Summary
recognizing fraud claim based on defendants' post-contract promises of performance that fraudulently induced plaintiff to continue relationship with defendant past the time for performance rather than sue for breach or explore other options
Summary of this case from Ctr. Operating Co. v. Base Holdings, LLC (In re Base Holdings, LLC)Opinion
Civil Action No. 3:97-CV-2660-L
March 15, 2002
MEMORANDUM OPINION AND ORDER
Before the court are the following motions:
1. Defendants' Motion for Partial Summary Judgment, filed January 29, 1999;
2. Plaintiff's Motion for Partial Summary Judgment, filed April 5, 2001; and
3. Defendants' Supplemental Motion for Partial Summary Judgment, filed May 24, 2001.
4. Plaintiff's Motion to Compel Mediation, filed November 6, 2001. Also before the court is Defendants Gary Robbins' and Aldona Robbins' "Objection to Assertion of Personal Jurisdiction," most recently asserted in their Second Amended Answer, filed April 13, 2001. After having considered the parties' motions, their responses, and their replies thereto, the evidence submitted, and the applicable law, the court grants in part and denies in part Defendants' Motion for Partial Summary Judgment and Defendants' Supplemental Motion for Partial Summary Judgment; grants in part and denies in part Plaintiff's Motion for Partial Summary Judgment; and grants Plaintiff's Motion to Compel Mediation. Defendants' "Objection to Assertion of Personal Jurisdiction" is overruled.
Also before the court are: Plaintiff's Motion to Strike Summary Judgment Evidence, filed February 18, 1999; Defendants' Objections to the Affidavit Testimony of John C. Goodman, filed May 24, 2001; Plaintiff's Objections to Certain Portions of Defendants' Affidavits in Defendants' Appendix to Supplemental Motion for Partial Summary Judgment, filed July 27, 2001; Defendants' Objections to the Affidavit Testimony of Thomas R. Saving, filed August 20, 2001; and, Defendants' Objections to the Second Affidavit Testimony of John C. Goodman, filed August 20, 2001. With few exceptions, the majority of the objections contained in the parties' motions are themselves conclusory, boilerplate objections to otherwise admissible testimony. In any event, after a review of the parties' objections, the court makes the following rulings: The objections contained in Plaintiff's Motion to Strike, filed February 18, 1999 are overruled; Plaintiff's Objections to the Affidavit Testimony of John C. Goodman are overruled; Plaintiff's Objections to Certain Portions of Defendants' Affidavits are overruled; Defendants' Objections to the Second Affidavit Testimony of John C. Goodman are overruled; and Defendants' Objections to the Affidavit Testimony are overruled.
When a defendant challenges the court's personal jurisdiction, plaintiff must carry its burden of proof on the issue by making a prima facie case. See Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993). The burden then shifts to the defendant to present "a compelling case that the presence of some other consideration would render jurisdiction unreasonable." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985). A federal court has jurisdiction over a nonresident defendant if the state long-arm statute confers personal jurisdiction over that defendant, and if the exercise of jurisdiction is consistent with due process under the Unites States Constitution. Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir. 1993). Because the Texas long-arm statute extends to the limits of federal due process, Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990), the court must determine whether (1) the defendants have established "minimum contacts" with the forum state; and, (2) whether the exercise of personal jurisdiction over the defendants would offend "traditional notions of fair play and substantial justice." Ruston Gas, 9 F.3d at 418 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
The "minimum contacts" prong is satisfied when a defendant "purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Burger King Corp., 471 U.S. at 475. The non-resident defendant's availment must be such that the defendant "should reasonably anticipate being haled into court" in the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). The court concludes the Individual Defendants have engaged in sufficient conduct directed at Texas to confer jurisdiction over them. The Individual Defendants negotiated and executed a contract with NCPA, a Texas non-profit corporation, which states that it is to be performed in Dallas, Texas. Moreover, the Individual Defendants attended numerous meetings at NCPA's offices in Dallas, and made numerous telephone calls to NCPA's offices. Finally, the evidence indicates that the Individual Defendants conduct business with other Texas entities in their individual capacities. The court believes these minimum contacts satisfy the first prong of the jurisdictional test.
