Pine Telephone Company v. Alcatel-Lucent USA Inc.

Filing 297

ORDER AND OPINION by District Judge James H. Payne: denying 117 Plaintiffs' Sealed Motion for Leave to File Second Amended Complaint; granting 166 Defendant's Motion for Summary Judgment (cjt, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OKLAHOMA
PINE TELEPHONE COMPANY, INC., an
Oklahoma
corporation,
and
PINE
CELLULAR PHONES, INC., an Oklahoma
corporation,
Plaintiffs,
v.
ALCATEL-LUCENT USA, INC., a
Delaware corporation, f/k/a ALCATEL
USA MARKETING, INC.,
Defendant.

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Case No. CIV-11-353-JHP

ORDER AND OPINION
Before the Court are Defendant Alcatel-Lucent USA, Inc.'s Motion for Summary
Judgment [Docket No. 166], Plaintiffs Pine Telephone Company, Inc. and Pine Cellular Phones
Inc.'s Response in Opposition [Docket No. 182], Defendant's Reply [Docket No. 230] and
Plaintiffs’ Surreply [Docket No. 259]. Defendant moves for summary judgment on all claims
alleged in Plaintiffs First Amended Petition; claims for fraudulent inducement, breach of contract
and breach of warranty. Defendant also asserts that even if Plaintiffs have pled constructive or
common law fraud, those claims are also subject to summary judgment. Defendant argues
alternatively for a limitation of damages under the controlling Agreement. Plaintiffs oppose
summary judgment on all theories.
For the reasons set forth below, Defendant's Motion is GRANTED as to all claims.

BACKGROUND
A.

Undisputed Factual Background1
Plaintiffs, Pine Telephone Company, Inc. and Pine Cellular Phones, Inc. (collectively

“Pine”) are Oklahoma corporations engaged in the business of providing landline, cellular, cable
television, and other telecommunications services to thousands of customers in Southeast
Oklahoma for more than 100 years. (First Am. Pet. ¶ 1, Dkt. No. 2). Defendant, Alcatel-Lucent
USA, Inc. (“Alcatel-Lucent”), is a Delaware corporation which sells telecommunications
equipment and services. (First Am. Pet. ¶ 2.) This Court has diversity jurisdiction over the case
pursuant to 28 U.S.C. § 1332, as the matter in controversy exceeds the sum of $75,000 and is
between citizens of different states. 28 U.S.C. § 1332(a)(1) (2012).
In 2005, the parties entered into a Supply Agreement (“Agreement”) to govern the sale
by Alcatel-Lucent to Pine of telecommunications equipment, services, and licenses for firmware
and software. (First Am. Pet. ¶ 3; Supply Agreement ¶ 1.1, Ex. 1 to Alcatel-Lucent's Motion for
Summary Judgment (“Alcatel-Lucent’s Motion”)). The Agreement was to serve as a Master
Agreement for future purchases. To purchase under the Agreement, Pine delivered to AlcatelLucent written purchase orders identifying the equipment, services, or software licenses it
desired to purchase. (Agreement ¶ 2.1). After entering into the Agreement, in 2005, Pine
purchased equipment from Alcatel-Lucent. (Alcatel-Lucent's Motion, ¶ 3).
In 2008, Pine expressed an interest in purchasing equipment and services to deploy a
UMTS (3G) cellular network, with the focus on data services, to overlay its existing 2G system
used for voice communications. (Alcatel-Lucent’s Motion, ¶ 6). Beginning in August 2008 and

