Opinion
Civil Action No. 3:97-CV-3200-L
June 26, 2001
MEMORANDUM OPINION AND ORDER
Before the court are Defendant's Motion for Summary Judgment, filed January 8, 2001; Plaintiff's Motion for Continuance, filed January 24, 2001; Plaintiff's Motion to Strike, filed February 12, 2001; Defendant's Motion to Strike Affidavit of Joan Liszt, filed February 13, 2001; Plaintiff's Motion for Summary Judgment, filed April 2, 2001; Defendant's Motion to Strike the Affidavit of Joan Liszt Submitted in Support of Motion for Summary Judgment, filed April 23, 2001; Plaintiff's Motion to Strike Affidavit of Pat McNeelis [sic], filed May 8, 2001; and Defendant's Motion for Continuance of Trial Date, filed June 20, 2001. After careful consideration of the motions, responses, replies, briefs, evidence submitted, and applicable law, the court denies as moot Plaintiff's Motion for Continuance Pursuant to Rule 56(f); denies Plaintiff's Motion to Strike, Defendant's Motion to Strike Affidavit of Joan Liszt, Defendant's Motion to Strike the Affidavit of Joan Liszt Submitted in Support of Motion for Summary Judgment, and Plaintiff's Motion to Strike Affidavit of Pat McNeelis [sic]; grants in part and denies in part Defendant's Motion for Summary Judgment; denies Plaintiff's Motion for Summary Judgment; and denies Defendant's Motion for Continuance of Trial Date. I. Factual and Procedural Background
The facts contained herein are generally undisputed; where they are disputed, since both parties have moved for summary judgment, both parties' contentions are presented.
This lawsuit arises from a commercial relationship between the parties. Defendant Karen Kane, Inc. ("the Company") is a manufacturer of women's apparel, based in Los Angeles, California, and selling its products nation-wide. Plaintiff Joan Liszt ("Liszt") was a sales representative for the Company from 1982 through 1997. The relationship between Liszt and the Company was governed by an agreement. Although the parties executed a written contract, drafted by Liszt, in 1982 when they began their relationship, they agree that certain terms of their agreement differed from the terms of the written contract. For example, the written contract specifies that Liszt was the Company's sole sales representative in Texas, Oklahoma, Arkansas, Louisiana, and Mississippi. The parties agree that New Mexico was orally added to Liszt's territory in 1984. Most of the terms of their contractual relationship are not in dispute, but they do differ as to certain terms which affect the amount of sales commissions payable by the Company to Liszt.
Hereinafter, unless the context indicates otherwise, "agreement" refers to the entire contractual relationship between the parties, including both the written contract and any parol modifications.
The Company's actual practices with respect to payment of commissions were based on various factors:
• Size of customer: For sales to major department stores, such as Dillard's, the commission rate was 3%. For sales to smaller accounts ("speciality stores") the commission rate was 10%.
• Location of customer. For sales by a sales representative shipped to a store in her territory, the normal commission rate applied. For sales by one sales representative to a store in another sales representative's territory, the 10% commission was split equally between the two representatives; thus, Liszt would get a 5% commission on sales by other representatives in her territory and a 5% commission on sales she made in the territory of other representatives. For sales by a representative to a customer outside of her territory, but in an area where the Company had no sales representative, the representative would receive the full 10% commission.
• Direct sales: For orders placed directly with the Company, for example at its New York showroom, the appropriate commission was paid directly to the sales representative to whose territory the merchandise was shipped. That is, the sale representative received the full commission amount, rather than a "split" commission, even though the representative was not directly involved in the sale.
• Dillard's distribution centers: For sales to major department stores which were ultimately shipped to a specific store, the Company paid the commission to the sales representative whose territory included that store. If the merchandise was shipped to a distribution center and the Company could not determine the store to which it ultimately went, the Company determined the territory which contained the majority of the stores serviced by the distribution center and paid the entire commission to the sales representative for that territory.
• Deductions: The Company also deducted amounts from the commissions paid to sales representatives for various chargebacks (markdowns by stores, returns, credits, advertising allowances, and so forth), which the Company describes as an industry-wide practice. The court's understanding of the practice is that, for example, a representative might receive a 10% commission for a $10,000 sale for which the Company subsequently gave the customer a $3,000 credit. In that situation, the sale representative would receive a $1,000 commission(10% x $10,000) when the sale was made but would have a subsequent commission check reduced by $300 (10% x $3,000) when the customer received the credit. For customer credits not directly associated with specific merchandise sales, such as an advertising allowance, the Company allocated the customer credit (and thus the commission chargeback) between sales representatives based on their respective sales volumes to that customer.
The commission rate for Dillard's apparently was initially set at 5%, and then reduced to 3% by September 1993.
The written contract does not specify the "split commission" practice for sales by one representative to a customer in another representative's territory, the lower commission rate for major accounts, the inclusion of New Mexico in Liszt's territory, or the general practice of reducing commission checks for chargebacks. The parties nevertheless agree that all of these practices were part of their contractual relationship.
