Opinion
Civil Action No. 3:00-CV-0485-P.
July 28, 2004
MEMORANDUM OPINION AND ORDER
Now before the Court for consideration is Plaintiff's Motion for Summary Judgment, with brief in support and appendix, filed February 27, 2004. After a thorough review of the evidence, the pleadings, the parties' briefs, and the applicable law, for the reasons set forth below, the Court DENIES Plaintiff's Motion for Summary Judgment.
Defendants filed a Response on April 5, 2004, and Plaintiff filed a Reply on April 15, 2004.
BACKGROUND
The factual background is set forth fully in Magistrate Judge Kaplan's Report and Recommendation issued on April 30, 2001. For purposes of this motion, the Court need not reiterate all the facts, but rather will focus on the procedural history and those facts relevant to the issues at hand
On March 15, 1994, Plaintiff, Leasehold Expense Recovery, Inc. ("LER"), entered into a Contingent Fee Contract (the "Contract") with A Pea in the Pod ("APIP" or "Client"), which thereafter merged with Mothers Work. Under the Contract drafted by LER, LER agreed to review sixty-three (63) of APIP's leases with shopping malls to determine whether landlords were overcharging APIP for rent and operating expenses, agreed to collect overpaid charges from landlords, and agreed to negotiate settlement of any overpaid charges. However, the Contract provided that: "Prior to LER contacting any landlord, Client shall approve all potential contact and action by LER, it being understood that LER shall have no right to sue the landlord or otherwise harass the landlord, without Client's express written instructions."
Mothers Work acquired APIP's stock in 1995.
Between 1994 and 1996, LER, pursuant to the Contract, reviewed numerous leases and found overcharges. In 1996 and 1997, LER attempted to contact the appropriate landlords; however, the majority of them required an authorization letter from Mothers Work prior to dealing with LER. (See Pl.'s App. at 6-11, 13-14, 21, 37-38, 40-45.) LER drafted authorization letters with regard to three stores and sent numerous requests for Mothers Work to sign and return them. (See Pl.'s App. at 17-21, 57-72.) Mothers Work never returned the promised authorization letters to LER. The parties do not explain what occurred between August 1997 and June 1999. However, in September 1999, LER again requested that Mothers Work sign authorization letters, this time with respect to twenty-one (21) stores. It is undisputed that Mothers Work never sent the authorization letters. Mothers Work contends that they were not sent because initially they contained errors. (Defs.' App. at 1-2.) Mothers Work explains that by the time the letters were properly signed and ready to be returned, the parties were involved in a dispute regarding Mothers Work's compensation to LER, and decided to put proceedings on hold pending resolution. (Defs.' Resp. at 6; Defs.' App. at 2, 4.)
On January 10, 2000, LER sued Mothers Work for breach of contract for Mothers Work's failure to pay compensation, fraud, negligence, grossly negligent misrepresentation and conspiracy in state court. Mothers Work removed the case to the Northern District of Texas on March 3, 2000, and the case was referred to Magistrate Judge Kaplan for pre-trial management. Mothers Work then filed a motion seeking summary judgment in its favor regarding all of LER's claims on December 22, 2000.
On April 27, 2001, Magistrate Judge Kaplan recommended that Mothers Work's Motion for Summary Judgment be granted in part and denied in part. Specifically, Magistrate Judge Kaplan recommended denial of summary judgment with respect to LER's breach of contract claims concerning three stores. Magistrate Judge Kaplan recommended entry of summary judgment in favor of Mothers Work with regard to all of the other stores and with regard to LER's breach of implied duty to cooperate claim. Magistrate Judge Kaplan found that under Texas law, implied covenants are disfavored and grafted onto contracts, "only if necessary to effectuate the intention of the parties as disclosed by the contract as a whole, but not to make the contract fair, wise or just . . . [and] [t]here can be no implied covenant as to a matter specifically covered by the written terms of the contract." Magistrate Judge Kaplan found that the Contract in this case explicitly allowed Mothers Work to withhold cooperation, and since the contract expressly addressed the matter of cooperation, no duty could be implied to vary that.
On July 27, 2001, the Court entered an Order adopting Magistrate Judge Kaplan's Report and Recommendation. On August 9, 2001, LER filed a Motion for Reconsideration of the Order, which the Court denied on August 20, 2001. The Court held a bench trial from September 24, 2001 through September 26, 2001. On September 27, 2001, the Court awarded LER damages in the amount of $9,074.46, plus pre-judgment and post-judgment interest for Mothers Work's recovery of overcharges on one of the three stores subject to the breach of contract claim. LER filed a Motion for Attorneys' Fees on October 9, 2001 and on July 31, 2002 the Court awarded $10,250.00 in attorneys' fees relating to the previous award.
