todtenbier Claim did not exist as of the closing date and was not set forth on Schedule 3.2(e) to the Agreement as a Retained Liability. See Plaintiff's Appendix at 68. To date, Cosco has refused to assume Century's defense and/or to indemnify Century in connection with the Todtenbier Claim. See See Defendant's Original Answer ¶ 13.
On March 20, 2000, Century filed its petition for declaratory judgment with a district court in Dallas County, Texas, seeking a declaration that, under the terms of the Agreement, Cosco is obligated to indemnify Century for any and all liabilities arising from the Todtenbier Claim. See Petition for Declaratory Judgment, attached to Defendant's Notice of Removal at Tab 3. Cosco removed the case to this court on the basis of the court's diversity jurisdiction. See Defendant's Notice of Removal ¶ 4.
On April 17, 2000, Cosco filed its answer, in which it asserted the affirmative defense of fraud. See Defendant's Original Answer ¶ 17. Cosco also counterclaimed against Century, alleging causes of action against Century for fraud, negligent misrepresentation, and breach of contract. See id. ¶ 18. Century now moves for summary judgment on its declaratory judgment claim and on Cosco's counterclaims. See Century Products Company's Motion for Summary Judgment at 1.
II. ANALYSIS A. Evidentiary Burdens on Motions for Summary Judgment
Summary judgment is proper when the pleadings and evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. A movant for summary judgment makes such a showing by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). The pleadings, depositions, admissions, and affidavits, if any, must demonstrate that no genuine issue of material facts exists. FED. R. CIV. P. 56(c).
The disposition of a case through summary judgment "reinforces the purpose of the Rules, to achieve the just, speedy, and inexpensive determination of actions, and, when appropriate, affords a merciful end to litigation that would otherwise be lengthy and expensive." Fontenot v. Upjohn Company, 780 F.2d 1190, 1197 (5th Cir. 1986).
Once the movant makes this showing, the nonmovant must then direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. See Celotex, 477 U.S. at 323-24. To carry this burden, the "opponent must do more than simply show . . . some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corporation, 475 U.S. 574, 586 (1986). Instead, the nonmovant must show that the evidence is sufficient to support a resolution of the factual issue in its favor. See Anderson, 477 U.S at 249.
While all of the evidence must be viewed in a light most favorable to the motion's opponent, see Anderson, 477 U.S. at 255 (citing Adickes v. S.H. Kress Company, 398 U.S. 144, 158-59 (1970)), neither conclusory allegations nor unsubstantiated assertions will satisfy the opponent's summary judgment burden. See Little v. Liquid Air Corporation, 37 F.3d 1069, 1075 (5th Cir. 1994) ( en banc); Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825 (1992). In the instant case, summary judgment is proper if, after adequate time for discovery, Cosco fails to establish the existence of an element essential to its case and as to which it will bear the burden of proof at trial. See Celotex, 477 U.S. at 322-23.
B. Fraud as Counterclaim Affirmative Defense
Century urges that it is entitled to summary judgment on its declaratory judgment action, because Cosco is contractually obligated to indemnify Century, and also because Cosco's affirmative defense and counterclaims do not state viable defenses to Century's claim for declaratory judgment. See Plaintiff's Summary Judgment Brief at 7-8. Century begins by arguing that the "unambiguous language" of the Agreement entitles it to indemnification. Plaintiff's Summary Judgment Brief at 7. To support this contention, Century points out that, in the Agreement, Cosco assumed responsibility for all products liability claims not expressly retained by Century. See id. Specifically, Section 3.1 of the Agreement provides, in pertinent part, that:
At and as of the Time of Closing, [Cosco] will assume and will, after the Time of Closing, in due course pay and fully discharge and satisfy all of the Liabilities and obligations of [Century], other than the Retained Liabilities (the "Assumed Obligations"), including but not limited to . . .
* * *
(d) except as set forth in Section 3.2(e), all Liabilities and obligations . . . (ii) for the injury, death, or damage to persons or property resulting from the ownership, possession, or use of products sold or manufactured by the OHS Unit before the Time of Closing. . . .
