Opinion
Civil Action No. 3:03-CV-1437-No.
May 11, 2005
ORDER
Before the Court is Defendant's Motion for Partial Summary Judgment filed on November 23, 2004. For the reasons stated below, the Court grants Defendant's motion.
I. BACKGROUND
Defendant Centex Construction Company, Inc. ("Centex") was the general contractor on a project for the Veteran's Affairs ("VA") Medical Center in Dallas, Texas and Plaintiff Cleveland Construction, Inc. ("Cleveland") was a subcontractor for the project. In 1999, Cleveland sued Centex for delays and changes in the scope of the project, and the two parties settled by written agreement dated April 10, 2002 (the "Settlement Agreement"). The Settlement Agreement resolved only the direct claims between Cleveland and Centex, carving out an exception for Cleveland's claims against the VA. Meanwhile, Centex had been negotiating with the VA about its claims and its subcontractors' claims arising out of the project (the "Omnibus Claim"). The Settlement Agreement included provisions regarding Centex continuing negotiations on the Omnibus Claim and filing suit against the VA on Cleveland's behalf. Cleveland filed the instant suit claiming that Centex was obligated to file suit on Centex's behalf and breached the Settlement Agreement and its fiduciary duties by failing to do so. Centex moves for summary judgment arguing that the Settlement Agreement did not impose a duty on Centex to file suit and that Centex assumed no fiduciary duties with respect to Cleveland.
II. BREACH OF THE SETTLEMENT AGREEMENT
The Court first considers what obligations the Settlement Agreement with Cleveland imposes on Centex. "Under Texas law, a settlement agreement is a contract subject to the same rules of construction as other contracts." Certain Underwriters at Lloyd's, London v. Oryx Energy Co., 203 F.3d 898, 901 (5th Cir. 2000) (citing Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990)). "A court's primary concern in construing a contract is to ascertain the intentions of the parties as expressed in the instrument memorializing their agreement." Id. (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)). To achieve this goal, the Court "examine[s] the entire document and consider[s] each part with every other part so that the effect and meaning of one part on any other part may be determined." Heritage Resources v. Nationsbank, 939 S.W.2d 118, 121 (Tex. 1996). The Court must also "presume that the parties to a contract intend every clause to have some effect." Id.
Applying the foregoing rules of construction to the Settlement Agreement, the Court holds that Centex is not obligated to file suit on Cleveland's behalf. The portion of the Settlement Agreement at issue is paragraph 3(f):
Nothing in this Agreement obligates [Centex] to pursue litigation or other proceedings on behalf of [Cleveland]. If [Centex] elects not to pursue litigation, [Centex] will consult with [Cleveland] regarding allowing [Cleveland], in [Centex's] name, to institute further proceedings. However, in such event, the entire cost of such further proceedings shall be borne by [Cleveland]. In addition, if [Centex] is unable to settle the remaining claims with the [VA], [Cleveland] shall indemnify and hold [Centex] and its subcontractors harmless from any loss or diminution of the amount [Centex] and its subcontractors have stated they are willing to accept without proceeding further plus interest thereon at the rate payable under the Contract Disputes Act of 1978. [Cleveland] shall, at the request of [Centex], be required to furnish [Centex] with reasonable evidence of its financial ability to indemnify and hold harmless [Centex] and its subcontractors in the amount for which [Centex] and its subcontractors are willing to settle their respective claims, plus interest, as aforesaid, and [Centex] may demand that [Cleveland] escrow funds with a bank agreeable to [Centex] or provide [Centex] with a surety bond in the aggregate amount of the remaining claims of [Centex] and its subcontractors. Failure by [Cleveland] to either escrow such funds or furnish such surety bond as above provided within fifteen (15) days of having been requested to do so by [Centex] shall constitute a complete waiver by [Cleveland] of the right to proceed any further with said appeal, and [Cleveland] shall be required to settle its claims for the amount to be determined in accordance with Paragraph 3(d). [Centex] will file suit in the Court of Federal Claims or commence a proceeding with the VABCA within 12 months of the date of this Agreement, absent [Cleveland's] consent to an extension of such date, it being understood that such consent will not be unreasonably withheld.