LER appealed the award of summary judgment in favor of Mothers Work and the Court's Final Judgment of September 27, 2001 to the Fifth Circuit. The Fifth Circuit affirmed all of the Court's findings except for those rejecting an implied duty to cooperate and rejecting recovery in quantum meruit. Regarding the implied duty to cooperate, the Fifth Circuit held that, "neither the rule of law in this jurisdiction or the terms of the Contract bar the court from finding an implied duty to cooperate, and LER has presented sufficient evidence to raise a genuine issue of fact as to whether this duty was breached." Leasehold Expense Recovery, Inc. v. Mothers Work, Inc., 331 F.3d 452, 462 (5th Cir. 2003). Regarding quantum meruit, the Fifth Circuit found that "the services for which the out-of-pocket expenses were incurred were covered by the Contract" therefore preventing recovery under quantum meruit. Id. (emphasis in original). However, the Fifth Circuit held that due to an exception allowing recovery when defendant breaches and plaintiff is unable to perform, "if Mothers violated the duty to cooperate implied in the Contract, then LER was unable to recover any potential overcharges on Mothers's behalf because Mothers breached the contract." Id. The Fifth Circuit reversed the Court's finding on this issue insofar as it relates to LER's implied duty to cooperate claim.
Thus, the only issues before the Court are whether Mothers Work breached an implied duty to cooperate, and, if so, whether LER can recover the value of time and out-of-pocket expenses in quantum meruit.
DISCUSSION
I. Legal Standard.Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party bears the burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and of identifying those portions of the record that demonstrate such an absence. Id. However, all evidence and the reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).
Once the party has made an initial showing, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The party defending the motion for summary judgment cannot defeat the motion unless he provides specific facts that show the case presents a genuine issue of material fact, such that a reasonable jury might return a verdict in his favor. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). Mere assertions of a factual dispute unsupported by probative evidence will not prevent a summary judgment. Id. at 248-50; Abbot v. Equity Group, Inc., 2 F.3d 613, 619 (5th Cir. 1993). In other words, conclusory statements, speculation and unsubstantiated assertions will not suffice to defeat a motion for summary judgment. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc).
If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to his case, and on which he bears the burden of proof at trial, summary judgment is mandatory. Celotex Corp., 477 U.S. at 322-24; Washington v. Armstrong World Indus., Inc., 839 F.2d 1121, 1122 (5th Cir. 1988). A motion for summary judgment cannot be granted simply because there is no opposition, even if the failure to oppose it violates a local rule. Hibernia Nat'l Bank v. Adminstracion Central Sociedad Anonima, 776 F.3d 1277, 1279 (5th Cir. 1985). However, when the non-movant fails to provide a response identifying the disputed issues of fact, the Court is entitled to accept the movant's description of the undisputed facts as prima facie evidence of its entitlement to judgment. Eversly v. MBank Dallas, 843 F.2d 172, 173-174 (5th Cir. 1988); Nordar Holdings, Inc. v. W. Sec. (USA) Ltd., No. 3:96-CV-0427-H, 1996 WL 739019, *2 (N.D. Tex. Dec. 18, 1996).
Finally, the Court has no duty to search the record for triable issues. Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). "The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise matter in which the evidence supports his or her claim." Id. A party may not rely upon "unsubstantiated assertions" as competent summary judgment evidence. Id.
II. Breach of Implied Duty to Cooperate.
An implied duty to cooperate means that a promisee may not hinder, prevent, or interfere with the promisor's ability to perform his duties under an agreement. Citizens Nat'l Bank of Orlando v. Vitt, 367 F.2d 541, 544 (5th Cir. 1966); Vanadium Corp. of Am. v. Fid. Deposit Co., 159 F.2d 105, 108 (2d Cir. 1947) ("Wherever the cooperation of a promisee is necessary for the performance of the promise, there is a condition implied in the fact that the cooperation will be given."). This duty will be implied only to the extent necessary to give effect to the actual intention of the parties as reflected by the contract as construed in its entirety in the light of the circumstances under which it was made and the purposes sought to be accomplished thereby. Danciger Oil Refining Co. of Tex. v. Powell, 154 S.W.2d 632, 635 (Tex. 1941).
Defendants contend that Bagwell Coatings, Inc. v. Middle South Energy, Inc., 797 F.2d 1298, 1305 n. 6 (5th Cir. 1986), stands for the proposition that the "duty of cooperation only prevents a party from unreasonably impeding other party's ability to perform." (Defs.' Resp. at 5.) The footnote Defendants quote does not address reasonableness. To the contrary, it states:
In this context, we also note that interference of contractual performance is a breach of contract. See, e.g., United States v. Klingensmith, Inc., 670 F.2d 1227, 1230 (D.C. Cir. 1982). In Citizens National Bank of Orlando v. Vitt, 367 F.2d 541, 545 (5th Cir. 1966), we stated, "Wherever the cooperation of a promisee is necessary for the performance of a contract, there is an implied condition of the contract that the cooperation will be given." Here the case for recovery is stronger, for there is a breach of a specific contractual provision as to the appropriate working conditions for performance of the fireproofing work.797 F.2d at 1305 n6. However, not only is a reasonableness inquiry absent from the Fifth Circuit's analysis in Bagwell Coatings, but the Court did not find, nor did the parties cite to any authority or case which addressed reasonableness in determining whether there was a breach of an implied duty to cooperate. Thus, the reasonableness of Mothers Work's actions is not determinative of whether it breached the implied duty to cooperate.
