Opinion
CIVIL ACTION NO 4:99-CV-0665-P
February 13, 2001
MEMORANDUM OPINION AND ORDER
Now before the Court are the following:
1. Defendant The Medallion Company, Inc.'s Motion for Summary Judgment and Brief in Support, filed on October 2, 2000;
2. Plaintiff FFP Marketing Company, Inc.'s Response to Motion for Summary Judgment and Brief in Support, filed on January 16, 2001; and
3. Defendant's Reply to Plaintiff's Response to Defendant's Motion for Summary Judgment, filed on February 2, 2001.
For the reasons set forth below, the Court concludes that Defendant's Motion for Summary Judgment should be GRANTED as to all of Plaintiff's claims.
BACKGROUND
This case involves a contract dispute. Plaintiff FFP Marketing Company, Inc. ("FFP") is a marketing company active in retail convenience store and truck stop operations, fuel distribution, and money order sales. Defendant The Medallion Company, Inc.'s ("Medallion") manufacturers over twenty-five (25) types of cigarettes under several brand names and sells them to licensed wholesalers across the country. Medallion's products are generally the lower cost "discount" brands as opposed to "premium" brands, such as Marlboro and Winston offered by other manufacturers. FFP alleges in this lawsuit that Medallion breached a contract for the sale of cigarettes.
In the summer of 1998, FFP was looking for a supplier of discount cigarettes with whom it could enter into a long-term pricing agreement, and thereby rebuild its wholesale business. An initial meeting was arranged between Medallion and FFP in Chicago. Following the Chicago meeting, on November 2, 1998, Medallion's National Sales Manager, Wayne Rice, sent a letter ("November 2 letter") relaying Medallion's cigarette pricing information for the year 1999 to Mike Triantafellou, Vice President of Retail Operations for FFP. Rice and Triantafellou then had additional conversations by telephone. Thereafter, on November 3, 1998, Rice sent a second letter ("November 3 letter") to Triantafellou outlining lower pricing information for FFP for a five-year period. It is this November 3 letter, together with the prior discussions between the parties, that FFP alleges formed an offer, which FFP accepted on November 24, 1998. FFP now brings the current lawsuit, alleging claims for breach of contract; or, in the alternative, anticipatory breach or specific performance; declaratory judgment; and fraud based on the alleged contract.
In response, Medallion asserts that following transmission of the November 3 letter, it did not receive any response from FFP. Rice made several phone calls to Triantafellou at FFP; none of which were returned. Medallion states that all indications from FFP pointed to its disinterest in doing business with the Defendant, and Medallion believed FFP was shopping with other suppliers for a better price.
On November 21, 1998, the Offices of the Attorney Generals for forty-six (46) states and the major cigarette manufacturers signed the Master Tobacco Settlement Agreement ("Master Settlement Agreement"). Shortly thereafter, on November 24, 1998, only one day after the public announcement of the Master Settlement Agreement and a price hike by the major tobacco manufacturers, Medallion received its November 3 letter from FFP indicating that it was signed and accepted. Medallion argues that no enforceable contract exists under Texas law for lack of a quantity term and mutuality of obligation. Furthermore, Medallion argues that, even though it denies a contract exists, it is still willing to honor the prices quoted in its November 3 letter (plus the addition of certain "fees" resulting from the Master Settlement Agreement and subsequent industry price hike). FFP, however, has never ordered and continues not to order cigarettes from Medallion.
DISCUSSION
I. SUMMARY JUDGMENT STANDARD
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). All evidence and the reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). The moving party bears the burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and of identifying those portions of the record that demonstrate such an absence. Celotex, 477 U.S. at 323.
Once the moving party has made an initial showing, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The party defending against the motion for summary judgment cannot defeat the motion unless he provides specific facts that show the case presents a genuine issue of material fact, such that a reasonable jury might return a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Mere assertions of a factual dispute unsupported by probative evidence will not prevent summary judgment. Id. at 248-50; Abbot v. Equity Group, Inc., 2 F.3d 613, 619 (5th Cir. 1993). In other words, conclusory statements, speculation and unsubstantiated assertions will not suffice to defeat a motion for summary judgment. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc). If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case, and on which he bears the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
Finally, the Court has no duty to search the record for triable issues. Guarino v. Brookfield Township Trustees, 980 F.2d 399, 403 (6th Cir. 1992). The Court need only rely on the portions of submitted documents to which the non-moving party directs. Id.
II. BREACH OF CONTRACT, ANTICIPATORY REPUDIATION, SPECIFIC PERFORMANCE, AND DECLARATORY JUDGMENT
Plaintiff alleges a claim for breach of contract, or, in the alternative, anticipatory repudiation or specific performance. Plaintiff also seeks a declaratory judgment as to the rights and duties of the parties under the contract. Because these claims are interrelated insofar as they are each based on Plaintiff's assertion that a contract did in fact exist between the parties, similar arguments are grouped together where appropriate for purposes of this analysis.