In evaluating the second prong of the test, the court must examine a number of factors including: (1) the defendants' burden; (2) the forum state's interests; (3) the plaintiff's interest in convenient and effective relief; (4) the judicial system's interest in efficient resolution of controversies; and, (5) the state's shared interest in furthering social policies. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112 (1987). In light of their substantial and continuous contacts with the State of Texas, the court cannot conclude that defendants suffer any more than a slight burden in litigating this matter in Texas. Moreover, the parties have been litigating this case in Texas for more than four years, and at no time during this period have the Individual Defendants moved to dismiss based on the court's lack of personal jurisdiction. Although the court cannot hold the parties' waived their jurisdictional objections on this basis alone, see e.g., Painewebber Inc. v. Chase Manhattan Private Bank (Switzerland), 260 F.3d 453, 461 (5th Cir. 2001), the court believes this fact weighs heavily in favor of retaining jurisdiction based on the fourth factor listed above. The court therefore holds NCPA established its prima facie case for jurisdiction over the Individual Defendants. Because the Individual Defendants failed to rebut Plaintiff's jurisdictional allegations, their "objection" is overruled.
I. Factual and Procedural Background
Plaintiff National Center for Policy Analysis ("NCPA") is a not-for-profit organization that disseminates information, reports, and studies regarding matters of public policy. Defendants Gary and Aldona Robbins own and operate Fiscal Associates, Inc., ("Fiscal"). Fiscal constructs computer systems that model various aspects of the national economy. The court now sets forth the facts and contentions of the parties.
NCPA contracted with Fiscal in October 1991 to develop a computer model of the U.S. Healthcare Market (the "Medical Model"). The parties signed a written instrument entitled the Basic Ordering Agreement ("BOA" or the "contract"). Under the terms of the BOA, NCPA paid Fiscal $150,000 to develop the computer model. In addition, the contract required Fiscal to use the Model to produce ten research studies, on topics and issues selected by NCPA, at the cost of $5,000 per study. These research studies were to be initiated by separate "order and delivery agreements" ("ODAs") in which NCPA stated more specifically the nature of each individual study. Finally, the BOA granted NCPA an exclusive license to use the Medical Model for other, additional research. The contract term ran from October 1, 1991 to September 30, 1993, except for the licensing agreement which, according to the terms of the BOA, expired in 1996.
The BOA does not describe in detail the specific type or technical characteristics of the Medical Model. NCPA contends the parties contemplated the construction of an economic model that conformed to "generally accepted principles and standards of econometrics." In support of this contention, NCPA alleges that the parties met in July 1990 and discussed a proposal entitled the "Project Plan for the Development of A MODEL OF THE U.S. HEALTH CARE MARKET" (the "Project Plan"). According to NCPA, the Project Plan called for the development of an econometric model and provided the blueprint for the computer model described only generally in the parties' contract. NCPA further contends Fiscal agreed to draft a paper (the "Technical Description") that described the Model's technical characteristics for publication in a peer reviewed economic journal.
Fiscal completed work on the Medical Model in May 1992, and by September 1992, had submitted a draft of the first research study using the software. NCPA released the results of the first study during a press conference in February 1993. Shortly after the release, however, Fiscal discovered technical flaws in the Model, and represented it could complete no further studies until it resolved these flaws. Fiscal did not "fix" the Model until December 1993, nearly three months after the expiration of the contract term.
Fiscal provided NCPA with a draft of the second research study in January 1994. In February 1994, NCPA contends Fiscal promised to complete the remaining eight studies by September of the same year. NCPA further alleges that Fiscal produced only three additional studies by September 1994, and ultimately completed only seven of the studies required by the BOA.
Fiscal submitted a final version of the Technical Description in January 1996, nearly three years after the expiration of the contract term. NCPA provided the Technical Description to a number of economists for peer review. The reviewers determined that the Technical Description did not meet professional standards, and therefore, would not be accepted for publication in any peer reviewed professional economics journal.