Liszt contends, however, that in other respects the practices described above violate the terms of the agreement between the parties, and that in some instances the actual calculation of the commissions varied from the Company's stated practices. There appear to be three separate categories of alleged underpayments: 1) commissions payable on sales to major accounts such as Dillard's department stores, where the parties disagree as to the provisions of their agreement; 2) other sales on which Liszt was due a commission but did not receive it, although the governing provision of their agreement is not in dispute; and 3) erroneous deductions from commissions for "chargebacks." With respect to sales to major accounts such as Dillard's, as noted above, the Company contends that the appropriate practice was to pay commissions to the sales representatives for the territories containing the stores to which the merchandise was actually shipped. Liszt contends that their agreement was different than the Company's agreement with other sales representatives, in that Liszt was entitled to commissions on sales to customers located in her territory, regardless of where the merchandise was shipped. She describes industry custom as providing that a customer's location is determined by its principal place of business. For example, Liszt argues that since Dillard's has its principal place of business in Arkansas, part of Liszt's territory, she was entitled to commissions on all sales to Dillard's.
Liszt also alleges that there were other sales for which she was due a commission, but did not receive it. These include merchandise ordered directly from the Company and shipped to stores in Liszt's territory; sales by Liszt shipped to territories (Kansas and Missouri) for which the Company had no sales representatives, for which she was due the entire commission;, sales by Liszt shipped to another sales representative's territory, for which she was due a "split commission"; and sales by other sales representatives to customers in Liszt's territory, for which she was due a "split commission." These alleged errors were discovered by Liszt during her review of the Company's records in connection with this lawsuit. As far as the court can tell, these discrepancies do not involve a dispute between the parties as to the provisions of their agreement; rather, they represent alleged deviations from those provisions.
With respect to deductions for chargebacks, Liszt does not challenge the practice per se but argues that it was at times applied incorrectly. The alleged errors include: 1) deducting chargebacks related to credits for specific sales although Liszt had not received a commission on the sale in the first place; 2) calculating chargebacks at a higher percentage rate than used for the original commissions; 3) deducting chargebacks without providing documentation in the form of a credit memo; and 4) deducting chargebacks for credits although the credits were already reflected in the net sale amount on which the original commissions were paid, thus reducing her commissions twice for the same customer credits. As with the preceding category, these alleged errors were discovered by Liszt during her review of the Company's records in connection with this lawsuit and apparently represent alleged deviations from the provisions of the parties' agreement rather than a dispute as to what those provisions require.
Liszt also contends that she "was charged 100% of the chargeback or a greater percentage of the chargeback or credit of the customer than the commission percentage of that particular customer that she actually received." This may be merely a reiteration of the statement that "[deductions from my commission were at a higher rate than the commission rate she was paid." If not, and the former represents something other than the other types of errors listed, the court is at a complete loss as to the meaning of the statement — in comparison, much of the Internal Revenue Code is a model of clarity — and therefore ignores it for purposes of this opinion.
Liszt and the Company parted ways in a less than amicable fashion. The parties negotiated a retirement agreement to take effect in July 1997. The final written agreement that the Company sent to Liszt apparently differed substantially from her expectations (based on their negotiations in February), and Liszt initially refused to turn the Dallas showroom over to Company representatives. The Spring 1998 "season" began on October 16, 1997, shortly after the parties' relationship was terminated.
Liszt filed suit against the Company in state court on September 5, 1997, and the Company removed to federal court on December 31, 1997. Pursuant to the court's order of September 29, 2000, Liszt filed her Second Amended Complaint, which asserts causes of action for breach of contract, quantum meruit, unjust enrichment, and failure to pay commissions due in violation of the Texas Sales Representatives Act, Tex. Bus. Com. Code Ann. §§ 35.81-35.86 (Vernon 1987 Supp. 2001). Liszt seeks compensatory damages in the amount of $878,409.30, trebling of damages pursuant to Tex. Bus. Com. Code Ann. §§ 35.84, an accounting of all amounts due her, and attorney's fees and costs. The Company denies that any amounts are due Liszt, and also asserts affirmative defenses of laches, waiver, modification, estoppel, quasi-estoppel, ratification, novation, statute of limitations, ambiguity, and repudiation.
Although the original petition was expressed in general terms, it appears that this lawsuit may have initially contemplated challenges which have since been dropped, such as to the lower commission rate for major accounts, the "split commission" practice, and any entitlement to commissions for the Spring 1998 season. Also, some of the commission underpayments that Liszt alleges were apparently only discovered during discovery. The court concludes that the allegations in the Second Amended Complaint comprehend the specific underpayment errors Liszt alleges, and that any previous disputes concerning the lower commission rate for major accounts and the split commission practice are not part of the lawsuit.
II. Procedural Motions A. Motion for Continuance
Liszt moves for a continuance pursuant to Fed.R.Civ.P. 56(f), to allow her to conduct a deposition of the Company's Accounting Manager, Patricia McNelis ("McNelis"), before responding to the Company's motion for summary judgment. The court notes that the Company filed its motion for summary judgment on January 8, 2001, almost two months before the close of discovery. Under the circumstances, Liszt's request seems reasonable. The court also notes, however, that Liszt filed a response to the Company's motion for summary judgment on January 29, 2001, and filed her own motion for summary judgment on April 2, 2001. After examining the cross motions for summary judgment, the court concludes that there is a substantial overlap of issues, and therefore will consider the cross motions jointly. Accordingly, Liszt has been afforded an opportunity to present her position on all the issues after the close of discovery. Her motion for continuance is therefore denied as moot.
