Opinion
Civil Action No. 3:02-CV-0600-BF
February 10, 2003
MEMORANDUM OPINION AND ORDER
"Defendants' Motion for Summary Judgment," filed December 9, 2002, "Plaintiff's Response to Defendants' Motion for Summary Judgment," filed January 24, 2003; and "Defendants"' Reply to Procom's Response to Defendants' Motion for Summary Judgment," filed January 31, 2003, are before this Court for consideration and decision. I. Background
The parties consented to proceed before the United States Magistrate Judge pursuant to 28 U.S.C. § 636 (c).
Plaintiff Procom Services, Inc. (Procom), filed this tort action against Defendants Jack J. Deal (Deal), Tony Usalis (Usalis), and Media Vision Services, L.L.C. (Media Vision), in the 298th Judicial District Court, Dallas County, Texas. Defendants removed the case to the Northern District of Texas on the grounds of diversity jurisdiction.
Procom alleges that, pursuant to an agreement, it provides marketing services for ATT. In October 1999, Procom entered into a Procom Services, Inc., Agent's Contract (the Contract) with Deal and Usalis, respectively. (D's Exs 8 9.) The Contract provided for Deal and Usalis to market Procom's products and services as independent contractors. Plaintiff alleges that while Deal and Usalis were under their respective contracts, they launched a business, Media Vision, in direct competition with Procom. Procom claims Deal and Usalis used training and knowledge provided by Procom, together with Procom's business plans and contacts with ATT, to become Plaintiff's competitors. It further claims they provided false information to Procom and recruited Procom's employees and customers in an unfair attempt to take business away from Procom. Procom alleges Defendants are liable to it in damages for (1) Breach of Fiduciary Duty and (2) Conspiracy. Additionally, Procom seeks injunctive relief.
Procom brought a similar suit for breach of fiduciary duty and conspiracy against other of its former independent agents in Procom Services, Inc. v. Comtel Marketing Solutions, et al., No. 3:01-CV-0073-BD (N.D. Tex.) (dismissed with prejudice Nov. 19, 2002).
II. Legal Standards
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and the record evidence show that no genuine issue of material fact exists and that, as a matter of law, the movant is entitled to judgment. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). An issue of material fact is genuine if the evidence could lead a reasonable jury to find for the non-moving party. Hanks v. Transcontinental Gas Pipe Line Corp., 953 F.2d 996 (5th Cir. 1992) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). In determining whether a genuine issue for trial exists, the court must view all of the evidence in the light most favorable to the non-movant. Anderson, 477 U.S. at 248.
The moving party "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavit, if any," which it believes demonstrates the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). If the non-movant bears the burden of proof at trial, the movant need not support the motion with evidence negating the opponent's case; rather, the movant may satisfy its burden by showing that there is an absence of evidence to support the nonmovant's case. Latimer v. Smithkline French Lab., 919 F.2d 301, 303 (5th Cir. 1990); Little, 37 F.3d at 1075.
Once the movant makes this showing, the burden shifts to the non-movant to show that summary judgment is not appropriate. Little, 37 F.3d at 1075 ( citing Celotex, 477 U.S. at 325). This burden is not satisfied by some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence. Little, 37 F.3d at 1075 ( citing Celotex, 477 U.S. at 325). Rather, the non-moving party must come forward with competent summary judgment evidence showing that there is a genuine issue for trial. FED. R. CIV. P. 56(e).
III. Undisputed Material Facts
During 1999, 2000, and 2001, Procom marketed ATT's cable television services in the Rocky Mountain Region, primarily in Wyoming and Montana. (P's App. at 2.) Specifically, Procom sold ATT analog and digital cable television packages and installed the hardware to view the packages. ( Id.)
ATT is not a party to this lawsuit.
Procom routinely contracts with managers and sales agents throughout the country to market its clients' services. In October, 1999, Deal and Usalis each became independent contractors for Procom to market ATT's products on a commission basis. (Ds' Exs. 8 9.) In relevant part, the Contract provided that "[t]he Agent understands that an Agent will not be treated as an employee" and that "the Agent understands and accepts as his responsibility all duties to pay Federal self-employment and income tax." (Id.) Further, the Contract provided that "[e]ither party may terminate this contract on a five (5) day notice to the other party." ( Id.) Moreover, the Contract provided that "[t]he Agent agrees upon termination to return to the Company all materials, supplies, study material, sales sides, list of names or addresses of any subscribes[,] or other data in the Agent's performance of services pursuant to this Contract." ( Id.) Finally, the Contract provided that "the Agent shall be entitled to receive . . . commissions and escrow funds" so long as the "Agent has complied with the Contract." ( Id.)