Plaintiff filed suit against Defendants in Texas state court on September 29, 1997, complaining of breach of contract and fraud. Defendants subsequently removed to this court. Plaintiff filed its Second Amended Complaint on March 30, 2001, wherein it asserted claims for (i) breach of contract; (ii) fraud; (iii) violations of the Texas Deceptive Trade Practices Act ("DTPA"); and (iv) violations of warranty provisions of the Texas Business and Commercial Code §§ 2.3 14 and 2.315. Defendant Fiscal and Defendants Gary Robbins and Aldona Robbins filed their amended answers on April 13, 2001. Defendant Fiscal asserted counterclaims against NCPA for (i) breach of contract; (ii) tortious interference with existing contracts; (iii) tortious interference with business relations; and (iv) defamation.
NCPA moves for summary judgment on all of its claims, which include breach of contract, fraud, DTPA, and breaches of warranty, and moves for summary judgment on Fiscal's tortious interference with contract and tortious interference with existing business relations claims. Defendants move for summary judgment on all of the claims asserted by Plaintiff.
II. 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. 1994), 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., 953 F.2d 909, 915-16 n. 7 (5th Cir. 1992), cert. denied 506 U.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.
III. Analysis
A. Breach of Contract
1. Claim of Breach for Failure to Construct Medical Model in Accordance with Generally Accepted Econometric Standards
The parties do not dispute that Texas contract law governs the construction and enforcement of the BOA. See Defs.' App. 26 ("This BOA . . . [is] performable in Dallas, Texas and shall be construed under the laws of the State of Texas."). Under Texas law, the court must ascertain the true intentions of the parties as expressed in the contract, considering the entire writing, and giving effect to all the provisions of the instrument so that none will be rendered meaningless. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Defendants argue the Texas parol evidence rule bars any extrinsic evidence to prove the parties intended to construct an econometric model.
Under Texas law, a court may admit parol evidence only after it finds the terms of the contract ambiguous. See Friendswood Dev. Co. v. McDade Co., 926 S.W.2d 280, 283 n. 1 (Tex. 1996). When determining the contract's meaning, the court must focus on the objective intention of the parties as evidenced by the contract itself See Sun Oil Co. (Delaware) v. Madelay, 626 S.W.2d 726, 727-28 (Tex. 1981). In Texas, the determination of contract ambiguity is a question of law. See Coker, 650 S.W.2d at 393; R P Enters. v. LaGuarta, Gavrel Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980).
A contract is ambiguous when, after applying established rules of construction, the court finds it reasonably susceptible to more than one interpretation. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996), Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 665 (Tex. 1987); Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2 154, 157 (Tex. 1951). To determine whether a contract is ambiguous, the court must examine the contract as a whole in light of circumstances existing at the time of its execution. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987). If the court finds the contract ambiguous, the parties may present parol evidence to explain the ambiguity, but the true intent of the parties remains a fact issue for the jury. See Trinity Universal Ins. Co. v. Ponsford Bros., 423 S.W.2d 571, 575 (Tex. 1968). "[E]ven when the contract is ambiguous, and parol evidence is therefore admissible to explain the ambiguity, such evidence is not competent to vary the terms of the contract or contradict the legal effect of its unambiguous provisions." Triad Elec. Controls, Inc. v. Power Systems Eng'g Inc., 117 F.3d 180, 191 (5th Cir. 1997) (citations omitted).
The court finds the BOA ambiguous as a mailer of law because the term "computer model" is susceptible to more than one reasonable interpretation. The BOA describes the model as "a computer model of the U.S. Health Care Market." Defs.' App. 19. Nowhere, however, does the contract identify the model's technical characteristics. Plaintiff's parol evidence, however, suggests the parties contemplated the construction of an econometric model. Specifically, NCPA contends the Project Plan prepared by Fiscal in July 1990 outlines the technical characteristics of computer model Fiscal agreed to develop and NCPA agreed to purchase prior to entering the BOA. See Pl.'s App. 24. Fiscal rejects this contention, and offers conflicting parol evidence to explain the parties' intentions. The court thus finds a genuine issue of material fact and denies summary judgment on this claim.