LER asserts that Mothers Work breached the implied duty to cooperate by failing to provide the requested authorization letters to LER. (Pl.'s Mot. Summ. J. at 4.) The landlords of many stores requested current authorization from Mothers Work prior to permitting LER to review the rent and operating charges. (Pl.'s App. at 6-11, 13, 14, 21, 37, 38, 40-45.) LER maintains that Dina Oddis, Lynn Wieder, Elizabeth Obloy, and Edward Tress, employees of Mothers Work, made numerous oral representations and one written representation that the authorization letters would be signed. Specifically, on October 4, 1996, Oddis wrote to LER, "the letters that you have requested on Mothers Work, Inc. letterhead are currently being completed and will be forwarded to you under separate cover." ( Id. at 6, 7, 39.) However, the authorization letters were never signed and returned to LER, and thus, LER was not permitted to complete the proceedings with the landlords or receive compensation. ( Id. at 11.)
Mothers Work explains with respect to the letters received in 1999 that the letters were not signed and returned because there were mistakes in the submitted letters. (Defs.' Resp. at 5; Defs.' App. at 1-2.) Mothers Work deemed the letters improper for various reasons, including identifying Edward Tress as Eddie Tress, not including Tress's title under his name, using the nine digit zip code rather than the seven digit zip code, and using the assumed name rather than the corporate name of the company. (Defs.' App. at 1-2; Pl.'s App. at 10.) Plaintiff claims that none of these preferences were mentioned to LER prior to the requests for the revisions. (Pl.'s App. at 10.) LER states that Tress requested "minor changes" to each batch of letters offered to him and specified that he wanted the letters mailed rather than faxed once corrected. ( Id. at 10.) Furthermore, LER asserts that Tress did not express any disenchantment with LER because of the multiple revisions prior to the lawsuit. ( Id. at 9-11.) Mothers Work explains that by the time the letters were properly signed and ready to be returned, the parties were involved in a dispute regarding Mothers Work's compensation to LER, and decided to put proceedings on hold pending resolution. (Defs.' Resp. at 6; Defs.' App. at 2, 4.)
Mothers Work claims that its failure to sign the authorization letters was not a breach of the implied duty to cooperate as it was not obliged to sign improper letters simply because LER made the request and because the parties agreed to put everything on hold (Tress Aff. ¶ 6.) due to a disagreement over compensation. (Defs.' Resp. at 4.) Therefore, Mothers Work has raised a genuine issue of material fact as to whether its failure to sign the authorization letters as requested by LER was a breach of the implied duty to cooperate. As a result, Plaintiff's Motion for Summary Judgment is DENIED as to the issue of Mothers Work's breach of an implied duty to cooperate.
III. Recovery in Quantum Meruit of Out-of-Pocket Expenses.
Quantum meruit is an equitable theory which permits a "right to recover . . . based upon a promise implied by law to pay for beneficial services rendered and knowingly accepted." Leasehold Expense Recovery, 331 F.3d at 462 ( quoting Black Lane Pipeline v. Union Const. Co., Inc., 538 S.W.2d 80, 86 (Tex. 1976)). Recovery is permitted only when there is no express contract covering those services or materials. Id. However, an exception to quantum meruit allows a party to recover when a plaintiff is prevented from completing the contract due to the defendant's breach. Truly v. Austin, 744 S.W.2d 934, 936 (Tex. 1988).
Under Texas law, in order to recover on a claim for quantum meruit, a plaintiff must prove the following elements: (1) valuable services were rendered or materials furnished, (2) for the person or entity sought to be charged, (3) which services were accepted by the person sought to be charged, used, and enjoyed by him, and (4) under such circumstances as reasonably notified the person or entity sought to be charged that the plaintiff, in performing the services or providing the materials, expected to be paid by the person or entity sought to be charged. C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768, 792 (Tex.App.-Houston [1st Dist.] 2004, no pet. h.); Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). The proper measure of damages in a quantum meruit action is the reasonable value of the services rendered or the materials furnished by the complaining party. PIC Realty Corp. v. Southfield Farms, 832 S.W.2d 610, 616 (Tex.App. — Corpus Christi 1992, no writ).
Because the recovery is contingent upon whether Defendants breached the implied duty to cooperate, Plaintiff's Motion for Summary Judgment is DENIED as to the issue of LER's recovery in quantum meruit.
CONCLUSION
Accordingly, upon careful review of the parties' arguments, the summary judgment evidence, and the relevant law, for the reasons stated above, the Court DENIES Plaintiff's Motion for Summary Judgment.The parties are directed to submit proposed dates for trial within ten (10) days of the entry of this order.
IT IS SO ORDERED.