Opinion
C. A. 6:23-CV-00242-ADA-JCM
01-22-2024
LOUISVILLE EXCHANGER & VESSEL INC., Plaintiff, v. AMERITUBE LLC, Defendant.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
JEFFREY C. MANSKE UNITED STATES MAGISTRATE JUDGE
TO: THE HONORABLE ALAN D ALBRIGHT, UNITED STATES DISTRICT JUDGE
This Report and Recommendation is submitted to the Court pursuant to 28 U.S.C. § 636(b)(1)(C), Fed.R.Civ.P. 72(b), and Rules 1(f) and 4(b) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas, Local Rules for the Assignment of Duties to United States Magistrate Judges. Before the Court is Plaintiff Louisville Exchanger & Vessel Inc.'s Motion for Partial Summary Judgment (ECF No. 14), Defendant Ameritube, LLC's Response (ECF No. 15), and Plaintiff's Reply (ECF No. 18). For the following reasons, the Court RECOMMENDS Plaintiff's Motion be GRANTED.
I. BACKGROUND
Plaintiff Louisville Exchanger & Vessel Inc., a Kentucky corporation, sued Defendant Ameritube, LLC, a Texas limited liability company, for breach of contract and unjust enrichment. Plaintiff is a specialty metal fabrication shop that designs and fabricates heat exchangers, pressure vessels, and process equipment. Pl.'s Compl. (ECF No. 1) at 2. Defendant processes, manufactures, and distributes copper alloy, nickel alloy, and steel tubing products used in the heat transfer and heat exchange industry. Id.
On October 20, 2021, Plaintiff sent a purchase order to Defendant, which included (1) 302 pieces of eighteen-foot-long copper-nickel tubing; (2) 1,020 pieces of twenty-foot-long copper-nickel tubing; and (3) 8,450 pieces of twenty-four-foot-long copper-nickel tubing. Id. The total purchase price of the order was $1,053,992.50 at $4.61 per foot of tubing. Id. Plaintiff noted on the purchase order that it wanted the tubing delivered by the week of March 28, 2022. Id. On October 22, 2021, Defendant issued Invoice #1578 to Plaintiff, and on January 17, 2022, Defendant issued Invoice #1604 to Plaintiff. Id. Plaintiff timely paid both invoices which totaled $523,482.20. Id. On March 30, 2022, Defendant issued Plaintiff Invoice #1630 for $217,423.30, which included a price increase attributed to a rise in the price of nickel. Id. On May 19, 2022, Defendant issued Invoice #1643 for $217,423.30, including the same price increase for the price of nickel. Id. Plaintiff paid both invoices. Id. At this point, Plaintiff had paid Defendant $958,328.80 over the four separate invoices. Id. at 3. On May 6, 2022, the week after Plaintiff wanted the tubing delivered, Defendant delivered the 302 pieces of eighteen-foot-long tubing and the 1,020 pieces of twenty-foot-long tubing, leaving only the twenty-four-foot-long tubing. Id.
Plaintiff alleges that in December 2022, as Defendant was preparing the twenty-four-foot-long tubing, Plaintiff learned, for the first time, that Defendant had unilaterally changed the price per tube. Id. Plaintiff alleges that Defendant attempted to retroactively increase the price per tube for each copper-nickel tube in the original order, including those paid for before the increase in the price of nickel. Id. Plaintiff claims that, consequently, the $958,328.80 it had paid was sufficient only to purchase 302 pieces of eighteen-foot-long tubing, 1,020 pieces of twenty-foot-long tubing, and only 6,693 pieces of twenty-four-foot-long tubing of the 8,450 pieces of twenty-four-foot-long tubing reflected in the purchase order. Id.
Plaintiff claims that it paid $523,482.20 to Defendant before the price of nickel increased and before Plaintiff was made aware of and consented to the increased price for future work. Id. Plaintiff claims that, accordingly, the amount paid before the price increase was sufficient to purchase 302 pieces of eighteen-foot-long tubing at $82.98 per tube, 1,020 pieces of twenty-foot-long tubing at $92.20 per tube, and 3,656 pieces of twenty-four-foot-long tubing at $110.64 per tube. Id. Plaintiff also claims that after the increase in the price of nickel, the payments made by Plaintiff were sufficient to purchase an additional 3,468 pieces of twenty-four-foot-long tubing at the increased price of $125.38 per tube. Id. Thus, Plaintiff claims that it was entitled to receive approximately 7,124 pieces of twenty-four-foot-long tubing and not the 6,693 pieces of tubing it received. Id. Plaintiff claims that under these facts, it overpaid Defendant by approximately $78,237.12. Id.