Defendants include as exhibits the Contracts of Tony Vaquer, Robert Downey, and Orlando Orozco. (D's Ex. 2.) These contracts are identical to those of Deal and Usalis. Vaquer, Downey, and Orozco were individual defendants in the previous lawsuit mentioned in Footnote 2.
Vaquer was Procom's manager on Procom's ATT account in Denver, Colorado, and Downey and Orozco were sales agents on that account. On July 24, 2000, Downey and Orozco incorporated Comtel, working their last days for Procom on August 7, 2000, and July 31, 2000, respectively. On or about August 7, 2000, Comtel began to market ATT's services in Denver. In mid-August, 2000, Vaquer left Procom to work for Comtel. Procom sued Comtel, Vaquer, Downey and Orozco for breach of fiduciary duty, tortious interference with contract, and conspiracy. Judge Kaplan granted summary judgment in favor of Defendants on all three causes of action. Procom did not appeal. Rather, it proceeded to urge two of the same causes of action in this case without mentioning Judge Kaplan's adverse decision or distinguishing it. Deal and Usalis are entitled to summary judgment against Plaintiff for the same reasons Judge Kaplan granted summary judgment in favor of the individual defendants on Procom's claims of breach of fiduciary duty and conspiracy in Procom v. Comtel, No. 3:01-CV-0073-BD. Nevertheless, for the sake of clarity, the Court will address each Procom's contentions in this case separately.
The Contract also provided that "the laws of the State of Texas shall govern [the Contract]" and that "any matter arising under or growing out of [the Contract] shall be brought and tried only in the Courts located in the County of Dallas, State of Texas, and both parties hereto expressly waive their rights to cause any such actions or proceedings to be brought or tried in the Courts of any other County." (Ds' Exs. 8 9.)
Deal was a sales manager in the Rocky Mountain Region when he gave notice to Procom and terminated the Contract in August 2001. (D's Ex. 10.) Usalis, who was managing the Cheyenne, Wyoming, system, gave notice and terminated the Contract shortly after Deal. (Ds' Ex. 11.) In September 2001, Deal and Usalis started a new company, Media Vision. ( Id.) On September 21, 2001, Media Vision entered into a contract with ATT to market ATT's services in the Cheyenne, Wyoming, market, and it has been marketing cable and internet services for ATT in Wyoming and the surrounding area since that time. ( Id.) Media Vision hired some of Procom's independent contractors and performed the same work for ATT that Procom had done. (P's App. at 7.)
III. Analysis A. Defendants' Motion for Summary Judgment
Defendants move for summary judgment on Procom's breach of fiduciary duty and conspiracy claims. Procom, on the other hand, urges that summary judgment is not appropriate. For the following reasons, Defendants' motion for summary judgment is GRANTED in its entirety.
1. Breach of Fiduciary Duty
Defendants contend that Deal and Usalis did not have a fiduciary duty to Procom and that Procom has not submitted any competent summary judgment evidence to prove such a special relationship. Where, as here, a plaintiff seeks damages for a breach of fiduciary duty, Texas law requires a showing of a fiduciary duty, a breach of the fiduciary duty, an injury, and proximate causation between the breach and the injury. In re Segerstrom, 247 F.3d 218, 226 n. 5 (5th Cir. 2001). In this case, Defendants claim the fiduciary-duty element of Procom's breach of fiduciary duty claim is missing. "Fiduciary duties are imposed by courts on some relationships because of their special nature." Johnson v. Brewer Pritchard, P.C., No. 00-0081, 2000 WL 33716714, at *3 (Tex. 2002). "Generally speaking, it applies to any person who occupies a position of peculiar confidence towards another." Id. (quoting Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 512 (Tex. 1942)).