McNelis' current position at the Company is Controller.
B. Motions to Strike Liszt Affidavits
The Company has filed two separate motions to strike the affidavit of Liszt. The first motion pertains to the affidavit filed in support of Liszt's response to the Company's motion for summary judgment; the second, to the affidavit filed in support of Liszt's motion for summary judgment. The court has compared the two affidavits carefully, and finds that they are virtually identical. Accordingly, the court considers the two motions to strike Liszt's affidavit jointly. The Company asserts that the court should strike the affidavits because: 1) they conflict with Liszt's deposition testimony; and 2) certain statements are conclusory and not admissible. The Company requests that the affidavits be excluded from consideration and that it be awarded attorney's fees pursuant to Fed.R.Civ.P. 56(g). Liszt disputes the Company's arguments, and requests that she be awarded attorney's fees for having to respond to the motion to strike.
A similar motion to strike was filed regarding the affidavit submitted in support of an earlier motion for partial summary judgment. The court's order of September 29, 2000, having granted Liszt leave to file an amended complaint, denied without prejudice both the motion for partial summary judgment and the motion to strike.
The second motion to strike explicitly incorporates the first.
The court need not address the Company's second contention. The court is not inclined to evaluate the admissibility of evidence unless needed. Often, challenged items of evidence will not affect the court's determination of the issues, and a resolution of admissibility will be unnecessary. Now that the Company has communicated its concerns about admissibility, the court can determine whether the evidence should be considered in making its rulings. The court will exclude the summary judgment evidence of both parties sua sponte where necessary (because the evidence would affect the court's ruling) and appropriate (because the evidence is not properly before the court).
"[T]he nonmovant cannot defeat a motion for summary judgment by submitting an affidavit which directly contradicts, without explanation, his previous testimony." Albertson v. T.J. Stevenson Co., 749 F.2d 223, 228 (5th Cir. 1984) (emphasis added). See also S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 495 (5th Cir. 1996); Thurman v. Sears, Roebuck Co., 952 F.2d 128, 136 n. 23 (5th Cir.), cert. denied, 506 U.S. 845 (1992). The basis for this conclusion, however, is "the reviewing court's determination that the issue raised by the contradictory affidavit constituted a sham. Certainly, every discrepancy contained in an affidavit does not justify a district court's refusal to give credence to such evidence." Kennett-Murray Corp. v. Bone, 622 F.2d 887, 894 (5th Cir. 1980).
The Company describes two alleged contradictions with Liszt's deposition testimony. The first concerns whether she was entitled to a commission on all sales to major accounts based in her territory (affidavit) or only those sales shipped into her territory (deposition). Having reviewed the deposition testimony, however, the court concludes that the two statements are not directly contradictory. In the deposition, Liszt stated that she needed discovery of the factor reports from the financial company to "see what was shipped into my territory" for the major accounts. Moments later, however, she also indicated that the factor's records are by company, and that she did not know whether the data was available by state. Another statement in her deposition, that she was "entitled to commission on anything that is shipped into my territory," was made in the context of a discussion of sales directly by the Company through its New York showroom. Apparently, her statement was primarily intended to address whether she was entitled to a commission despite her lack of direct involvement in the sale, rather than how her entitlement was or was not affected by where the merchandise was shipped.
Her statements may imply that she was due a commission only for those sales shipped into her territory, but that is not an inevitable conclusion. Stating that she was entitled to a commission on merchandise shipped into her territory does not necessarily mean that she was not entitled to a commission on merchandise sold to a customer "located" in her territory but shipped elsewhere. Her request for the factor reports is also not necessarily inconsistent. If she were paid, during a given month, for fewer sales to a given account than the amount shipped into her territory, that alone could establish that the Company had not paid all commissions due her, even if it did not establish the amount unpaid. The Company could have, if it chose, attempted to clarify her statement on the record during the deposition, but apparently did not do so. This is therefore not a direct contradiction.
The second alleged contradiction contrasts a statement that she was aware that the Company had made sales to Dillard's (deposition) with a statement that she was unaware at the time that she was not being paid all commissions due her (affidavit). This would be a direct contradiction only if she were not receiving any commissions on sales to Dillard's at the time, or receiving commissions based on sales volumes clearly less than those of which she was aware. The Company offers no indications of either of these circumstances.
The court concludes that the statements in the Liszt affidavit on which the Company bases its motion are neither directly contradictory of her deposition testimony nor a transparent sham. The court therefore denies both motions to strike the Liszt affidavits. The Company may, of course, explore apparent inconsistencies during trial. The court also concludes that these motions were not so unfounded as to justify awarding attorney's fees to Liszt, and therefore denies her request for same.
C. Motions to Strike the Company's Evidence
Liszt makes two motions to strike the Company's evidence, one concerning evidence submitted with the Company's motion for summary judgment and the other concerning evidence submitted with the Company's response to Liszt's motion for summary judgment. The first motion identifies certain evidence that is allegedly inadmissible as conclusory, speculative, hearsay, statements of opinion/conclusion rather than fact, or without qualification or identification as an expert witness qualified to testify on the subject matter. As with the similar objections raised by the Company to Liszt's evidence, the court need not address these objections because it will exclude the summary judgment evidence of both parties sua sponte where necessary (because the evidence would affect the court's ruling) and appropriate (because the evidence is not properly before the court).