Plaintiff's Appendix at 17-18. Pursuant to Section 3.2(e) of the Agreement, the "Retained Liabilities" were limited to "[a]ll Liabilities for legal fees, settlement costs and other obligations or Liabilities relating to the pending actions . . . set forth on Schedule 3.2(e) — Pending Products Liability Claims. . . ." Id. at 18-19 (emphasis in original). The only pending products liability claims set forth on Schedule 3.2(e) were the Brown Claim and another claim unrelated to the Todtenbier Claim. See id. at 68.
Contrary to Century's argument, it does not necessarily follow that, because the Todtenbier Claim was omitted from the list of Retained Liabilities on Schedule 3.2(e), Cosco is obligated to indemnify Century in connection with the Todtenbier Claim. Cosco, arguing that Century fraudulently induced it to enter the Agreement, denies the existence of any such obligation. See Cosco, Inc.'s Brief in Response to Century Products Company's Motion for Summary Judgment ("Defendant's Summary Judgment Brief") at 12-17. If Century did fraudulently induce Cosco to contract, as Cosco alleges, then the resulting Agreement itself is invalid. See, e.g., Formosa Plastics Corporation USA v. Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998) ("As a rule, a party is not bound by a contract procured by fraud."). And if that is so, then whatever "unambiguous" or other language the Agreement contains will not suffice as a basis for granting summary judgment to Century. The court must therefore first determine whether Cosco has raised a genuine issue of material fact as to whether it was fraudulently induced to contract with Century.
Century relies on several inapposite cases for the proposition that Cosco's affirmative defense and counterclaim for fraud fail as a matter of law because they are actually breach of contract claims "disguised as tort claims." Plaintiffs Summary Judgment Brief at 8 (citing DeWitt County Electric Cooperative, Inc. v. Parks, 1 S.W.3d 96, 105 (Tex. 1999)); see also Century Products Company's Reply to Cosco, Inc.'s Response to Century Products Company's Motion for Summary Judgment ("Plaintiffs Reply Brief") at 3-7 (citing Southwestern Bell Telephone Company v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991); Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (Tex. 1986); and Facciolla v. Linbeck Construction Corporation, 968 S.W.2d 435 (Tex.App. — Texarkana 1998, no writ)). This argument is unpersuasive. In Formosa, the Texas Supreme Court held as follows:
None of the authorities cited by Century is applicable to the case at bar. For example, neither DeLanney nor Jim Walter Homes dealt with a claim of fraud in the inducement of contract, as Cosco has alleged here. The Formosa Court expressly stated that "a DeLanney-type analysis does not apply to fraud claims" such as those presented in the case at bar. Formosa, 960 S.W.2d at 45. DeWitt is equally unhelpful to the plaintiff. Century cites DeWitt for the proposition that a party's fraud claim sounds in tort only if the opposing party's conduct would give rise to a liability independent of the existence of a contract between the two parties. See Plaintiffs Summary Judgment Brief at 8. This rule, which is the subject of only a brief discussion in DeWitt, is in fact a direct quotation from DeLanney; DeLanney — as has already been noted — did not involve fraudulent inducement of contract. DeWitt itself mentions the tort of fraudulent inducement to contract only in relation to claims brought pursuant to the Texas Deceptive Trade Practices Consumer Protection Act ("DTPA"). DeWitt, 1 S.W.3d at 103-04. DeWitt holds, unremarkably, that "it is not a DTPA violation if one party to an agreement fails to inform the other party that it intends to exercise rights that the agreement expressly confers." DeWitt, 1 S.W.3d at 104. Unlike the situation in DeWitt, Cosco did not bring its claims pursuant to the DTPA; nor has Cosco accused Century of failing to inform Cosco of Century's intent to exercise any rights expressly conferred by the Agreement. The misrepresentations which Cosco claims induced it into the Agreement were not incorporated into the contract; specifically, the representations in the Agreement do not deal with CPSC investigations. Even if they did, however, fraudulent inducement claims are valid regardless of whether the representations in question are later subsumed in the contract. Formosa, 960 S.W.2d at 46. Finally, Facciolla — also relied upon by Century for support of its theory that Cosco's fraud claim is untenable-expressly recognizes that Formosa is applicable to fraudulent inducement claims. See Facciolla v. Linbeck Construction Corporation, 968 S.W.2d 435, 448 (Tex.App.-Texarkana 1998, no writ). In Facciolla, the plaintiff's fraud claim was nothing more than a claim that, because the defendant failed to perform under the contract, it was also liable for fraud. See id. at 448-49. Unlike Cosco in the instant case, the plaintiff in Facciolla did not claim that the defendant had made fraudulent misrepresentations in order to induce the plaintiff's acceptance of an offer.