1

The following facts are either not specifically controverted in accordance with Local Civil Rule
56.1(c), or are described in the light most favorable to the non-moving party. Immaterial facts
are omitted.
2

continuing to December 15, 2008, Alcatel-Lucent provided proposals and quotes to Pine for the
3G system. (Id. at ¶ 7).
Alcatel-Lucent submitted a proposal and pricing for a “turn-key” solution under which
Alcatel-Lucent would provide all equipment and services needed to deploy a full network. (Id. at
¶ 7). In furtherance of the process set forth in the Agreement, Pine issued purchase orders on
December 15, 2008 for some of the equipment and services offered, but it did not purchase all of
the offered equipment or services. In particular, Pine originally chose to use a router it already
owned and elected to do its own installation of cell site equipment, its own cell site survey, and
its own radio frequency engineering. (Alcatel-Lucent’s Motion, ¶¶ 10-11; Pine’s Objection and
Response to Motion for Summary Judgment “Pine’s Response,” p. 7, ¶ 11). Pine does not
dispute these facts except to state that what it purchased was a turn-key network solution subject
only to Pine's obligation to perform certain limited installation tasks. (Pine's Response, p. 6, ¶
10).
The Project did not go as planned and resulted in the current litigation. Pine wrote
Alcatel-Lucent on January 12, 2011 stating that it was rejecting equipment because it “is not and
does not function to promised capacity and operational specifications” and that numerous sites
are “non-operational.” Pine identified the individual pieces of purchased equipment that it was
rejecting. (Alcatel-Lucent’s Motion, ¶ 14). The letter did not identify the claimed defects. (Ex.
10 to Alcatel-Lucent’s Motion).
Pine sues upon the Supply Agreement and does not dispute the provisions contained
therein. (Pine’s Response, p. 5, ¶ 1). The Supply Agreement contains the following provisions
applicable to the current Motion:


“Alcatel warrants that, for the applicable warranty period, (a) Equipment and Software
media shall, under normal use and service, be free from defects in material and
3

workmanship, and (b) Equipment and Software shall materially conform to Alcatel’s
specifications therefor in effect on the date of shipment. However, Alcatel makes no
warranty that any software will operate uninterrupted or error free . . ..” ¶¶ 7.1.


“If any Equipment is not as warranted in this Article, then (a) Purchaser shall obtain from
Alcatel a Material Return Authorization (“MRA”) and return the Equipment and MRA to
Alcatel’s designated repair facility, and (b) Alcatel shall repair or replace the Equipment
and return it to Purchaser's point of shipment. . . . If, after the exercise of commercially
reasonable efforts by Alcatel to repair or replace any Equipment or correct any Software,
Alcatel determines that the Product cannot be repaired, replaced or corrected, then
Alcatel may, in its sole discretion, refund to Purchaser the Purchase Price of the Product,
less a reasonable adjustment for beneficial use.” ¶ 7.3.



“NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY, THE PROVISIONS OF THIS ARTICLE CONSTITUTE PURCHASER’S
SOLE REMEDY UNDER THIS AGREEMENT WITH RESPECT TO ANY
DEFECTIVE PRODUCT, DOCUMENTATION OR SERVICES. EXCEPT AS
OTHERWISE PROVIDED IN THIS ARTICLE, ALCATEL MAKES NO WARRANTY
OF ANY KIND WITH RESPECT TO ANY PRODUCT, DOCUMENTATION OR
SERVICES, AND ALCATEL DISCLAIMS ANY AND ALL IMPLIED WARRANTIES
RELATING THERETO, INCLUDING, BUT NOT LIMITED TO, ANY AND ALL
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY
INTENDED OR PARTICULAR PURPOSE.” ¶ 7.5.



As to services, the Agreement provides that “[i]f Alcatel performs installation Services
for any Product, then Alcatel shall perform those Services in a workmanlike manner and
substantially in accordance with Alcatel’s specifications therefor in effect on the date of
completion.” ¶ 6.1.



“NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY, (A) NEITHER ALCATEL NOR ANY OF ALCATEL'S SUPPLIERS OR
LICENSORS SHALL HAVE ANY LIABILITY TO PURCHASER FOR ANY
CONSEQUENTIAL, INDIRECT, INCIDENTAL OR SPECIAL DAMAGES
(INCLUDING, BUT NOT LIMITED TO, ANY LOST REVENUES OR PROFITS)
ARISING OUT OF THIS AGREEMENT, AND (B) ALCATEL'S LIABILITY FOR ANY
CLAIM ARISING OUT OF THIS AGREEMENT (OTHER THAN LIABILITY FOR
PERSONAL INJURY CLAIMS) SHALL NOT EXCEED THE PURCHASE PRICE OF
THE PRODUCT OR SERVICES THAT ARE THE SUBJECT OF SUCH CLAIM.” ¶ 15.



“Except as otherwise provided in this Agreement, no provision of this Agreement shall be
modified, supplemented or waived except by a writing executed by the party to be . . . .” ¶
18.8.



The Agreement also states that it “shall be governed by and construed in accordance with
the laws of the State of Texas.” ¶ 18.11.

4

Pine’s Lawsuits and Damage Claims
Pine brought this action in McCurtain County on September 15, 2011.2 Pine filed a First
Amended Complaint in this action on September 19, 2011, and that has been the operative
pleading in this case since that time. (Dkt. No. 2).3 In its First Amended Petition, Pine does not
identify its causes of action by Count, but it can be fairly read to allege breach of the Supply
Agreement for supplying defective goods (and services) which Pine claims to have rejected, an
alternative claim for breach of warranty, and a claim for fraudulent inducement as to the 2008
purchases. (First Amended Petition, ¶¶ 3-31).
As to equipment defect, Pine alleges that the equipment did not work, asserts outages due
to storms and the absence of surge protection, that the equipment for the damaged sites was
replaced, after a delay, but did not work thereafter, and generally that the “equipment had failed
of its essential purpose of allowing Pine to provide data communications to Pine’s customers.”
(First Amended Petition, ¶ 12).
Pine also alleges that the 2008 purchases were fraudulently induced. (First Amended
Petition, ¶¶ 24-31). Pine does not allege that the Supply Agreement entered into in 2005 was
fraudulently induced. As to its fraudulent inducement claim, the First Amended Petition alleges
2

Pine filed an earlier action in McCurtain County on February 3, 2011 but never served the
Summons and Petition in that case. (Pine’s Response, pp. 18-19, ¶¶ 56-57; Pine Telephone v.
Alcatel USA Marketing, Inc., Case No. CJ-11-20). The Petition in Case No. CJ-11-20 is
substantively the same as the original Petition and the First Amended Petition filed in this case.
3
On September 5, 2013, three months before discovery close and after the time for amendments
had expired, Pine filed a Motion for Leave to File Second Amended Complaint. (Docket No.
117). In its Motion, Pine states that it is not adding any causes of action, (Motion, ¶¶ 1 and 4) but
rather is only particularizing existing claims, and it then adds seven pages of additional
allegations. (Second Amended Complaint, pp. 8-14, Dkt. No. 117). The Court finds that the
proposed amendment is untimely and denies the Motion for Leave to File Second Amended
Complaint. (Dkt. No. 117). However, the Court also finds that the amendment makes no
difference to the outcome of this Motion because Pine states that its proposed amendment adds
no new claims thus making the claims in the First Amended Petition operative, and all claims fail
on the undisputed facts and law.
5