Under Rule 56(c), the moving party "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavit, if any,' which it believes demonstrates the absence of a genuine issue of material fact." Celotex Corp., 477 U.S. at 323. Defendants rely on the Contract, and the deposition testimony of Harold Crews (Crews), Procom's representative, and Russell Leitch (Leitch), Procom's president, as competent summary judgment evidence that no fiduciary relationship existed between Procom and Deal or Usalis.
The depositions of Leitch and Crews were taken in the lawsuit referred to in Footnote No. 2.
Crews and Leitch acknowledge that persons who signed the Contract were considered independent contractors, as that term is used in the field of sales, and were not employees, officers, directors, or shareholders of Procom. (Deposition of Crews, Nov. 9, 2000 at p. 13:1-2.) Furthermore, Crews and Leitch admit that the Contract did not prevent the independent contractors from (1) starting their own businesses, (2) competing with Procom, and (3) starting or working for a competing business. (Deposition of Crews, Nov. 9, 2000, at p. 54: 6-9 and 55: 10-13; Deposition of Leitch, April 25, 2001, at p. 73: 5-10, Deposition of Leitch, May 4, 2001, at p. 206: 19-25.) Finally, the Contract provided that the independent contractors have no contractual obligations to Procom following termination of their Contracts, other than "to return all materials, resources, contracts . . . [t]ools, equipment . . . [and] [m]oneys" to Procom. (Deposition of Crews, Nov. 17, 2000 at p. 112:4-5, 7-10, 14-17 and 25, and p. 113: 1, 2, 9-10, 17.)
Defendants have met their summary judgment burden of presenting evidence that shows an absence of a genuine issue of material fact as to whether a fiduciary duty existed between Procom and Deal or Usalis. The burden then shifts to Procom to demonstrate that summary judgment is not appropriate. Little, 37 F.3d at 1075.
Procom argues that Deal and Usalis owed Procom a fiduciary duty based upon a principal-agency relationship. Procom claims Deal's and Usalis's positions as managers changed the relationship between the parties. It asserts that its relationship with Deal was no longer governed by the Contract but by an oral agreement giving him extra management duties and compensation. (P's Brief at 5.) The Contract provided that it could not be modified except by an instrument in writing which expressed by its terms an intention to modify the contract. (D's Exs. 8 9.) Accordingly, this argument fails. The Court finds that the Contracts executed by Deal and Usalis in October 1999 were not modified. Additionally, Leitch claims that an independent contractor's taking a paycheck from Procom gave rise to a fiduciary duty. (Deposition of Leitch, May 4, 2001, at p. 207:20-23.) This claim is patently frivolous.
Procom argues Deal's knowledge of information such as sales goals and the terms of the contract with ATT, its conversations with him about customer satisfaction and full and complete disclosures, his submission of daily reports, and the importance of meeting ATT's sales goals changed the relationship.
Procom claims a principal-agency relationship with Usalis based upon its assignment of the products, services, and neighborhoods and the fact that Procom's contract with ATT set forth the price Usalis could quote to prospective customers. (P's Brief at 12.) Additionally, Procom relies upon Usalis's lack of authority to "waive or modify any terms, conditions, or limitations of any contract; issue or circulate any advertisement or literature unless the same shall have been first approved by the Plaintiff; or enter into legal proceedings with any matters pertaining to the company's business." ( Id.) Procom argues that the fiduciary relationship in this case may be implied from the conduct of the parties and from the fact that Deal and Usalis were under Procom's supervision.
If an agency relationship had existed between Procom and Deal or Usalis, Procom would have had the power to hire and fire and the power of supervision, but the exercise of these two powers is not sufficient to show that a principal-agency relationship existed. See, e. g., Radich v. U.S., 160 F.2d 616, 618 (9th Cir.) (power of termination does not establish agency); Mathews Conveyor Co. v. Palmer Bee Co., 135 F.2d 73, 81 (6th Cir. 1943) (power of one to control conduct of another does not establish agency); First Jackson Securities Corp. v. B. F. Goodrich Co., 176 So.2d 272, 278 (Miss. 1965) ("employee" not synonymous with "agent"). One of the most characteristic features of an agency relationship is missing here. Procom did not give Deal and Usalis the power to bring about business relationships between third parties and Procom. An essential characteristic of an agency is the power of the agent to commit his principal to business relationships with third parties. See Griffin v. United States, 588 F.2d 521, 528-29 (5th Cir. 1979); Restatement (Second) of Agency § 12 (1958).