Liszt also challenges two of the Company's affidavits as contradicted by deposition testimony by the affiants. The first motion challenges the affidavit of one of the Company's Sales Managers, Kathy Hill ("Hill"), and the second motion challenges the affidavit of the Company's Controller, McNelis. Both attacks clearly fail. The alleged inconsistency by Hill simply does not exist, as Liszt is contrasting Hill's statements about the Company's normal practices (affidavit) with her statement that she was not familiar with the Company's contractual arrangement with Liszt (deposition). Those are not necessarily the same thing, and Hill's lack of knowledge concerning the latter does not impeach her statement concerning the former. The alleged inconsistency by McNelis also evaporates upon examination. Her affidavit asserts that, based on her knowledge, the Company's agreement with Liszt called for paying commissions on sales to Dillard's only for sales shipped to stores in Liszt's territory or shipped to distribution centers which served mostly stores in Liszt's territory. Liszt notes that McNelis, in her deposition, also stated that Liszt received commissions for all sales to Neiman Marcus and Foley's, although both chains apparently have stores outside Liszt's territory. As the Company points out in its response, the challenged statements in the affidavit are limited to Dillard's, not "major accounts" in general, while the cited deposition testimony concerned only Foley's and Neiman Marcus. The affidavit and deposition in conjunction, of course, imply that the Company paid commissions to Liszt differently for these chains, without any explanation for the difference. That different treatment may well affect the credibility of the Company's evidence at trial, but credibility concerns are not implicated at the summary judgment stage. The court concludes that the affidavit does not clearly contradict McNelis' deposition testimony and therefore need not be excluded from consideration. For the foregoing reasons, the court denies Plaintiff's Motion to Strike and Plaintiff's Motion to Strike Affidavit of Pat McNeelis [sic]. The court will exclude the summary judgment evidence of both parties sua sponte where necessary (because the evidence would affect the court's ruling) and appropriate (because the evidence is not properly before the court). The court specifically declines to exclude the challenged affidavits as contradicting the affiants' prior deposition testimony. Of course, Liszt may explore these apparent discrepancies, which do not rise to the level of a direct contradiction, during the trial.
Liszt also challenges, by Objections rather than Motion, other testimony, including an affidavit by Lonnie Kane that allegedly contradicted his deposition testimony. As with the Hill affidavit, the alleged contradiction is illusory. The challenged portion of the affidavit concerned the Company's practices and industry custom, while the cited deposition testimony concerned the agreement between Liszt and the Company. The subject matter is different and therefore there is no contradiction.
Liszt characterizes McNelis' deposition as stating that Liszt received commissions for all sales to Neiman Marcus because Neiman Marcus' principal place of business is in Texas, but that is a blatant mischaracterization. The court assumes that Neiman Marcus' headquarters and principal place of business are indeed located in Texas, but McNelis clearly denied knowledge as to that fact, let alone any causal connection between that and the policy that Liszt was to receive commissions for all Neiman Marcus sales.
Liszt also argues that "[t]he entire Affidavit of Pat McNeelis [sic] is void due to the fact that the such [sic] Affidavit purports to have been executed in Los Angeles County, State of Texas." This challenge, based on an obvious but trivial error in the affidavit heading, is frivolous and the court rejects it.
III. Summary Judgment Standard
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Ragas, 136 F.3d at 458.
Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871 (1994). The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Ragas, 136 F.3d at 458. Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to support the nonmovant's opposition to the motion for summary judgment. Id., see also Skotak v. Tenneco Resins, Inc., 95 3F.2d 909, 915-16 n. 7(5th Cir.), cert. denied, 506U.S. 832 (1992). "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues which are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
IV. Motions for Summary Judgment
As noted above, due to the content of the submissions, the court will consider the arguments in Defendant's Motion for Summary Judgment and Plaintiff's Motion for Summary Judgment jointly. The court proceeds to analyze the arguments using the following framework: 1) Liszt's prima facie breach of contract case regarding a dispute as to the provisions of the contract, regarding the policy for sales to multi-territory customers; 2) Liszt's prima facie breach of contract case regarding the alleged deviations from agreed policy; 3) the Company's affirmative defenses; and 4) Liszt's other causes of action (for quantum meruit, unjust enrichment, and violation of the Texas Sales Representatives Act).
The Company's answer asserts affirmative defenses, inter alia, of modification, ratification, and novation. The court presumes that the latter actually is intended to argue a "substituted contract," a slightly different concept. See Black's Law Dictionary 325 (7th ed. 1999). All of these concepts directly relate to an alleged change in the provisions of the agreement between the parties. As such, they relate to the dispute concerning sales to multi-territory customers and are subsumed in the discussion of the prima facie breach of contract case, rather than separately addressed under the section on affirmative defenses.
A. Prima Facie Breach of Contract Case — the Dillard's Policy
Liszt has identified only one specific policy as in violation of her agreement with the Company. The Company contends that Liszt is entitled to a commission on sales to major accounts such as Dillard's only if the merchandise sold was shipped: a) into Liszt's territory, or b) to a distribution center which serviced mostly stores in Liszt's territory. Liszt contends that she was entitled to a commission on such sales if the customer's principal place of business was in her territory, regardless of where the merchandise was shipped.
