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Johnson Controls, Inc. v. Heery International, Inc.

United States District Court, N.D. Texas, Dallas Division
Jul 7, 2000
Civil Action No. 3:98-CV-2148-M (N.D. Tex. Jul. 7, 2000)

Opinion

Civil Action No. 3:98-CV-2148-M.

July 7, 2000.


MEMORANDUM OPINION AND ORDER


Plaintiff sues for tortious interference with existing and prospective contracts; defamation; business disparagement; violations of the Lanham Act, 15 U.S.C. § 1125(a); and professional negligence. Before the Court are Defendant's Motion for Summary Judgment on all of Plaintiff's claims and Plaintiff's Motion for Partial Summary Judgment on its defamation claim, both filed May 8, 2000, all briefs in support of those motions, and all responses and replies thereto.

Having considered the record, applicable law, and the arguments of counsel in a hearing held in open court on June 29, 2000, for the reasons stated below, the Court GRANTS IN PART and DENIES IN PART Defendant's Motion for Summary Judgment and DENIES Plaintiff's Motion for Partial Summary Judgment.

The Court has separately ruled upon various motions to strike and to supplement summary judgment evidence, and thus relies only on evidence which the Court did not strike.

I. Background

In the summer of 1996, Plaintiff Johnson Controls, Inc. ("JCI") entered into a contract (the "Phase I" contract) with the Dallas Independent School District ("DISD") to perform energy conservation work at a number of DISD schools. The work involved upgrades to heating, ventilation, air conditioning, lighting and other facilities. The DISD and JCI agreed that the work would proceed in three different phases, with each governed by a separate contract. By mid-1997, a number of DISD's contracts were under scrutiny by the media and by investigative authorities. This negative publicity prompted the DISD to hire outside consultants to provide technical assistance in reviewing the contractors' work.

This was a "performance contract." The theory behind performance contracts is that the work done under the contract will save enough energy and operational costs to pay for the cost of itself.

This case arises from consulting work performed by Defendant Heery International, Inc. ("Heery") for the DISD, as a result of which Heery, principally through its employee Wayne Robertson, reviewed JCI's Phase I work and then reported to the DISD on its observations. Heery's report contained statements that Mr. Robertson saw "no evidence" that certain work, which JCI was supposed to do, was in fact performed. Without Heery's participation or advance knowledge, its report was leaked to the Dallas Morning News ("DMN"). As a result, JCI received very negative publicity, and DISD did not go forward with the next two phases of its contemplated ongoing relationship with JCI.

II. Summary Judgment Standard

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that, as a matter of law, the movant is entitled to judgment. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). A material fact is one that "might affect the outcome of the suit under the governing law" and a "dispute about a material fact is `genuine' . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

In a motion for summary judgment, the burden is on the movant to prove that no genuine issue of material fact exists, and if the movant fails to meet its burden, the motion must be denied, regardless of the nonmovant's response. Little, 37 F.3d at 1075. If, however, the movant does meet its burden, then the nonmovant must go beyond the pleadings and "designate specific facts showing that there is a genuine issue for trial." Id. The record before the court must be considered in the light most favorable to the nonmovant. Harrison v. Byrd, 765 F.2d 501, 504 (5th Cir. 1985).

III. Analysis

A. Business Disparagement and Defamation

To establish a claim for business disparagement, JCI must prove: (1) publication by Heery; (2) of disparaging words; (3) falsity; (4) malice; (5) lack of privilege; and (6) special damages. Hurlbut v. Gulf Atl. Life Ins. Co., 749 S.W.2d 762, 766 (Tex. 1987).

To establish a claim for defamation, JCI must prove: (I) Heery published a statement; (2) that was defamatory concerning JCI; (3) while acting with either actual malice, if JCI is a public figure, or with negligence, if JCI is a private individual, regarding the truth of the statement. WFAA-TV, Inc. v. McLemore, 978 S.W.2d 568, 571 (Tex. 1998), cert. denied, 119 S.Ct. 1358 (1999).

Qualified privilege is a defense to defamation (and presumably to business disparagement as well, although the cited case does not expressly say so). Hanssen v. Our Redeemer Lutheran Church, 938 S.W.2d 85, 92 (Tex.App.-Dallas 1996, writ denied) ("A privilege will be granted to statements that occur under circumstances wherein any one of several persons having a common interest in a particular subject matter may reasonably believe that facts exist that another, sharing that common interest, is entitled to know.") A showing of actual malice at the time of publication, however, can overcome Heery's undisputed qualified privilege. Actual malice includes a reckless disregard of the truth. Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex. 1995).

Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex. 1995). Texas law requires that a defendant asserting a qualified privilege establish the absence of actual malice. Id. However, Fifth Circuit jurisprudence requires the nonmovant to offer, through the summary judgment evidence, some proof of actual malice rather than putting the burden on a defendant who properly moves for summary judgment. Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 314 (5th Cir. 1995). The Court believes that JCI put forth some proof of actual malice.

As to the "publication" element of a claim for business disparagement or defamation, JCI has the burden of demonstrating that Heery published its report to the DMN or that it was reasonably foreseeable that the communications would be republished. RESTATEMENT (SECOND) OF TORTS § 576(c) (1977).

The Court finds that disputed fact issues exist as to whether or not the publication of the report was reasonably foreseeable and as to whether Heery acted with actual malice. Heery's summary judgment motion is thus DENIED as to JCI's defamation and business disparagement claims and JCI's Motion for Partial Summary Judgment is similarly DENIED.

B. Tortious Interference.

With respect to JCI's tortious interference claims, the Court finds them untenable as a matter of law because, pursuant to its consulting agreement with the DISD (See Consultant Agreement ¶¶ 1.1.1 and 4.2.2.), Heery was the DISD's agent, and thus, in the absence of personal animus or greed, which the Court finds was not demonstrated by the summary judgment evidence, cannot interfere with a contract or prospective business relationship between its principal and JCI. Haralson v. E.F. Hutton Group, Inc., 919 F.2d 1014, 1037 (5th Cir. 1990). Were the law to mandate otherwise, Heery would, in effect, be liable for interfering with itself. See Holloway v. Skinner, 898 S.W.2d 793, 795 (Tex. 1995); Central Savings and Loan Ass'n v. Stemmons Northwest Bank, N.A., 848 S.W.2d 232, 241-42 (Tex.App.-Dallas 1992, no writ); V.M Solis Underground Utility and Parking v. City of Laredo, 751 S.W.2d 532, 534-35 (Tex.App.-San Antonio 1988, writ denied). JCI contends that although Heery was DISD's agent, the scope of its agency was exceeded when it falsely reported to the DISD about JCI. JCI notes that Heery was obligated by its contract with DISD to report truthfully and to follow appropriate professional standards when it was reporting on matters within the subject matter of the contract, and that its failure to do so took it out of the protected agency role. Although Defendant's argument is creative, the Court finds that Heery had a broad role as consultant to the DISD and that its statements regarding JCI were within the scope of that agency. Alternatively, the Court finds that Heery's actions were justified based on its own rights as expressed in the Consultant Agreement § 1.2.1(3). Kipp v. LTV Aerospace and Defense, 838 F. Supp. 289, 295 (N.D. Tex. 1993). Heery's summary judgment motion is thus GRANTED as to JCI's claims for tortious interference.

C. Lanham Act.

The Court finds that disputed fact issues exist as to JCI's Lanham Act claims and thus DENIES Heery's summary judgment motion on those claims.

D. Professional Negligence.

For reasons stated in open court on June 29, 2000, and particularly because of the fact that Heery had no legal duty to JCI, Defendant's Motion for Summary Judgment as to this claim is GRANTED.

IV. Conclusion

For the foregoing reasons, Defendant's Motion for Summary Judgment as to both tortious interference counts and professional negligence are GRANTED, but the balance of Defendant's Motion for Summary Judgment is DENIED. Plaintiff's Motion for Partial Summary Judgment is DENIED.

SO ORDERED.


Summaries of

Johnson Controls, Inc. v. Heery International, Inc.

United States District Court, N.D. Texas, Dallas Division
Jul 7, 2000
Civil Action No. 3:98-CV-2148-M (N.D. Tex. Jul. 7, 2000)
Case details for

Johnson Controls, Inc. v. Heery International, Inc.

Case Details

Full title:JOHNSON CONTROLS, INC., Plaintiff, v. HEERY INTERNATIONAL, INC., Defendant

Court:United States District Court, N.D. Texas, Dallas Division

Date published: Jul 7, 2000

Citations

Civil Action No. 3:98-CV-2148-M (N.D. Tex. Jul. 7, 2000)