Plaintiff notified Defendant of what it believed to be a mistake, but Defendant neither delivered the extra tubing Plaintiff believed it was entitled to nor refunded the amount that Plaintiff believed was overpaid. Id. Despite not receiving the extra tubing or a refund, Plaintiff agreed to pick up 6,500 pieces of twenty-four-foot-long tubing. Id. Plaintiff claims that despite being told by Defendant that it could pick the tubing up the morning of January 10, 2023,the trucks hired by Plaintiff had to wait almost seven hours, leading to additional charges from the trucking company. Id. at 4. Plaintiff sent Defendant a formal demand letter requesting that Defendant reimburse Plaintiff $78,237.12. Id.
When Defendant did not reimburse Plaintiff, Plaintiff filed suit for breach of contract and unjust enrichment. Id. Plaintiff seeks $78,237.12 in damages and attorneys' fees. Id. at 4-5. Defendant filed its Answer, claiming that Plaintiff was aware that all sales were subject to Defendant's Terms and Conditions which state that “prices quoted are not firm;” and that “all orders are accepted subject to prices in effect at the time of shipment.” Def.'s Answer (ECF No. 8) at 1-2. Defendant also raised the affirmative defense of force majeure based on a force majeure clause in the same Terms and Conditions. Id. at 3. Plaintiff then filed a Motion for Partial Summary Judgment, which is currently before this Court, seeking (1) a dismissal of Defendant's affirmative defense of force majeure as a matter of law, and (2) a finding that Defendant's Terms and Conditions of Sale were not incorporated into the Parties' agreement. Pl.'s Mot. at 1.
II. STANDARD OF REVIEW
Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute is not genuine if the trier of fact could not, after an examination of the record, find for the nonmoving party. Matsushita Elec. Indus., Co. v. Zenith Radio Corp., 475 U.S. 574, 578 (1986). The moving party bears the burden of showing that no genuine dispute of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). That said, the moving party can satisfy its burden either by producing evidence negating a material fact or pointing out the absence of evidence supporting a material element of the nonmovant's claim. Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 190 (5th Cir. 1991). Throughout this analysis, the Court must view the evidence and all factual inferences in a light most favorable to the party opposing summary judgment. Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014).
III. ANALYSIS
The agreement in controversy concerns the sale of goods and is thus governed by article two of the Uniform Commercial Code (“UCC”), adopted in Texas's Business and Commerce Code (“Tex. Bus. & Com. Code”). Emerson Elec. Co. v. Am. Permanent Ware Co., 201 S.W.3d 301, 310 (Tex. App.-Dallas 2006, no pet.); Tex. Bus. & Com. Code § 2.102. Section 2.204 states that “[a] contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.” Tex. Bus. & Com. Code § 2.204. Neither party disputes that they formed a contract for the sale of goods. Pl.'s Compl. at 2; Def.'s Answer at 1. Rather, this Motion hinges on whether Defendant's Terms and Conditions were incorporated into the contract. Pl.'s Mot. at 1; Def.'s Resp. at 2.
Plaintiff argues that the Terms and Conditions were not incorporated into the Parties' agreement because Plaintiff never signed them or any document referencing them. Pl.'s Mot. at 4. Plaintiff claims that the only documents that reference the Terms and Conditions are an order summary and the invoices that Defendant sent, neither of which Plaintiff signed. Pl.'s Reply at 3. Plaintiff further argues that because the agreement did not incorporate the Terms and Conditions, the affirmative defense of force majeure fails as a matter of law. Id. at 6. Defendant, in response, argues that despite the fact the purchase order did not contain reference to the Terms and Conditions, it was signed and sent after Plaintiff reviewed Defendant's pro-forma invoice which included reference to the Terms and Conditions. Def.'s Resp. at 4. Defendant further argues that the Parties exchanged signed emails which referenced an order summary that in turn referenced the Terms and Conditions. Id. at 4-5.