Tort damages are recoverable for a fraudulent inducement claim irrespective of whether the fraudulent representations are later subsumed in a contract or whether the plaintiff only suffers an economic loss related to the subject matter of contract. Allowing the recovery of fraud damages sounding in tort only when a plaintiff suffers an injury that is distinct from the economic losses recoverable under a breach of contract claim is inconsistent with this well-established law, and also ignores the fact that an independent legal duty, separate from the existence of the contract itself, precludes the use of fraud to induce a binding agreement. . . . We . . . conclude that, if a plaintiff presents legally sufficient evidence on each of the elements of a fraudulent inducement claim, any damages suffered as a result of the fraud sound in tort.960 S.W.2d at 46 (emphasis added).
A fraud cause of action requires "a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, which was relied upon, and which caused injury." Sears, Roebuck Company v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994). For an actionable nondisclosure fraud to lie, there must be a duty to disclose. See Ralston Purina Company v. McKendrick, 850 S.W.2d 629, 633 (Tex.App.-San Antonio 1993, writ denied). "This is entirely a question of law, to be decided by reference to statutory and case law. . . ." Id. Texas law provides that a duty to disclose may arise in the following situations: "(1) when there is a fiduciary relationship; (2) when one voluntarily discloses information, the whole truth must be disclosed; (3) when one makes a representation, new information must be disclosed when that new information makes the earlier representation misleading or untrue; and (4) when one makes a partial disclosure and conveys a false impression." Hoggett v. Brown, 971 S.W.2d 472, 487 (Tex.App.-Houston [14th Dist.] 1997, writ denied).
Undisputed summary judgment evidence in the record suggests that Cosco attempted, during the course of negotiations leading up to the Agreement, to ascertain whether — and, if so, to what extent — Century was likely to be the subject of legal actions arising from any accidents involving the use of products manufactured by the OHS Unit. Most significantly, on or about July 2, 1997, Jonathan P. Reynolds, Executive Vice President and General Counsel for Cosco, contacted Boyd Ratchye, an attorney who served as outside litigation counsel for Century, concerning pending and potential product liability claims involving the OHS Unit. See Affidavit of Jonathan P. Reynolds, Appendix to Cosco, Inc.'s Brief in Response to Century Products Company's Motion for Summary Judgment ("Defendant's Appendix") at 4-4-5. Reynolds testified that he inquired of Ratchye "whether there was [sic] any ongoing or open [CPSC] investigations involving alleged accidents possibly involving products sold, designed or manufactured by the OHS Unit." Id. at 4. Reynolds further testified that he indicated to Ratchye that he "needed this information for purposes of determining Cosco's best course of action with respect to entering into an agreement with Century to purchase substantially all of the assets of the OHS Unit." Id. at 4-5. According to Reynolds, Ratchye responded by informing him of the Brown Claim and of one other case unrelated to the Totenbier Accident. See id. at 5. On July 2, 1998, Reynolds wrote Ratchye a letter confirming what Ratchye had told him during their July 2 phone conversation about the CPSC investigations. See Defendant's Appendix at 6.
Ratchye's testimony revealed that he received the CPSC Report no later than August 24, 1998 — one week before the Agreement's Closing Date — and perhaps as early as July 16, the date of Dave Galambos' deposition in connection with the Brown Claim, if not earlier. See Plaintiff's Appendix at 115, 151-52. Moreover, Paula Reed's testimony implied that Century's president, George Smith, received the CPSC Report no later than July 31, 1998, see Plaintiffs Appendix at 155, while Smith testified that he received it around August 24, 1998. See Smith Deposition at 84, lines 6-12, attached as Exhibit C to Defendant's Supplemental Response.
The affidavit of Boyd H. Ratchye, from which this date comes, incorrectly gives August 24, 2000 as the date on which Ratchye requested copies of the Police Report of the incident described in the CPSC Report. See Plaintiff's Appendix at 151. The surrounding context makes it plain, however, that August 24, 1998, not 2000, was the date on which this request was made. See note 2, above.