that Alcatel-Lucent claimed this proposal included all equipment and services needed to
implement a network and represented to Pine that (1) Alcatel-Lucent's technology would
outperform offerings by Alcatel-Lucent's competitors; (2) Alcatel-Lucent would provide Pine the
advantage of offering better services to Pine's customers; (3) that Alcatel-Lucent's equipment
would allow Pine to gain significant operational expense savings; (4) that Alcatel-Lucent
understood Pine's goal to rapidly deploy a data communications network and could enable Pine
to capture a large share of the wireless data and services market; and (5) that Alcatel-Lucent's
equipment would provide reduced total cost of ownership, increased profitability, operational
efficiency, enhanced quality of experience for Pine's customers, accelerated ability to introduce
new services and improve Pine customer satisfaction due to Pine's ability to identify and resolve
problems fasters. (First Amended Petition ¶ 24; Pine's Response, p. 17, ¶ 47).
As to damages, Pine claims actual damages of “$19,861,327.64 [composed of price paid
($3,770,832.64), losses due to delay in ability to offer 3G high speed services ($15,555,070.00),
wasted time of Pine employees ($472,800), and wasted cost of subcontracted tower work
($62,625)].” (Alcatel-Lucent’s Motion, ¶ 32).
Alcatel-Lucent’s Motion for Summary Judgment
Alcatel-Lucent filed this Motion for Summary Judgment on December 2, 2013. (Dkt.
166). As to Pine’s fraudulent inducement claim, in addition to alleging the pleading fails to meet
the requirements of Rule 9(b), Alcatel-Lucent asserts that Pine cannot prove all of the elements
of the cause of action because (a) as to the requirement for a misrepresentation of a current or
past fact, the alleged statements were promises of future performance or statements of opinion
which are not actionable, (b) Pine does not present evidence of falsity, (c) if false, Pine does not
present evidence that the speaker knew it was false or acted recklessly in disregard of the truth,

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(d) that the fraud allegations are too vague to sustain the cause of action and (e) Pine can prove
no recoverable damages. In support, Alcatel-Lucent relies upon the allegations pled by Pine and
points to testimony of Pine personnel, including acknowledgment that the alleged statements
were of future performance, that the only evidence they have of falsity is that the promise turned
out to be, in their opinion, false, and to the absence of evidence that any speaker knew a
statement was false when made. (Alcatel-Lucent’s Motion, pp. 10-16).4
Alcatel-Lucent argues that the breach of contract (Supply Agreement) and warranty
claims fail as a matter of law because (a) Plaintiff has no proof the equipment or services were
defective, (b) even if defective, the sole remedy is the return for replacement or repair of the
nonconforming equipment, (c) Alcatel-Lucent replaced the equipment returned by Pine, and (d)
even if Pine could prove failure to return defective equipment, its remedy is enforcement of the
warranty, not return of the purchase price. In support of this argument, Alcatel-Lucent relies
primarily upon the inability of Pine to come forward with any evidence of defect, but also points
to testimony of Pine personnel where they do not identify a defect, but only allege the equipment
did not work. Alcatel-Lucent also points to Pine’s later testimony and position that it has no
obligation to prove any individual defect, but rather claims that it bought a network, the network
does not work and Pine does not know why. (Alcatel-Lucent’s Motion, pp. 20-21, Defendant
Alcatel-Lucent USA, Inc.’s Reply in Support of Motion for Summary Judgment, pp. 7-10
(“Alcatel-Lucent’s Reply”)).

4

Alcatel-Lucent also argues that even if the claim for fraudulent inducement could survive
summary judgment as to the 2008 purchases, there is no allegation of fraud in 2005 when the
parties entered into the Supply Agreement and therefore the limitation of damages provisions of
the Supply Agreement control to limit Pine’s damages to the warranty provision of the
Agreement or, if inapplicable, at least to no more than the price paid for each piece of equipment
that is found to be defective.
7