Her other allegations concern the Company's deviation from undisputed policy, rather than a policy's deviation from the parties' agreement.
The written agreement contains two relevant provisions concerning the sales for which Liszt was entitled to a commission:
• "If any orders are taken by Company directly from customers within the territory covered by this Agreement, Representative shall be entitled to a full commission on said sales in the same manner as if representative had taken the order."
• "On all customers' regular priced orders received from the territory covered by this Agreement, Company agrees to pay representative a commission of 10% of the net income of invoices rendered to such customers."
As noted previously, the parties do not dispute that some of these terms, for example the commission rate as applicable to sales to major accounts, were modified.
Plaintiff's Appendix to Plaintiff's Motion for Summary Judgment at 13 (emphasis added). Liszt notes that these provisions make no reference to where merchandise is shipped, but only the customer's location (for direct sales, such as at the Company's New York showroom) and from where orders are received. Accordingly, she interprets these provisions, in the context of a multi-territory customer, to provide that she is entitled to commissions for all sales to any such customer "within [her] territory." As further evidence of the meaning of the contract, she offers her affidavit. The affidavit, in addition to describing her understanding of the contract provision, also states that during the first year of sales to Dillard's, Liszt received commissions for sales shipped to stores outside her territory, including Missouri, Arizona, and Georgia. Another sales representative (Dan Barton, or "Barton"), for the states of Georgia, Alabama, Kentucky, and Tennessee, supplied an affidavit stating that his agreement provided he was to be paid commissions on any sales shipped into his territory. Although there were Dillard's stores and a Dillard's distribution center within his territory, Barton did not receive commissions for any sales to Dillard's for at least his last four years as a sales representative. Also, as noted above, the Company's Controller stated in her deposition that Liszt received commissions on all sales to two other multi-territory department stores, Neiman Marcus and Foley's. A reasonable fact-finder could infer that this was the appropriate practice for all multi-territory department stores.
Liszt initially received copies of the sales orders and invoices, which identified the stores to which the merchandise was shipped. After the first year of sales, she states that she no longer received copies of the orders and invoices on a regular basis, and thus would have been unaware that the Company was only paying her commissions on merchandise shipped into her territory.
Liszt notes that her agreement differed from that of most of the Company's sales representatives; their agreements typically provided for commissions based on where the merchandise was shipped, rather than where the customer was located.
The Company relies on essentially three arguments to support its interpretation of the contract. The first is the apparent discrepancy between the Liszt affidavit and her deposition testimony. The court concludes that, although as noted above this was not a clear contradiction warranting striking the affidavit, it does constitute evidence supporting the Company's interpretation. The second is the Company's normal practice in paying, and the understanding of Company employees as to Liszt's entitlement to, commissions. This is relevant to the interpretation of the agreement provisions, as indicative of the Company's intent.
This arguably constitutes evidence either of the parties' original intent as to the meaning of the written contract, or alternatively of a subsequent modification of the terms of the agreement. With respect to the latter, it is not conclusive, as such modification must be known and accepted by the other party and there is a genuine issue of material fact whether Liszt was aware that she was not receiving commissions for sales to Dillard's shipped into other territories. Although not conclusive, it nevertheless is some evidence of modification.
The Company's third argument is its assertion of the rule of contract interpretation that a court should construe ambiguous language against the drafter of the contract. McDermott Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1206-07 (5th Cir. 1991) (insurance contracts); Republic Nat'l Bank of Dallas v. Northwest Nat'l Bank of Fort Worth, 578 S.W.2d 109, 115 (Tex. 1978). The written agreement was drafted by Liszt and therefore, the Company argues, the ambiguity regarding the treatment of sales to customers based in one territory, but with stores in multiple territories, must be construed against Liszt. The court finds this argument unpersuasive in these circumstances, however, and therefore insufficient to grant summary judgment, for four reasons.
First, this case does not implicate the paradigm circumstances supporting the principle of contra proferentem ("against the profferer"). Although not limited to such situations, this interpretive rule "is typically applied in interpretation of standard form contracts or invoked against a party operating at a distinct bargaining advantage." Carpenter v. Carpenter, 1996 WL 417648, at *5 (Tex.App.-Houston [1st Dist.] July 25, 1996, no writ). See also C L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 121 S. Ct 1589, 1596-97 (2001) (finding the rule inapposite not only because the contract was unambiguous but also because the Tribe did not "find itself holding the short end of an adhesion contract stick"); In re Delta America Re Insurance Co., 900 F.2d 890, 892 n. 4 (6th Cir.) (the rule "is an interpretive aid of greater value when dealing with contracts of adhesion or contracts negotiated between parties of unequal sophistication or bargaining power") (cited by McDermott Int'l, 944 F.2d at 1207), cert. denied, 498 U.S. 890 (1990); E. Allan Farnsworth, Contracts § 7.11 (2d ed. 1990); Restatement 2d of Contracts § 206, cmt. a. There is no indication in the record that Liszt had superior bargaining power to the Company when negotiating the contract. While that does not preclude the application of the rule of contra proferentem, it certainly weakens its force.