The CPSC Report describes facts and circumstances surrounding the Todtenbier Accident, and includes descriptions and dimensions as well as photographs of the chest of drawers involved in the incident. See Plaintiff's Appendix at 125-130. The report states that two of the photographs of the chest of drawers show that a warning label is located inside the top drawer. Included in the report is a thorough word-by-word description of the information included in this warning. See id. at 129. Paula Reed testified in her deposition that the warnings displayed in the chests of drawers manufactured by the OHS Unit were not identical to the warnings in the chests made by any other manufacturer, and that if she were to see a warning label on a chest of drawers, that would be "another way for [her] to be more sure" whether or not the chest in question was manufactured by the OHS Unit. See Reed Deposition at 24, lines 3-8; 51, lines 14-25; 52, lines 1-6, attached as Exhibit B to Defendant's Supplemental Response. Galambos, Century's corporate representative, conceded in his deposition that the words he was able to discern on the photograph of the warning contained in the CPSC Report were identical to those used on other chests of this model manufactured by the OHS Unit. See Plaintiff's Appendix at 122.
Considered as a whole, this evidence creates a genuine dispute of material fact as to whether, prior to the Closing Date, Century or its representatives learned that the Todtenbier Accident being investigated by the CPSC involved, or likely involved, a chest of drawers manufactured by the OHS Unit. If Century made such a discovery after July 2 — the date of the Reynolds-Ratchye telephone conversation — and before the Closing Date of August 31, 1998, then it plainly had a duty to disclose such discovery to Cosco. As noted before, "when one makes a representation, new information must be disclosed when that new information makes the earlier representation misleading or untrue." Hoggett, 971 S.W.2d at 487.
Nothing in the record thus far assembled, however, suggests that Ratchye or any other Century representative told Reynolds or another of Cosco's representatives about CPSC's investigation of the Todtenbier Accident. On the contary, Reynolds testified that, "[a]t all points during the negotiations and in speaking with Boyd Ratchye, Century and its representatives indicated that the only existing or potential product liability claims regarding products manufactured by the OHS Unit were the Brown and Bush cases." Defendant's Appendix at 5. Reynolds further asserted that "Cosco's purchase of . . . the [OHS Unit] at the price finally paid and its entering the Agreement were contingent and done in reliance upon the representations made by Boyd Ratchye regarding the lack of CPSC investigations regarding alleged accidents possibly involving products sold, designed or manufactured by the OHS Unit. . . ." Id. The court concludes that Cosco has raised a genuine dispute of fact as to whether Century's alleged nondisclosure constituted "a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of its truth . . ., which was relied upon, and which caused injury." Meadows, 877 S.W.2d at 282.
Cosco has failed, however, to produce any evidence that Century intended by its alleged nondisclosure to induce Cosco to sign the Agreement. Century is therefore entitled to summary judgment on the defendant's fraud counterclaim. See Meadows, 877 S.W.2d at 282 (a fraud cause of action requires that the victim's reliance upon the alleged misrepresentation have been intended by the tortfeasor); Custom Leasing, Inc. v. Texas Bank and Trust Company of Dallas, 516 S.W.2d 138, 143 (Tex. 1974) (each element of fraud claim must be established with reasonable certainty, and absence of any one of them will prevent a recovery). For the same reason, Century is also entitled to summary judgment on its declaratory relief cause of action. See Walker v. Horine, 695 S.W.2d 572, 575 (Tex.App. — Corpus Christi 1985, no writ) (to avoid summary judgment based on the affirmative defense of fraud, defendant had to raise issues of fact regarding whether the alleged misrepresentation was made "with the intention that it should be acted upon by the party. . . ."); McCulley Fine Arts Gallery, Inc. v. "X" Partners, 860 S.W.2d 473, 479-80 (Tex.App.-El Paso 1993, no writ) (same).
C. The Breach of Contract Counterclaim
Cosco has also brought a breach of contract counterclaim against Century which alleges that the plaintiff violated the Agreement by failing to disclose, prior to the Closing Date, the existence of the Todtenbier Claim. See Defendant's Original Answer ¶¶ 18-33. This contention is unavailing. In Section 5.6(b) of the Agreement, Century declared that it had "not received any notice alleging a Liability" involving a product designed, manufactured, or sold by the OHS Unit, apart from the Brown Claim and one other case listed on Schedule 5.6(b). See Plaintiffs Appendix at 26, 76. Cosco insists that Century breached the Agreement by failing to include the Todtenbier Claim on Schedule 5.6(b). See Defendant's Summary Judgment Brief at 11.