2. Claim of Breach for Failure to Complete the Contract Prior to the Expiration of the Contract Term
Defendants next contend Plaintiff waived its right to insist on strict compliance with the BOA's time requirements. Texas law defines waiver as the intentional relinquishment of a known right, or conduct which warrants the inference of a relinquishment of a known right. Massachusetts Bonding Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex. 1967). The elements of waiver include (1) an existing right, benefit or advantage; (2) knowledge, actual or constructive, of its existence; and (3) an actual intent to relinquish the right. FDIC Corp. v. Attayi, 745 S.W.2d 939, 946 (Tex.App. — Houston [1st Dist.] 1988, no writ). A waiver of strict performance may be inferred from the circumstances or from the parties' conduct. Puckett v. Hoover, 202 S.W.2d 209 (Tex. 1947). Absent an express renunciation of a known right, the intent element may be based on inference. Attayi, 745 S.W.2d at 947. The party who benefits from the waiver, however, carries a "particularly onerous" burden, and must establish that the opposite party "unequivocally manifested its intent to no longer assert its claim." Id. When based on inference, the question of waiver is generally one of fact for the jury. Id.; see also Ford v. Culbertson, 308 S.W.2d 865 (Tex. 1958).
Defendants concede they failed to perform their contractual obligations before the expiration of the contract term. Instead, they allege NCPA waived its right to timely performance. Specifically, Defendants contend NCPA requested that Fiscal perform additional, unrelated work before September 30, 1993. According to Fiscal, the completion of this unrelated work precluded Defendants from complying with the BOA. Defendants argue that these circumstances indicate NCPA's intention to waive its right to timely performance.
Defendants also argue that principles of estoppel bar Plaintiff from insisting on timely performance. Specifically, Fiscal contends the terms of the BOA require NCPA to submit an ODA to Fiscal before it could start work on any individual study. NCPA did not submit any ODAs before the end of March 1994. Thus, Fiscal argues, it was under no legal duty to perform its obligations by the express terms of the BOA. The evidence indicates, however, that Fiscal routinely performed work under the contract without the prior submission of an ODA. The study completed in February 1993, for example, was produced pursuant to the BOA and by agreement of the parties without a signed ODA. Similarly, Fiscal prepared the first draft of the Technical Description without insisting on the prior submission of a signed ODA. The court therefore rejects Defendants' estoppel argument.
The court cannot conclude, based on this evidence, that Plaintiff waived its right to timely performance as a matter of law. Defendants' motion for summary judgment on this claim is therefore denied. Plaintiff's cross motion for summary judgment is also denied.
B. Fraud
1. Claim of Fraud Based on Defendants' Representations that They Would Complete Work Under the Contract
NCPA bases its fraud claim on Defendants' representations "that they were working to finalize the Medical Model and prepare research reports, when, in fact, they were devoting their time to working for another entity on a more lucrative contract." Pl.'s Second Am. Compl. ¶ 23. Defendants argue that these alleged misrepresentations do not constitute actionable fraud because the alleged misrepresentations occurred after the execution of the contract.
Under Texas law, a cause of action for fraud 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 Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994). When the alleged fraud involves promises of future performance, the plaintiff must prove that, at the time the defendant made the promise, he had no intention of performing. See Schindler v. Austwell Farmers Coop., 841 S.W.2d 853, 854 (Tex. 1992); Formosa Plastics Corp. USA v. Presidio Eng'rs and Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998); Kajima Int'l v. Formosa Plastics Corp., 15 S.W.3d 289, 293 (Tex.App.-Corpus Christi 2000, pet. denied); Miga v. Jensen, 25 S.W.3d 370, 375 (Tex.App.-Fort Worth 2000, pet. granted).
As a general rule, failure to perform, standing alone, does not constitute evidence of a promissor's fraudulent intent. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986); Kajima, 15 S.W.3d at 293 ("[A]n unfulfilled promise does not, standing alone, constitute fraud; otherwise, every breach of contract would amount to fraud."). A breach of contract, coupled with "slight circumstantial evidence" of fraud, however, is sufficient to support a finding of fraudulent intent. Spoljaric, 708 S.W.2d at 435. The circumstantial evidence must be relevant to the defendant's intent at the time the promise was made. Formosa Plastics Corp., 960 S.W.2d at 48. Finally, intent is a fact question "uniquely within the realm of the trier of fact because it so depends upon the credibility of the witnesses and the weight to be given to their testimony." Spoljaric, 708 S.W.2d at 434.