A. Defendant's Terms and Conditions are not incorporated into the agreement by reference.
The UCC does not displace the common law entirely and where the UCC is silent, Texas common law supplements it. F & P Builders v. Lowe's of Tex., Inc., 786 S.W.2d 502, 503 (Tex. App.-Dallas 1990, no writ); Travis Bank & Tr. v. State, 660 S.W.2d 851, 855 (Tex. App.- Austin 1983, no writ). Texas common law provides that an unsigned paper may be incorporated by reference in another paper signed by the person sought to be charged. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004). The language used to refer to the document is not important as long as the document plainly refers to another writing. Id. Plainly referring to a document requires more than merely mentioning the document. Bob Montgomery Chevrolet, Inc. v. Dent Zone Cos., 409 S.W.3d 181, 189 (Tex. App.-Dallas 2013, no pet.). The language in the signed document must show the parties intended for the other document to become part of the agreement. Id. Although whether an agreement has incorporated another has factual components, whether the material was incorporated presents a question of law. 11 Williston on Contracts § 30:25 (4th ed. 2023).
Plaintiff relies heavily on a similar case from this District. Indicium Dig. Network, LLC v. CDW Direct, LLC, No. EP-17-CV-00054-FM, 2018 U.S. Dist. LEXIS 223371 (W.D. Tex. 2018). In Indicium, the plaintiff entered a contract with the defendant to purchase outdoor digital signage kiosks. Id. at *2. The defendant sent the plaintiff an email with specifications about the signage and issued two sales quotes. Id. The quotes stated that they were subject to the defendant's terms and conditions of sales and provided a link to where they could be found. Id. at *2-3.
After receiving the email and the quotes, the plaintiff emailed the defendant asking for several clarifications. Id. at *5. Following the answers to its questions, the plaintiff wired payment to the defendant. Id. at *6. The plaintiff later sued for breach of contract, claiming the kiosks did not work correctly. Id. The defendant argued that the sales quotation containing the plain reference to the terms and conditions represented the agreement, and thus, the terms and conditions were incorporated. Id. at *7. The court found that because Texas law requires a writing incorporating another writing to be signed and the quote referencing the terms and conditions was not signed, the defendant's terms and conditions were not incorporated by reference into the parties' agreement as a matter of law. Id. at *13-15.
Indicium is instructive here. Here, there are two signed writings, the purchase order and a series of emails exchanged between Plaintiff and Defendant. Pl.'s Reply at 1. The purchase order does not reference the Terms and Conditions. Pl.'s Mot. at Ex. A-1. Because the purchase order does not reference the Terms and Conditions, it does not incorporate them by reference. In re Prudential Ins. Co., 148 S.W.3d at 135. Further, while the emails constitute signed writings, they do not incorporate the Terms and Conditions by reference. Tex. Bus. & Com. Code Ann. §§ 322.001-322.021; Khoury v. Tomlinson, 518 S.W.3d 568, 577 (Tex. App.-Houston [1st Dist.] 2017, no pet.). The emails do not plainly refer to the Terms and Conditions, but they do refer to an order summary. Def.'s Resp. at Ex. A-1, A-3. The order summary does make plain reference to the Terms and Conditions, stating that “All [q]uotes and sales are subject to Ameritube Terms and Conditions of sale” and providing a link to them. Def.'s Resp. at Ex. A-2. This, however, is not enough to incorporate the Terms and Conditions by reference because while the emails may incorporate the order summary by reference, the order summary itself is not signed, and the documents it references are not incorporated. Indicium, 2018 U.S. Dist. LEXIS, at *14-15. Thus, Defendant's Terms and Conditions are not incorporated into the Parties' agreement by reference.
B. Defendant's affirmative defense of force majeure should be dismissed.
Defendant's affirmative defense of force majeure relies on the force majeure clause in its Terms and Conditions. Def.'s Answer at 3. Because Defendant's Terms and Conditions are not incorporated into the agreement between the Parties, Defendant's affirmative defense of force majeure fails and should be dismissed.
IV. CONCLUSION
For the reasons discussed above, the Court RECOMMENDS Plaintiff's Motion for Partial Summary Judgment (ECF No. 14) be GRANTED. Should the Court adopt this Report and Recommendation, the Court will dismiss Defendant Ameritube's affirmative defense of force majeure as a matter of law and enter a finding that Defendant's Terms and Conditions of Sale were not incorporated into the Parties' agreement.
V. OBJECTIONS
The parties may wish to file objections to this Report and Recommendation. Parties filing objections must specifically identify those findings or recommendations to which they object. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report. See 28 U.S.C. § 636(b)(1)(C); Thomas v Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc). Except upon grounds of plain error, failing to object shall further bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas, 474 U.S. at 150-53; Douglass, 79 F.3d at 1415.