Alternatively Alcatel-Lucent relies upon the sole remedy language of the Supply
Agreement to argue that Pine is limited in all of its claims to the return for repair/replacement
remedy provision of the Agreement, and that Pine has admitted that Alcatel-Lucent replaced all
equipment that was returned to it by Pine. (Alcatel-Lucent’s Motion, p. 22-23; Alcatel-Lucent’s
Reply, p. 10).
Finally, Alcatel-Lucent argues that, if the claims are not dismissed in their entirety, Pine’s
damage claims must be limited first to the return and replace remedy provision, or second to the
express limitation of liability provision of the Agreement which specifically excludes
consequential and incidental damages, including lost profits, and limits any recovery to the
amount paid for the non-conforming goods. Alcatel-Lucent also argues that the damage
calculations in support of lost profit and consequential damages claims are unreliable and
speculative, requiring exclusion and that therefore Pine’s damage claims fail for lack of proof.
(Alcatel-Lucent’s Motion, pp. 16-20; 24).
Pine’s Response to Summary Judgment
In its response to Alcatel-Lucent’s Motion for Summary Judgment, Pine claims that
disputed questions of fact prevent summary judgment. However, Pine admits to the facts as
described in the background section above. Pine also includes 65 paragraphs identified as
additional material facts. It argues and cites to only a handful of those facts in its Response and
Surreply Briefs, and does not explain the materiality of the others to the summary judgment
issues. The Court is not required to comb the record for evidence to support Pine’s claims. See
Cross v. The Home Depot, 390 F.3d 1283, 1290 (10th Cir. 2004), citing Downes v. Beach, 587
F.2d 469, 472 (10th Cir. 1978) (“[O]n a motion for summary judgment, ‘it is the responding
party's burden to ensure that the factual dispute is portrayed with particularity, without ...

8

depending on the trial court to conduct its own search of the record.”); Mitchell v. City of Moore,
218 F.3d 1190, 1199 (10th Cir. 2000) (“The district court was not obligated to comb the record
in order to make [the plaintiff's] arguments for him.”).
As to Pine’s fraud claim, in addition to the claims from its First Amended Petition, Pine’s
Response points to a meeting in Jackson Hole, Wyoming in November 2008 in which AlcatelLucent provided Pine a demonstration of another UMTS network with Alcatel-Lucent equipment
so that Pine could see how the technology performed (the “Edge Network.”) (Pine’s Response, p.
10, ¶ 7). At that meeting, Pine claims that Alcatel-Lucent advised Pine that it could expect better
performance than the Edge Network, including better throughput and latency. Id.

It also

contends that Alcatel-Lucent performed advance testing at the demonstration site to generate and
display misleading results without telling Pine about the advance testing. (Pine’s Response, p. 9,
¶ 10). Pine alleges that Alcatel-Lucent made misrepresentations concerning its capability to
quickly deploy a 3G network that would outperform the Edge Network and Pine's competitors,
as well as its capacity to provide comprehensive technical support and return-for-repair services.
(Pine’s Response, p. 12, ¶¶ 16-18; p. 13, ¶¶ 20-21).
In its summary judgment briefing, though not pled in the First Amended Complaint, Pine
alleges post-purchase fraud occurred during the course of the Project including the alleged
delivery of used (rather than new) equipment, surreptitiously activating software to impose
artificial data transmission speeds, and continuing to assure Pine that Alcatel-Lucent had the
resources and expertise required to implement the network. (Pine’s Response, pp. 11-12, ¶¶ 1115; pp. 15-17, ¶¶ 38-46). Pine also alleges a fraudulent omission claiming that Alcatel-Lucent
withheld information regarding equipment reliability, the testing procedures at the demonstration
in Wyoming, availability of personnel and resources to support the Project, and services required

9

to deploy the network. (Pine’s Response, pp. 10-11, ¶¶ 4-10; p. 13, ¶¶ 21-22, p. 14, ¶ 28-29; p. 15,
¶¶ 34-37).5
As to its particular arguments on defect, Pine refutes Alcatel-Lucent’s statement of
undisputed fact as to defect by citing generally, not to page, to the proffered expert report of
Jonathan Reeves, to deposition testimony of three of its employees, and to internal emails of
Alcatel Lucent. (Pine’s Response, p. 7, ¶ 22). The Reeves Report is 13 pages long, and Pine does
not cite to the particular opinion on which it relies. However, the Report repeats the broad
statement that “It is my opinion that the ALU equipment purchased by Pine for use in the UMTS
network was not functional, did not work for its intended purpose, and would have continued to
result in outages for their customers had they deployed it commercially.” (Reeves Report, ¶ 8,
Ex. 6 to Pine’s Response). The cited deposition testimony Pine offers is that the sites or the
system were not working or that performance was inconsistent and not as expected. (Pine’s
Response, p. 7, ¶ 22). The internal Alcatel-Lucent emails are various emails reporting problems
with the Pine project and troubleshooting issues. (See e.g. ALU0003436, ALU0003459,
ALU0015780, Ex. 3 to Pine’s Response).