In this case, NCPA provides summary judgment evidence that, when viewed in the light most favorable to the nonmoving party, proves both a failure to perform and circumstantial evidence of fraud. NCPA does not base its fraud claim on a mere breach of contract. Instead, Plaintiff offers competent summary judgment evidence to suggest Defendants postponed work on Plaintiff's contract past the September 1993 deadline to complete work on a more lucrative contract for a third party. A reasonable jury could find, based on this evidence, that Defendants fraudulently induced Plaintiff to continue its relationship with Fiscal past the time for performance rather than sue for breach or explore options with other economic consulting firms. The court therefore denies summary judgment on this fraud claim.
2. Claim of Fraud Based on Representations Made in the Final Technical Description
Defendants next move for summary judgment on NCPA's fraud claim based on alleged misrepresentations made in the Technical Description. Defendants maintain Plaintiff cannot produce any evidence to establish the elements of fraud. The court finds ample evidence in the record to suggest a genuine dispute of material fact regarding each element of Plaintiff's second fraud claim. A reasonable jury could conclude, based on Plaintiff's expert testimony, that Defendants fraudulently mischaracterized the model's technical attributes. Moreover, the evidence suggests that Defendants were aware that the Technical Description would be submitted for peer review and for eventual publication. Finally, there exists sufficient evidence to suggest that Plaintiff suffered actual harm as a result of Defendants' alleged fraudulent conduct. The court therefore denies summary judgment on this claim.
C. Texas Deceptive Trade Practices Act Claims
The Texas Deceptive Trade Practices Act ("DTPA") grants consumers a cause of action for damages caused by false, misleading, or deceptive acts or practices. See Tex. Bus. Coin. Code § 17.50(a)(1) (Vernon 1994). The DTPA provides "[a]ll actions brought under this subchapter must be commenced within two years after the date on which the false, misleading, or deceptive act or practice occurred or within two years after the consumer discovered or in the exercise of reasonable diligence should have discovered the occurrence of the false, misleading, or deceptive act or practice." Id. § 17.565, Defendants argue the statute's limitation provisions bar Plaintiff's DTPA claims.
Plaintiff filed suit in state court on September 29, 1997. Plaintiff first asserted its DTPA claims on November 24, 1998. Assuming Plaintiff's claims relate back to the original filing, Defendants must establish that Plaintiff discovered or should have discovered its DTPA claims before September 29, 1995 to succeed on their motion for summary judgment. The court finds conflicting evidence regarding when Plaintiff discovered or should have discovered through reasonable diligence the facts giving rise to its DTPA causes of action. Accordingly, summary judgment based on the statute of limitations is denied.
Defendants next contend summary judgment must be granted because the alleged deceptive acts occurred either after the contract had been formed or occurred in furtherance of performance. Under the DTPA, a consumer must establish that the defendant violated a specific provision of the Act and that the violation was a producing cause of the consumer's injury. See Tex. Bus. Coin. Code § 17.50(a)(1) (Vernon 1994). Defendants cite Texas Cookie Co. v. Hendricks Peralta, Inc., 747 S.W.2d 873, 880 (Tex.App.-Corpus Christi 1988, writ denied), for the proposition that post-transaction representations are not actionable under the DTPA because they could not have injured or adversely affected the plaintiff. See also Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 14 (Tex. 1996) ("An allegation of a mere breach of contract, without more, does not constitute a false, misleading or deceptive act in violation of the DTPA,") (internal citations omitted).
Defendants' reliance on Texas Cookie is incomplete. In Crawford, the Texas Supreme Court examined the intersection of the DTPA and contract law. See Formosa Plastics Corp. USA v. Presidio Eng'rs and Contractors, Inc., 960 S.W.2d 41, 45-46. (Tex. 1997) (clarifying Crawford v. Ace Sign, Inc., 917 S.W.2d 12 (Tex. 1996)). The court explained a plaintiff may not maintain a breach of contract action and a DTPA claim concurrently when "both the source of the defendant's duty to act . . . and the nature of the remedy sought by the plaintiff" are identical. Id. at 13. If the legal duty that prohibits a party from making misrepresentations arises from a source of law independent from the duties and obligations imposed by the parties' contract, then the claim is actionable under the DTPA. See, e.g., Howell Crude Oil Co. v. Donna Refinery Partners, Ltd, 928 S.W.2d 100, 109 (Tex.App.-Houston [14th Dist.] 1996, writ denied).