Thus, the Court must give effect to all of the following statements: (1) "[n]othing in this Agreement obligates [Centex] to file suit," (2) "[i]f [Centex] elects not to pursue litigation," and (3) "[Centex] will file suit . . . within 12 months. . . ."
When read as a whole, paragraph 3(f) concerns the circumstances under which suit may be brought against the VA on Cleveland's behalf. The first two sentences of paragraph 3(f) do not obligate Centex to sue; rather they give Centex the sole discretion to bring suit against the VA. Viewed in this context, the last sentence of paragraph 3(f) simply limits the time during which Centex may exercise its exclusive right. Centex has the exclusive right to sue for twelve months plus any extension Cleveland may grant. Thereafter, assuming Cleveland meets all the other requirements from paragraph 3(f), Cleveland may seek Centex's cooperation to institute proceedings against the VA; however, Centex need only "consult" with Cleveland in that regard. Nothing in paragraph 3(f) obligates Centex to: (1) sue the VA, (2) seek an extension of time in which to do so, or (3) allow Cleveland to file suit in Centex's name. Accordingly, the Court grants Centex summary judgment on the breach of contract claim.
Because the Court grants Centex summary judgment as already detailed, the Court does not consider the following arguments Centex advances: (1) any breach is excused because Cleveland unreasonably withheld its consent to an extension of the twelve month period, and (2) Cleveland's damages are unrecoverable as a matter of law. In addition, the Court does not consider Centex's motion to strike Cleveland's argument that Centex breached the Settlement Agreement by refusing to allow Cleveland to sue in Centex's name.
III. BREACH OF FIDUCIARY DUTY
The Court next considers whether Centex owes fiduciary duties to Cleveland. Under Texas law, fiduciary duties arise in two ways: first as a matter of law in certain relationships, such as principal/agent and among partners, Crim Truck and Tractor Co. v. Navistar International Transportation Corp., 823 S.W.2d 591, 593-94 (Tex. 1992), and second, by an informal relationship "where one person trusts in and relies on another, whether the relation is a moral, social, domestic, or purely personal one." Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 176 (Tex. 1997). However, not every relationship of trust and confidence creates fiduciary duties. Id. at 177; Crim Truck Tractor Co., 823 S.W.2d at 594. When confronted with an allegation of a fiduciary relationship between contracting parties, "to give full force to contracts, [courts] do not create such a [fiduciary] relationship lightly." Schlumberger Tech. Corp, 959 S.W.2d at 177. Furthermore, "while a fiduciary or confidential relationship may arise from the circumstances of a particular case, to impose such a relationship in a business transaction, the relationship must exist prior to, and apart from, the agreement made the basis of the suit." Id. Although the question of whether a fiduciary relationship exists is normally a question of fact, when the question is one of no evidence, it becomes a question of law for the Court. Crim Truck Tractor Co., 823 S.W.2d at 594.The Court holds that no fiduciary duties exist between Centex and Cleveland. Cleveland does not advance any basis, such as agency or partnership, for holding that Centex and Cleveland owe each other fiduciary duties as a matter of law. Here, the only basis for finding a confidential relationship between the parties is the fact that Centex agreed to continue pursuing Cleveland's claims against the VA and created a framework for any future legal proceedings against the VA in Centex's name. While Centex would be attempting to protect Cleveland's interests and Cleveland contends it trusted Centex to do so, the alleged confidential relationship could arise only from the Settlement Agreement. The parties' relationship prior to the Settlement Agreement was adversarial in nature, as evidenced by the prior lawsuit and the fact of the Settlement Agreement itself. Thus, no confidential relationship exists between the parties apart from the agreement made the basis of this suit. Accordingly, the Court grants Centex summary judgment on the breach of fiduciary duty claim.