DISCUSSION
A.

Summary Judgment Standard
Summary judgment is proper where there is no genuine issue as to any material fact, and

the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The movant carries
the burden of establishing there are no genuine issues of material fact, but the movant may
5

The allegations in Pine’s Response are virtually identical to the factual allegations added in
Pine’s proposed Second Amended Complaint.
10

discharge its burden by showing there is an absence of evidence to support the non-movant’s
case, Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once
the movant meets its burden, the burden shifts to the non-movant to demonstrate a genuine issue
for trial on a material matter. Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th
Cir. 1991). In making its summary judgment determination, the court looks at the pleadings and
documentary evidence in the light most favorable to the non-movant, Deepwater Invs., Ltd. v.
Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991), and the movant must show
beyond a reasonable doubt it is entitled to summary judgment, Hicks v. City of Watonga, Okla.,
942 F.2d 737, 743 (10th Cir.1991).
However, once the burden shifts to the non-movant, that party may not rest on its
pleadings but must set forth specific facts showing there is a genuine issue for trial as to those
dispositive matters for which it carries the burden of proof. Celotex Corp., 477 U.S. at 324.
“[A] complete failure of proof, concerning an essential element of the nonmoving party's case
renders all other facts immaterial.” Celotex, 477 U.S. at 323. Further, the “mere existence of
some alleged factual dispute between the parties will not defeat an otherwise properly supported
motion,” and “[f]actual disputes that are irrelevant or unnecessary will not be counted.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
If the non-movant cannot make such a showing, after adequate time for discovery, summary
judgment is mandated. Id. at 322.
B.

Fraud Claim
The seriousness of every fraud allegation is evidenced by the requirement that it be pled

with particularity, Fed. R. Civ. P. 9(b), and that it be proven by clear and convincing evidence.
Griffin v. Griffin, 2004 OK CIV APP 58, ¶ 17, 94 P.3d 96, 100. “'The mere fact that fraud is

11

claimed will not justify the submission of that issue [to the jury] unless facts are produced from
which an irresistible deduction of fraud reasonably arises.’” Silk v. Phillips Petroleum Co.,
1988 OK 93, ¶ 13, 760 P.2d 174, 176-77 (quoting Johnson v. Caldwell, 1937 OK 327, ¶ 15, 71
P.2d 620, 623). Fraud allegations may not survive on vague assertions and general statements.
See, e.g., Jensen v. America’s Wholesale Lender, 425 Fed. App’x 761, 763-64 (10th Cir. 2011)
(affirming determination that plaintiff failed to satisfy heightened pleading standard for fraud
where allegations were broad, speculative, and non-specific).
To establish fraud, Pine must prove by clear and convincing evidence that Alcatel-Lucent
(1) made a material representation of a past or present fact; (2) that it was false; (3) that AlcatelLucent made the representation when it knew it was false, or made it as a positive assertion
recklessly, without any knowledge of its truth; (4) that Alcatel-Lucent made it with the intention
that it should be acted upon by Pine; (5) that Pine acted in reliance upon it; and (6) that Pine
thereby suffered injury. F.D.I.C. v. Hamilton, 122 F.3d 854, 858 (10th Cir. 1997); Silk, 1988 OK
93, ¶ 12, 760 P.2d at 176.6