Here, the summary judgment evidence indicates that Defendants allegedly made false and deceptive statements after the expiration of the contract term. A reasonable trier of fact could conclude, based on this evidence, that Defendants' allegedly deceptive conduct induced Plaintiff to continue the contractual relationship beyond the contract term and to pay for additional services. Because the court finds a genuine dispute of material fact regarding the substance of the allegedly deceptive acts, the timing of those acts, and the damages incurred, the court denies summary judgment on this claim.
D. Breach of Warranties
The court grants Defendants' motion for summary judgment on Plaintiff's breach of warranty claims. Plaintiff alleges violations §§ 2.314 and 2.315 of the Texas Business and Commercial Code. These provisions grant a cause of action in the context of a sale of goods. See Tex. Bus. Coin. Code § 2.106(a) (Vernon 1994). Section 2.106(a) defines "sale" as the passing of title from the seller to the buyer for a price. Id. "It is elementary law that title of the transferred item must pass to and be vested in the transferee in order for the transaction to be a sale." Franklin v. Jackson, 847 S.W.2d 306, 308 ("Tex. App. 1993). The BOA expressly grants NCPA an exclusive license to the Medical Model. See Def. Fiscal's Second Am. Answer Ex. A. Accordingly, Plaintiff's breach of warranty claims do not fall within the provisions of the Texas Business and Commercial Code. Defendants' motion for summary judgment is therefore granted, and Plaintiff's fourth and fifth causes of action are dismissed with prejudice.
Section 2.314 provides "a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind." Section 2.3 15 provides "[w]here the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified . . . an implied warranty that the goods shall be fit for such purpose."
E. Defendant's Counterclaims
Plaintiff moves for summary judgment on Defendant Fiscal's counterclaim for tortious interference with contract. Under Texas law, the elements of tortious interference include: (1) the existence of a contract subject to interference; (2) a willful and intentional act of interference; (3) that was the proximate cause of plaintiff's damages; and (4) that actual damage or loss occurred. See Texas Beef Cattle Co. v. Green, 921 S.W.2d 203, 210 (Tex. 1996). Texas law does not require actual breach, however, the complaining party must demonstrate that the interference made "performance [of the contract] more burdensome or difficult, or of less or no value to the one entitled to performance." Hughes v. Houston Northwest Med Ctr., Inc., 680 S.W.2d 838, 842 (Tex.App.-Houston [1st Dist.] 1984, writ ref'd n.r.e.).
Fiscal does not point to any evidence that indicates its existing contracts were breached or made more difficult to perform as a result of NCPA's alleged tortious conduct. In response to Plaintiff's motion for summary judgment, Fiscal submits the affidavit of Tom Giovanetti, wherein he testifies that John Goodman, President of NCPA, made disparaging remarks about the Medical Model and the quality of Fiscal's work. Even assuming these remarks amount to tortious interference, Fiscal fails to produce any evidence to suggest it was damaged as a result of Goodman's remarks. In fact, the evidence demonstrates that Goodman's remarks had little or no effect on Fiscal's existing business opportunities. During his deposition, for example, Gary Robbins admitted that Fiscal procured "four or five" additional contracts with Giovanetti's organization. Fiscal points to several other business relationships in its response to Plaintiff's motion for summary judgment, but similarly fails to demonstrate how Goodman's remarks caused its existing contracts to be breached or made more difficult to perform. The court therefore grants Plaintiff's motion for summary judgment on Defendant's counterclaim for tortious interference with contract.