The elements of a claim for breach of contract are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the plaintiff resulting from that breach. Prudential Securities, Inc. v. Haugland, 973 S.W.2d 394, 397 (Tex.App.-El Paso 1998, writ denied). In the instant case, the Agreement's complete silence as to the existence of the Todtenbier Claim — which claim, significantly, was not filed until June, 1999, nearly a year after the closing of the Agreement — cannot, by definition, constitute a breach of the Agreement; rather, it simply constitutes one aspect of the Agreement itself.
Section 11.5 of the Agreement expressly provides that the Schedules are fully incorporated into the Agreement. See Plaintiffs Appendix at 43.
Cosco has not produced, and the court has not found, any evidence that Century breached the Agreement in the form in which it was entered into by the parties. A close examination reveals Cosco's breach of contract cause of action to be, in essence, a fraudulent inducement claim recast as a contract claim. "The facts which support [Cosco's] fraud and contract claims are identical, and the losses sought for each claim . . . are also identical. Only one claim will lie," Facciolla, 968 S.W.2d at 449, and that claim is a fraud claim. Century's summary judgment motion is therefore granted as to Cosco's breach of contract counterclaim.
D. The Negligent Misrepresentation Counterclaim
Finally, Cosco alleges that Century's alleged knowing failure to disclose the Todtenbier Claim constituted negligent misrepresentation. Under Texas law, the elements of a cause of action for negligent misrepresentation are:
(1) a representation was made by a defendant in the course of its business, or in a transaction in which it has a pecuniary interest;
(2) the defendant supplied "false information" for the guidance of others in their business;
(3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and
(4) the plaintiff suffered pecuniary loss by justifiably relying on the representation.Clardy Manufacturing Company v. Marine Midland Business Loans Inc., 88 F.3d 347, 357 (5th Cir. 1996), cert, denied, 519 U.S. 1078 (1997). In addition, the "false information" supplied must have been a misstatement of existing fact. Clary Corporation v. Smith, 949 S.W.2d 452, 463 (Tex.App.-Fort Worth 1997, writ denied).
Although Century has moved for summary judgment on Cosco's negligent misrepresentation cause of action, it has set forth no legal or factual basis for granting its motion. Indeed, both Century and Cosco have entirely failed to address the negligent misrepresentation cause of action in their briefs. Century is not automatically entitled to summary judgment as a result of Cosco's failure to respond to Century's motion for summary judgment on this claim, however. See John v. State of Louisiana (Board of Trustees for State Colleges Universities), 757 F.2d 698, 707-08 (5th Cir. 1985). Because Century, as the movant, failed to discharge its initial summary judgment burden, summary judgment must be denied-even though Cosco did not respond to the motion. See id. at 708 (citing Environmental Defense Fund v. Marsh, 651 F.2d 983, 991 (5th Cir. 1981) ("[t]he non-moving party is not required to respond unless and until the moving party has properly supported the motion with sufficient evidence"); Benton-Volvo-Metairie, Inc. v. Volvo Southwest, Inc., 479 F.2d 135, 138-39 (5th Cir. 1973) (same)).
III. CONCLUSION
For the foregoing reasons, Century's motion for summary judgment on its declaratory relief claim and on Cosco's breach of contract and fraud counterclaims is GRANTED. Century's motion for summary judgment as to Cosco's negligent misrepresentation counterclaim, however, is DENIED. Judgment will be entered that Cosco shall indemnify Century for the amount paid in settlement of the Todtenbier Claim. Counsel for Century shall submit, within ten days of this date, a proposed form of judgment in conformity with this memorandum order. Because this judgment will not dispose of all the claims, and because the parties have consented to trial before a magistrate judge, this case will, after entry of this interlocutory judgment, be TRANSFERRED to Magistrate Judge Jane J. Boyle for resolution of Cosco's negligent misrepresentation counterclaim. All future pleadings shall be filed under Civil No. 3:00-CV-0800-BC.
SO ORDERED.