6

Federal courts sitting in diversity follow the forum state’s choice-of-law principles to determine
which state’s law governs the action. BancOklahoma Mortgage Corp. v. Capital Title Co., Inc.,
194 F.3d 1089, 1103 (10th Cir. 1999).The parties appear to agree that Oklahoma law governs
Pine’s fraudulent inducement claim. For claims of fraud and misrepresentation, Oklahoma
courts apply “the most significant relationship test” set forth in Section 148 of the Restatement of
Conflict of Laws, which calls for application of the state’s law with the most significant
relationship to the parties and transaction or occurrence at issue. Ysbrand v. DaimlerChrysler
Corp., 2003 OK 17, ¶ 17, 81 P.3d 618, 626. The state where the alleged false representations
were “made and received” and where “plaintiff’s action in reliance took place” is presumed to
have the most significant relationship to the parties and transaction or occurrence. See
Restatement (Second) of Conflict of Laws § 148(1). Because the representations alleged in
Pine’s Petition were received in Oklahoma, where Pine is incorporated and has its place of
business (or Wyoming where a demonstration took place), Pine’s alleged “action in reliance”
took place in Oklahoma, and the equipment and services purchased were delivered and installed
in Oklahoma, the greater weight of the factors indicates Oklahoma law applies to the fraud
claim.
12

The first and most fundamental element of a fraud claim is a misrepresentation of a past
or present fact. Generally, to constitute actionable fraud, false representations cannot be
predicated upon a promise to perform in the future. F.D.I.C. v. Hamilton, 122 F.3d at 1527-28.
To render nonperformance of a promise to be performed in the future fraudulent, the promise to
perform must be “made with the intent to deceive the promisee into acting where he otherwise
would not have done so” and be “accompanied by an intention not to perform.” Citation Co.
Realtors, Inc. v. Lyon, 1980 OK 68, ¶ 8, 610 P.2d 788, 790. “There is a wide distinction between
the nonperformance of a promise and a promise made mala fide, only the latter being actionable
fraud.” Id. Eventual failure to perform is not evidence of intent not to do so. Thus, an allegation
that a defendant intended to deceive because the alleged promise was not met is insufficient as a
matter of law. Roberts v. Wells Fargo AG Credit Corp., 990 F.2d 1169, 1173 (10th Cir. 1993).
Likewise, a claim of fraud cannot properly be based upon an expression of opinion. A
statement made and reasonably understood as only an opinion or “puffing” does not constitute a
false representation of a past or present fact. Hall v. Edge, 1989 OK 143, ¶ 11, 782 P.2d 122,
126; OUJI 18.10. This is particularly true of broad, general statements made by a seller about the
value or quality of what he or she is selling. Sam P. McCullough, Inc. v. Doggett, 1936 OK 131,
¶ 13, 54 P.2d 184; OUJI 18.10.
Considering the facts in the light most favorable to the evidence offered by Pine, the
Court finds that Pine does not come forward with sufficient evidence to meet these high
standards, and no “irresistible deduction of fraud reasonably arises” on this record. Silk, 1988
OK 93, ¶ 13.
The Court first finds that the evidence offered in support of Plaintiff’s fraud claims, with
the limited exception of claimed omissions treated separately below, are statements of opinions