A. Absence of a Quantity Term
The UCC unequivocally states that a contract involving the sale of goods is not enforceable without a quantity term. See Tex. Bus. Corn. Code Ann. § 2.201; Merritt-Campbell, Inc, v, RxP Products, Inc., 164 F.3d 957, 962 (5th Cir. 1999). The Uniform Commercial Code, as enacted by the Texas legislature, provides that:
FFP argues that no Texas courts have specifically addressed the issue of whether a contract for the sale of goods must contain a quantity term. While there are no Texas cases directly on point, the Texas Legislature has addressed this issue in § 2.201 of the Texas Business and Commerce Code as well as in the Official Comments to § 2.201. Additionally, the Fifth Circuit has analyzed the Texas statute and its Comments and found that, indeed, a contract for the sale of goods must contain a quantity term. Merritt-Campbell, Inc. v. RxP Products, Inc., 164 F.3d 957, 962 (5th Cir. 1999).
Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract or sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
Tex. Bus. Com. Code Ann. § 2.201(a). The Official Comments to UCC § 2.201 confirms that a contract for the sale of goods must contain a quantity term to be enforceable. Tex. Bus. Com. Code Ann. § 2.201, cmt. 1. "Only three definite and invariable requirements as to the memorandum are made by this subsection. First, it must evidence a contract for the sale of goods; second, it must be "signed," a word which includes any authentication which identifies the party to be charged; and third, it must specify a quantity. Tex. Bus. Com. Code Ann. § 2.201, cmt. 1 (emphasis added).
As an initial matter, it is uncontested that the alleged contract between the parties does not contain a quantity term, as required under Texas law. See Tex. Bus. Com. Code Ann. § 2.201(a), cmt. 1 Plaintiff, however, argues that a quantity term is not needed because the contract in this case is a hybrid requirements and exclusivity contract and is thus exempted from having a quantity term. FFP Br. at 16. While Defendant admits that a quantity term is not necessary in a requirements contract or exclusive dealings contract, it argues that Plaintiff has provided no evidence to suggest that the parties contemplated or agreed to such a contract.
We turn now to whether the alleged contract between the parties is a hybrid exclusivity and requirements contract, as asserted by Plaintiff. In an exclusive dealings contract, a buyer agrees to purchase exclusively from the seller. In a requirements contract, the quantity term need not be numerically stated; rather, the quantity to be delivered under the contract is "a party's requirements." Merritt-Campbell, Inc. v. RxP Products, Inc., 164 F.3d 957, 963 (5th Cir. 1999) (citing Mid-South Packers, Inc. v. Shoney's, Inc., 761 F.2d 1117, 1120 (5th Cir. 1985). In addition, in requirements contracts, the quantity of goods to be delivered under the contract is determined by the good faith requirements of the buyer. This does not mean, however, that the statute of frauds' requirement of a quantity term is obviated since the inclusion of a quantity term is a mandatory requirement under the UCC. Merritt-Campbell, Inc., 164 F.3d at 963. There must be some writing that indicates the buyer agrees to purchase from the seller his entire requirements or up to a specified amount. Id.
In addition, § 2.306 provides that a "lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale." Tex. Bus. Com. Code Ann. § 2.306(b).
Section 2.306 prescribes that a "term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded." Tex. Bus. Com. Code Ann. § 2.306(a).
FFP argues that the Court need look no further than Medallion's product description materials to determine the quantity term in the agreement. FFP asserts that such "Fact Sheets" show the brands, sizes, prices, packaging quantities, and five-case minimum ordering requirement of Medallion's products. Plf. App. at 217-228. FFP states that these materials indicate that Medallion was pricing its product in order to solicit an agreement in which it would receive and fill orders in quantities to be determined over the life of the contract, by orders placed in minimum lots of five cases. FFP Br. at 15. The Court is unpersuaded by FFP's argument. The product description materials simply relay the specifics of Medallion's product line as well as its minimum ordering requirement — five cases. The language in the written documentation simply does not specify a quantity relating to FFP's requirements, nor does it evidence an agreement that FFP promises to purchase any goods, much less purchase those goods exclusively, from Medallion. Thus, the Court finds that the alleged contract between the parties cannot properly be characterized as a requirements contract or an exclusive dealings contract.
These materials were given to FFP by Medallion during the contract negotiations leading up to the November 2 and November 3 letters.
Consequently, the Court concludes that FFP's claims must fail as a matter of law for failure to prove the existence of an enforceable contract between the parties. As such, Defendant's motion for summary judgment is granted as to Plaintiff's claims for breach of contract, anticipatory repudiation, and specific performance. Furthermore, with respect to Plaintiff's claim for declaratory judgment, because a valid, enforceable contract does not exist in this case, the parties do not have any contractual rights or owe any duties to one another.