Second, whether a contract is ambiguous for purposes of this interpretive rule is appropriately determined based on the situation when the contract was formed. "Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered" Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983) (emphasis added). See also Farley v. Klaus, 946 S.W.2d 422, 424 (Tex.App.-Houston [14th Dist] 1997, writ denied) ("The court must look at the contract as a whole in light of the circumstances present when the contract was entered to determine whether the contract is ambiguous.") (emphasis added). It is far from clear based on the summary judgment evidence whether the contract provision in question was ambiguous when the contract was entered into in 1982. The provision is ambiguous only in the context of customers who are based in one territory but with stores in multiple territories. The Company may have had no such customers in 1982; its relationship with Dillard's began only in 1991. The principle of contra proferentem is based, in part, on a presumption that the party drafting the contract was aware of the ambiguity. The drafter is "more likely than the other party to have reason to know of uncertainties of meaning. Indeed, he may leave meaning deliberately obscure, intending to decide at a later date what meaning to assert." Restatement 2d of Contracts § 206, cmt. a. If the ambiguity was not present when the contract was formed, but only developed later as the Company's market expanded to include multi-territory department store chains such as Dillard's, the interpretive rule should be given less effect.
Third, this interpretive rule is not the only, or even necessarily the major, determinant of the legal effect of the contract. In particular, the parties' intent should be given effect. "In Texas a writing is generally construed most strictly against its author and in such a manner as to reach a reasonable result consistent with the apparent intent of the parties." Republic Nat'l Bank, 578 S.W.2d at 115 (emphasis added).
Further, application of the principle of contra proferentem necessarily ignores the intent of one party when a contract is ambiguous and the parties entered into the contract from equal bargaining positions but with conflicting intentions. However, the primary concern for a court in construing an ambiguous contract is to ascertain and give effect to the intent of the parties. A trier of fact faced with a contractual ambiguity should look to indicia of the parties' intent to interpret the contract.Carpenter, 1996 WL 417648, at *5 (emphasis added). As noted above, the parties here have submitted conflicting evidence as to their intentions.
Finally, the determination of intent is a quintessential fact question. The interpretive rule of contra proferentem therefore runs into a conflicting, and stronger, rule in this context — that the existence of a fact question as to an ambiguous contract precludes summary judgment. Coker, 650 S.W.2d at 394 ("When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue."); Farley, 946 S.W.2d at 424 ("If the contract contains an ambiguity, summary judgment is improper because the interpretation of the contract becomes a fact issue."). See also Vestal v. Conner, 1997 WL 461916, at *3-4 (Tex.App.-Houston [14th Dist] Aug. 14, 1997, pet. denied) (reversing the trial court's grant of summary judgment because the contract ambiguity created a fact issue, specifically in context of appellees' assertion of contra proferentem).
The court concludes, for these reasons, that this argument by the Company-that the written contract should be construed as they interpret it because Liszt drafted it — is insufficient to grant it summary judgment on this question. The other evidence and arguments offered by both parties demonstrate a genuine issue of material fact as to the terms of the parties' agreement with respect to sales to multi-territory customers. Accordingly, neither party is entitled to summary judgment as to this issue.
B. Prima Facie Breach of Contract Case — Deviations from Agreed Policy
Liszt alleges two categories of underpayments that are not based on disputes as to the appropriate policy — sales for which she was improperly denied a commission, and improper chargebacks deducted from her commissions. The summary judgment evidence relating to these alleged underpayments is particularly scarce. Liszt submits her affidavit, which recounts that she compared the Company's invoice registers and credit memo registers to her sales commission reports for the period of September 7, 1993 to November 26, 1997. Her analysis identified underpaid commissions of $803,336.98 and improper deductions of $74,820.75, for a total underpayment of $878,409.30. Based on the court's cursory review, the vast majority of the unpaid commissions Liszt identifies pertain to sales to Parisian's, apparently another multi-territory department store, and Dillard's. The amount of alleged underpayments not involving the dispute concerning the policy for multi-territory customers is not separately broken out.
The two component numbers do not add up to the total reported in the affidavit. Liszt does not account for the difference of $251.57. The court was also unable, after a brief attempt, to reconcile the supporting reports Liszt submitted to the numbers cited in her affidavit. Having chosen law as a profession rather than accounting, the court declines to make further attempts to reconcile the discrepancies.
Against this, the Company offers the affidavit of its Controller, who conducted an audit of Liszt's commissions and chargebacks for the "1994-1998 timeframe." Her audit was conducted based on the Company's interpretation of the parties' agreement regarding sales to multi-territory customers, and thus varies from Liszt's analysis. McNelis summarizes the results in her affidavit as follows: 123 transactions where Liszt was underpaid, for a total of $14,259.08, and various other transactions on which Liszt was overpaid, by a total of $19,600.55. After adjusting for amounts the Company held in reserve for outstanding markdown money, other chargebacks, customer returns, and the balance in Liszt's "account," McNelis identifies a net balance, due from Liszt to the Company, of $1,912.30.
The court concludes that there is a genuine issue of material fact with respect to alleged underpayments other than due to the dispute concerning multi-territory customers. Accordingly, neither party is entitled to summary judgment as to this component of Liszt's claims.