Proceeding from the presumption that a principal-agency relationship created a fiduciary duty, Procom presents evidence in its analysis that shows a breach of the assumed fiduciary relationship. The Court need not reach the question of whether a fiduciary relationship was breached because the fiduciary-duty element of Procom's claim is missing. Procom's summary judgment burden is not satisfied by its conclusory allegations regarding the creation of a fiduciary duty. Little, 37 F.3d at 1075.
Procom claims that Deal advised Procom that ATT's budget for the Rocky Mountain Region was exhausted in August 2001 and that no funds would be available after August. Procom claims that this was a lie and that, based upon this lie, they reassigned or terminated sales agents in the region. Procom claims it later discovered that Media Vision was doing the same work for ATT that Procom had done and that some of Procom's most productive Rocky Mountain Region agents were now working for Media Vision.
In addition, Procom readily admits that Deal and Usalis were independent contractors. Procom relies upon Royal Mortgage Corp. v. Montague, 41 S.W.3d 721, 733 (Tex.App. 2001), for the proposition that Texas law allows an individual to be both an independent contractor and an agent. Although an individual may, in some cases, be both an independent contractor and an agent, the Court finds no authority to impose fiduciary duties on independent contractors where, as here, no evidence exists that the independent contractors were also agents. The Contract specifically provided that neither Deal nor Usalis had authority to "make, alter or discharge any contract," negotiate contracts on behalf of Procom, "contract for the expenditure of funds of the Company" or to exercise any authority on behalf of the Company other than expressly conferred by the Contract. (D's Exs. 8 9.) The Contract created contractual relationships between Procom and Deal and between Procom and Usalis. The Contract did not expressly or implicitly create a fiduciary duty, nor did the conduct of the parties. "In order to give full force to contracts, [Texas courts] do not create [a fiduciary] relationship lightly." Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997).
As noted above, Procom not only has failed to present evidence that an agency relationship existed, but also has failed to present evidence that the agency relationship was of a fiduciary nature.
Finally, Crews admitted that Procom did not give any trade secret information to its sales managers. (Deposition of Crews, Nov. 17, 2000 at p. 115: 10-17.) Leitch stated that some of the training material is confidential, but he admitted that some people with access to the confidential training information may not have been told that the information is confidential. (Deposition of Leitch, May 4, 2001 at p. 173: 15-25, p. 175:1-15.) Furthermore, although Procom indicates that the independent contractors understood that some of the information they had obtained from Procom was confidential, "not every relationship involving a high degree of trust and confidence rises to the stature of a fiduciary relationship." Id. In this case, there is no evidence that a "high degree of trust and confidence" existed between Procom and Deal or between Procom and Usalis. Procom has failed to meet its summary judgment burden.
Defendants have presented competent summary judgment evidence that no fiduciary duty existed between Procom and Deal or Usalis, and Procom has failed to meet its burden of showing a genuine issue of material fact that would preclude summary judgment. Therefore, Defendants' motion for summary judgment on the breach of fiduciary duty claim is GRANTED. 2. Conspiracy
Defendants correctly contend that a finding of liability for conspiracy is dependent upon Defendants' participation in some underlying tort. Plaintiffs response does not address the conspiracy claim.
The Court further notes that Procom has wholly failed to point to any evidence to support its conspiracy claim. Procom appears to rest its entire conspiracy claim on its perception that the Defendants breached their fiduciary duty.
A civil conspiracy is "a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means." Triplex Communications, Inc. v. Riley, 900 S.W.2d 716, 719 (Tex. 1995) (quoting Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983)). The elements of civil conspiracy are: "(1) two or more persons; (2) an object to be accomplished; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; (5) damages as the proximate result." Massey, 652 S.W.2d at 934. Civil conspiracy is a derivative tort. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996). Therefore, in a civil conspiracy claim, there must be "some underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable." Id.
In this case, the only tort for which Procom seeks to hold Defendants liable is breach of fiduciary duty. The Court has granted summary judgment on the only tort claim. Accordingly, Procom cannot succeed on its conspiracy claim. Defendants' motion for summary judgment on the conspiracy claim is GRANTED.
Defendants' motion for summary judgment is GRANTED in its entirety.