Plaintiff also moves for summary judgment on Defendant's counterclaim for tortious interference with prospective business relations. Under Texas law, the elements of this claim include: (1) a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) an independently tortious or unlawful act by the defendant that prevented the relationship from occurring; (3) that the defendant did such act with a conscious desire to prevent the relationship from occurring or the defendant knew the interference was certain or substantially certain to occur as a result of the conduct; and (4) that the plaintiff suffered actual harm or damage as a result of the defendant's interference. See Baty v. Protech Ins. Agency, 63 S.W.3d 841, 860 (Tex.App.-Houston [14th Dist.] 2001, pet. filed) (clarifying the elements of a tortious interference with prospective business relations claim after Wal-Mart Stores, Inc. v. Sturges, 52 S.W.3d 711 (Tex. 2001)).
The court grants Plaintiff summary judgment on Fiscal's counterclaim for intentional interference with prospective business relations because Fiscal fails to produce any evidence to establish the first element of its claim. The first element requires Fiscal to identify facts and circumstances demonstrating a reasonable probability that it would have entered into a business relationship with a third party. See Hill v. Heritage Res., Inc., 964 S.W.2d 89, 109 (Tex.App.-El Paso 1997, pet. denied) ("More than mere negotiations must have taken place."). Defendant identifies a laundry list of prospective business opportunities, but does not point to any specific evidence in the record establishing the probability that Fiscal would develop any of them into a working business relationship. See Ragas, 136 F.3d at 458 (stating party opposing summary judgment must identify specific evidence in the record and articulate precise manner in which that evidence supports his claim).
Moreover, in Sturges, the Texas Supreme Court held that "to recover for tortious interference with a prospective business relation a plaintiff must prove that the defendant's conduct was independently tortious or wrongful." Sturges, 52 S.W.3d at 726. The court explained that "[c]onduct that is merely sharp or unfair is not actionable and cannot be the basis for an action for tortious interference with prospective relations." Id. In its briefing papers, Fiscal repeatedly accuses Plaintiff of engaging in a "whisper campaign of disparagement and defamation." but fails to identify facts that substantiate these allegations. Instead, Fiscal offers unspecific, conclusory allegations and hearsay testimony. See, e.g., Giovanetti Aff. ¶ 8 ("John Goodman admitted that he had said a number of derogatory things about Gary and Aldona Robbins and Fiscal to others."); Hunter Aff. ¶ 6 ("Mr. Goodman said words to the effect that `Larry, you know we are good friends and I want to give you a heads up on something. I want to let you know about problems with [Fiscal]. . . . [A]s a result of NCPA's substantive concerns regarding the work of [Fiscal], our relationship has soured and legal actions are starting.'"). The court finds that these facts alone, even when viewed in the light most favorable to the Defendant, do not amount to an independently tortious or unlawful act by the defendant that prevented the relationship from occurring. See Sturges, 52 S.W.3d at 723-24. The court therefore grants summary judgment and dismisses with prejudice Fiscal's tortious interference with business relations claim.
IV. Plaintiff's Motion to Compel Mediation
Plaintiff requests that the court issue an order compelling the parties to mediate their remaining claims. The Northern District of Texas has adopted a Civil Justice Expense and Delay Reduction Plan. Under this plan, a party may request that a court refer a matter to mediation. Northern District Civil Justice Expense and Delay Reduction Plan § IIIA ("A judge may refer a case to ADR on the motion of any party, on the agreement of the parties, or on the Judge's own motion."). the court believes this matter is appropriate for mediation. The court's ruling narrows the issues, and puts the case in a different light. The parties know precisely what issues will be tried, and the court believes that the current posture of the case presents an opportunity for the parties to rethink their positions before the case proceeds to trial. Moreover, given the amount of damages at issue and the amount of legal fees already expended by the parties, it would behoove all involved to resolve this action without the necessity of a trial. The court therefore grants Plaintiff's request for mediation and hereby orders the parties to mediate the remaining claims in this case by April 30, 2002 before a mediator of their choosing.
V. Conclusion
For the reasons stated herein, Defendants' Partial Motion for Summary Judgment, Defendants' Supplemental Motion for Partial Summary Judgment, and Plaintiff's Motion for Partial Summary Judgment are granted in part and denied in part as provided above.
It is further ordered that Plaintiff's Motion to Compel Mediation is granted. The parties are hereby ordered to mediate their remaining claims by April 30, 2002.
A scheduling order setting this case for trial in July 2002 will be entered by separate order.
It is so ordered this 15th day of March, 2002.