C. Breach of Contract — Affirmative Defenses
The Company asserts four affirmative defenses against Liszt's claims: waiver, estoppel, laches, and statute of limitations. The first three have at least one requirement in common. "Waiver is defined as an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right." Continental Casing Corp. v. Siderca Corp., 38 S.W.3d 782, 789 (Tex.App.-Houston [14th Dist] 2001, no writ) (emphasis added). Similarly,
the doctrine of equitable estoppel requires: (1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge or means of obtaining knowledge of the facts; (5) who detrimentally relies on the representations.Johnson Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515-16 (Tex. 1998). Because the Company characterizes the "fact" for purpose of equitable estoppel as that Liszt agreed with the manner in which the Company calculated the commissions, this implicitly requires that Liszt knew how the Company calculated the commissions. Finally, as to laches, the essential elements are "(1) unreasonable delay by one having legal or equitable rights in asserting them; and (2) a good faith change of position by another to his detriment because of the delay." Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 80 (Tex. 1989).
When a party takes no steps to enforce its known rights until the other party has, in good faith, so changed its position that it cannot be restored to its former state, the delay becomes inequitable and may estop the assertion of the right. Thus, proof that the [plaintiff] knew of its rights is essential to a defense of laches.City of Houston v. Muse, 788 S.W.2d 419, 422 (Tex.App.-Houston [1st Dist.] 1990, no writ). Accordingly, the first three affirmative defenses asserted by the Company all require that Liszt knew of a right which she failed to assert or otherwise concealed from the Company.
The Company argues that Liszt knew that commissions were calculated differently than Liszt's interpretation of the provisions of their agreement, and that therefore Liszt knew she had a right to seek recovery of underpayments. With respect to some aspects of the commission structure (such as the lower commission rate for major accounts, the "split commission" practice, and the practice of deducting "chargebacks"), the Company may well be correct that Liszt knew from the beginning that the Company's practices deviated from the terms of the written contract. Those practices, however, are not at issue here. At issue are: 1) the policy regarding sales to multi-territory customers, and 2) alleged errors in the calculation of other commissions or deductions.
The Company offers no evidence as to Liszt's prior knowledge of the second category, the alleged errors not related to disputes as to the provisions of the agreement. For knowledge of the policy regarding sales to multi-territory customers, the Company relies on Liszt's deposition statement that she was aware that the Company had made sales to Dillard's. As noted above, however, this does not necessarily contradict the statement in Liszt's affidavit that she was unaware at the time that she was not being paid all commissions due her. This would be a direct contradiction only if she were not receiving any commissions on sales to Dillard's at the time, or receiving commissions based on sales volumes clearly less than those of which she was aware. The Company offers no indications of either of these circumstances. Accordingly, the court concludes that the Company has not carried its burden of showing Liszt's prior knowledge of the alleged underpayments. The Company therefore is not entitled to summary judgment based on the affirmative defenses of waiver, estoppel, and laches. These defenses may, of course, be asserted at trial, but the Company has not shown the absence of a genuine issue of material fact as to what Liszt knew and when she knew it.
The Company also asserts that Liszt's admitted failure to check her commission statements necessarily implies that Liszt intended to waive her right to have any alleged mistakes corrected. The court disagrees that this is the only possible inference, and also notes that the case cited by the Company does not support this proposition.
The fourth affirmative defense asserted by the Company is another matter. In Texas, state law claims arising from breach of contract are subject to a four-year statute of limitations. Morriss v. Enron Oil Gas Co., 948 S.W.2d 858, 869 (Tex.App.-San Antonio 1997, no writ); Tex. Civ. Prac. Rem. Code Ann. § 16.004 (Vernon Supp. 2000). As this suit was filed on September 5, 1997, the Company asserts that any transactions that took place prior to September 5, 1993 must be excluded from the scope of this lawsuit. Liszt did not respond to this argument or assert that any tolling doctrines apply, and the court therefore concludes that there is no genuine issue of material fact as to Liszt's entitlement to maintain an action for unpaid commissions pertaining to transactions prior to September 5, 1993. Accordingly, the Company is entitled to judgment as a matter of law as to this limited question.
Texas courts interpret a breach of contract claim as an action for "debt" under the provisions of § 16.004(a)(3). Fazakerly v. Fazakerly, 996 S.W.2d 260, 264 n. 3 (Tex.App.-Eastland 1999, pet. denied). The residual limitations period of § 16.051, cited by the Company, therefore does not come into play.
D. Other Causes of Action
Liszt's claim under the Texas Sales Representatives Act for unpaid commissions is derivative of her breach of contract claim, since the breach in question is the alleged underpayment of commissions. The parties' arguments for summary judgment on this claim are similarly derivative of their arguments described above. As neither party is entitled to summary judgment with respect to the breach of contract claim, so too neither is entitled to summary judgment with respect to the claim under the Texas Sales Representatives Act.
Liszt also alleged causes of action for quantum meruit and unjust enrichment, specifying the same amount of damages as for her breach of contract claim. The Company argues that both causes of actin are disallowed when the services are performed pursuant to a contract.