B. Lack of Consideration
Even assuming, arguendo, that the memoranda between FFP and Medallion constituted a contract, such an agreement still fails as a matter of law for lack of consideration or mutuality of obligation.
An essential element of a requirements contract is the promise of the buyer to purchase exclusively from the seller either the buyer's entire requirements or up to a specified amount. Merritt-Campbell, Inc. v. RxP Products, Inc., 164 F.3d 957, 963 (5th Cir. 1999). In other words, a requirements contract is a contract that prohibits the buyer from purchasing from other sellers. Id. Without such a promise by the buyer, a requirements contract fails for lack of consideration. Id.
FFP argues that it was bound to buy Medallion cigarettes only from Medallion for a five-year period. John Harvison, Chairman and CEO of FFP, states that "there were, I guess, several things we talked about. We talked about that we wanted to buy from a manufacturer, we wanted to buy from them, and we wanted a fixed price. We would buy all of our Medallion products from them." Plf. App. at 16. Triantafellou also states that "FFP was required to buy all of its needs for Medallion cigarettes" under the price structure set forth in the November 3 letter. Plf. Aff. at 211. The written documentation, however, fails to contain such a promise of exclusivity or demonstrate that FFP was restricted from purchasing from other sellers. Plaintiff provides affidavits indicating that, at some point during contract negotiations, FFP and Medallion "talked about" having FFP buy all of its Medallion products from Defendant, Plf. Aff. at 16, 211, but Plaintiff fails to provide any written evidence memorializing such a promise so as to constitute a valid, enforceable agreement.
Because there is no legally sufficient evidence to support Plaintiff's contention that a promise of exclusivity was part of the agreement, the Court finds that the alleged contract fails for lack of consideration. Accordingly, Defendant's motion for summary judgment is granted as to Plaintiff's contract claims.
C. Absence of a Breach and Damages
For the foregoing reasons, the Court finds that Plaintiff has not presented competent evidence to show that a valid, enforceable contract exists between the parties. Therefore, we grant Defendant's motion for summary judgment on Plaintiff's breach of contract, anticipatory repudiation, specific performance, and declaratory judgment claims without reaching these issues.
III. FRAUD
Plaintiff asserts a claim of fraud against Medallion for sending FFP the November 3 letter, which, according to Plaintiff, fraudulently misrepresents Medallion's willingness to enter into a contract with Plaintiff. In response, Medallion argues that FFP has not provided any summary judgment evidence of a material representation, intent to defraud, or reliance by FFP. Having reviewed the summary judgment record and the relevant case law, the Court agrees that Plaintiff has failed to present sufficient evidence that Defendant acted in a fraudulent manner.
To state a cause of action for fraud in Texas, a plaintiff must prove that (1) a material misrepresentation was made; (2) it was false; (3) when the speaker made it, he knew it was false or made it recklessly, without any knowledge of the truth and as a positive assertion; (4) he made it with the intention that it be acted upon by the party; (5) the party acted in reliance upon it; and (6) he thereby suffered injury. 1488t Inc. v. Philsec Inv. Corp., 939 F.2d 1281, 1287 (5th Cir. 1991) (citing Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 185 (Tex. 1977)). A breach of a contract action alone does not constitute fraud. Dunn v. Menassen, 913 S.W.2d 621, 625 (Tex.App.-Corpus Christi 1995, writ denied). It is only when the failure to perform an act in the future is coupled with intent not to perform at the time of the promise that fraud occurs. Id.
FFP asserts that the November 3 letter, in its entirety, is a material misrepresentation intended to deceive FFP. Medallion sent the November 3 letter to FFP proposing that it would sell cigarettes to FFP at certain prices, but, according to Plaintiff, Medallion never intended to commit to any firm offer. There is simply no evidence, however, that Medallion did not intend to enter into a contract with FFP. Even at this time, Medallion is willing to sell to FFP at the same prices quoted in the November 3 letter, with the addition of certain "fees" to reflect the increased costs after the Master Settlement Agreement. FFP has provided no evidence that Medallion made any misrepresentations or fraudulent statements in proposing a lower pricing structure for FFP on November 3. Without more, Plaintiff's claim for fraud must fail as a matter of law. Accordingly, the Court finds that Plaintiff has not raised a genuine question of material fact as to its fraud claim, and Defendant's motion for summary judgment as to this claim is granted.
FFP consummated the alleged contract by "accepting" Medallion's November 3 pricing structure on November 24, 1998, the day after the Master Settlement Agreement was made public and the tobacco industry implemented a price hike.
CONCLUSION
Upon careful review of the parties' arguments, the summary judgment record, and the relevant law, the Court concludes that Plaintiff FFP has failed to demonstrate a material dispute of fact with respect to its fraud and contract claims. Accordingly, Defendant's motion for summary judgment is hereby GRANTED as to each of FFP's claims.