In general under Texas law, a party seeking to recover for services rendered will only be able to recover under quantum meruit when there is no express contract between the parties. Therefore, a plaintiff may not recover under the general rule of quantum meruit when the claim pleaded fits within the subject matter of a contract between the parties.U.S. Quest Ltd. v. Kimmons, 228 F.3d 399, 406 (5th Cir. 2000). Although there are exceptions for partial performance on unilateral contracts and for contracts in which the defendant's breach prevents the plaintiff from completing performance, see id., Liszt has not asserted that the exceptions are applicable here. Similarly, "[i]n Texas, unjust enrichment is based on quasi-contract and is unavailable when a valid, express contract governing the subject matter of the dispute exists." Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 454 (5th Cir. 2001).
The Company quotes a Texas case, Truly v. Austin, 744 S.W.2d 934 (Tex. 1988), for this proposition. The quote it attributes to Truly, however, comes from another case. The court further notes that Truly discusses quantum meruit, but not unjust enrichment, and also states two exceptions to the general rule on which the Company relies. Although Liszt does not assert that either of those exceptions is applicable here, the Company should have acknowledged these exceptions in its presentation.
Liszt fails to address this argument with respect to the unjust enrichment claim. Her only response with respect to the quantum meruit claim is that it is available "[t]o the extent that the Court finds that no contract existed or portions of the relationship which are not subject to a valid, enforceable agreement." This argument is insufficient, as the parties clearly agree that there was a valid contract between them. The only disputes concern how Liszt's commission was to be calculated and alleged errors in violation of the agreement. Liszt has not indicated any work she performed for the Company that was not performed pursuant to their agreement. Accordingly, the court concludes that the Company is entitled to judgment as a matter of law with respect to the quantum meruit and unjust enrichment claims.
The policy dispute concerning sales to multi-territory customers is not enough to revive the quantum meruit and unjust enrichment claims. Any services by Liszt with respect to these customers were performed pursuant to her agreement with the Company. Even if the finder of fact concludes that sales to these customers but shipped into other territories were not part of the base for calculating her commission, that is not equivalent to a conclusion that the services were not covered by the agreement. There is no logical reason why remuneration cannot be calculated by reference to only a portion of work performed.
V. Conclusion
For the above-stated reasons, there is no genuine issue of material fact with respect to Liszt's quantum meruit and unjust enrichment claims. The Company is entitled to judgment as a matter of law as to those claims. There is a genuine issue of material fact as to her breach of contract claim, and neither party is entitled to judgment as a matter of law as to that claim. Liszt has not, however, demonstrated a genuine issue of material fact as to the Company's statute of limitations affirmative defense. Accordingly, the breach of contract claim is limited to underpayments of commissions on transactions that occurred on September 5, 1993 or later. Finally, there is a genuine issue of material fact as to Liszt's claim under the Texas Sales Representatives Act, and neither party is entitled to judgment as a matter of law on that claim. Accordingly, Defendant's Motion for Summary Judgment is granted in part and denied in part, and Plaintiff's Motion for Summary Judgment is denied. Liszt's claims for quantum meruit, unjust enrichment, and breach of contract prior to September 5, 1993, are hereby dismissed with prejudice. VI. Rescheduling Pretrial Deadlines
Pursuant to the court's order of June 4, 2001, pretrial deadlines were suspended pending the resolution of the parties' cross motions for summary judgment. As the court has now ruled on those motions, the case may proceed to trial. This case is almost four years old, and is the oldest case on the court's July docket. After careful consideration, the court concludes that it is still possible, and highly desirable, to go to trial in July. Accordingly, Defendant's Motion for Continuance of Trial Date is hereby denied. The pretrial deadlines are revised as follows:
The court further notes that the motion does not comply with Local Rule 40.1 and the court's scheduling order, which require that a motion for continuance of a trial setting be signed by the party as well as the attorney of record.
1. Pretrial Disclosures and Materials are to be filed by July 2, 2001.
2. Objections to Pretrial Materials and Motions in Limine are to be filed by July 9, 2001.
3. Pretrial Conference is scheduled for July 13, 2001 at 10:00 a.m.
At the pretrial conference, it should be possible to assign the specific date for the trial. All other provisions of the court's Order Modifying Scheduling Dates of September 29, 2000 remain in effect.
The court has already ruled on the admissibility of Liszt's expert witnesses, striking all but two of the thirteen proposed witnesses, by order dated March 22, 2000. The Company provided its designation of expert witnesses (all intended as rebuttal witnesses) on January 14, 1999 and Liszt has filed no motion to strike. Accordingly, the court assumes that there is no remaining dispute concerning the admissibility of testimony of expert witnesses pursuant to the standards of Fed.R.Evid. 702 and 703, as interpreted in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kuhmo Tire Co. v. Carmichael, 526 U.S. 137 (1999). In the unlikely event that either party still intends to challenge the other party's expert witnesses, the court requires that such challenges be resolved prior to trial, to avoid serious disruption caused by time-consuming hearings outside the presence of the jury. Accordingly, any such challenges to expert witnesses must be included with the parties' submission of pretrial materials on July 2, 2001, and responses included with the objections filed on July 9, 2001. Any party raising such a challenge will be required to explain satisfactorily to the court the reason for doing so at this late date.
The court further expresses its concern over the apparent possibility that the parties would need to present a large volume of sales and accounting data to a jury for determination of the amount of damages, if any. Accordingly, the parties are directed to confer concerning how most effectively and expeditiously to present voluminous sales and accounting data during trial, and incorporate a joint proposal on same in the proposed joint pretrial order.
It is so ordered