13

or promises of future performance, and not representations of past or present facts. These
include the allegations that Alcatel-Lucent promised its equipment and technology would
“outperform offerings” by competitors, “provide Pine the advantage of offering better service to
Pine’s customers” and “allow Pine to gain significant operational expense savings” and “capture
a large share of the wireless data market” (First Amended Petition, ¶ 24); that Pine could expect
better performance, including faster upload and download speeds (Pine’s Response, p. 11, ¶ 10);
that Alcatel-Lucent had (or would provide) a return and repair service, had comprehensive
support and integration experience, would furnish manuals and training, quoted Pine everything
needed to implement a network, and would devote technical support personnel to the project.
(Pine’s Response, p. 12, ¶ 16; p. 13, ¶ 21; p. 15, ¶ 34; p. 17, ¶¶ 47-48). The allegations and cited
evidence cannot be construed to be anything more than promises to provide equipment, services,
and levels of performance as the project was deployed in the future. Thus, these claims fail the
first element of the cause of action – an affirmative statement of a past or present fact.
Pine’s claimed misrepresentations also fail the falsity element of a fraudulent inducement
claim as well because they relate to future performance, and therefore cannot have been false
when made. Only if the speaker made the statement with the intent not to perform in the future
can a future promise have been false when made. Citation Co. Realtors, 610 P.2d at 790;
Roberts, 990 F.2d at 1173. Pine makes no such allegation and offers no such proof, stating only
that the promises turned out not to be true. (Alcatel-Lucent’s Motion, ¶¶ 25-26). Statements that
turn out to be untrue do not prove falsity at the time the statements were made. See Roberts, 990
F.2d at 1173; Gibson v. Weyerhaeuser Co., 35 Fed. App’x 834, 837 (10th Cir. 2002) (upholding
district court’s grant of summary judgment on fraud in the inducement claim where plaintiffs

14

failed to show that statements of future work were made with knowledge of falsity or that the
statements were indeed false).
There is also no evidence sufficient to go to the jury as to the element of known falsity.
Pine instead argues reckless disregard for the truth but offers no evidence of “irresistible
deduction of fraud” as to recklessness. “[T]o plead sufficient recklessness, a plaintiff must allege
facts demonstrating highly unreasonable conduct that constitutes extreme departure from
standards of ordinary care that the defendant either knew of the likelihood of the falsity [or] must
have been aware of it.” 26 Williston on Contracts § 69:26 (4th ed. 2009-2010).
This element is much of the focus of Pine’s Surreply to Motion for Summary Judgment
(“Pine’s Surreply”). However, Pine’s Surreply in Opposition contains further generalized
arguments without evidentiary proof of knowledge or even conduct from which recklessness can
be inferred. Pine fails to provide either evidence establishing the standard of expected behavior,
or evidence demonstrating deviation from that standard. Pine submits no evidence of actual
knowledge, but argues Ms. Raskin knew or should have known of insufficient resources for the
Pine project.7 (Pine’s Surreply, p. 2, ¶ 2). Pine attempts to tie Ms. Raskin to that knowledge by
virtue of the fact she is a sales representative of the company and offers a “collective knowledge”
argument. Such argument was raised for the first time in the Surreply and is not proper under
Local Rule 7.1(k). In any event, the Tenth Circuit has refused to apply the doctrine to commonlaw fraud actions. Woodmont, Inc. v. Daniels, 274 F.2d 132, 137 (10th Cir. 1959) (“And while
in some cases, a corporation may be held constructively responsible for the composite

7

The Court also finds no evidence cited by Pine that the claimed lack of resources impacted the
Pine project at all, thus negating the materiality requirement as well.
15

knowledge of all its agents, whether acting in unison or not, we are unwilling to apply the rule to
fix liability where, as here, intent is an essential ingredient of tort liability for deceit.”).8
Further, the cited emails in Pine’s Surreply cannot be said to be evidence of a false
representation that was or should have been known by Ms. Raskin when her alleged
representations were made in 2008, because all of the cited emails post date those alleged
representations by months or years. (See Alcatel-Lucent’s Motion, ¶ 30). Thus, they are not proof
of falsity at the time the claim was made. Nor does Pine establish how Raskin’s failure to learn
of and disclose post-purchase internal discussions about resources on UMTS projects, none of
which Pine shows to have had any direct impact on Pine, is fraudulent conduct.
The Court therefore finds that there has been a “complete failure of proof” as to one or
more of the essential elements of Pine’s fraudulent inducement claim, rendering all other facts
immaterial and causing the entirety of the claim to fail as a matter of law. Celotex, 477 U.S. at
323.
Beyond the fraudulent inducement claim pled by Pine in its First Amended Petition, Pine
argues, in its summary judgment response, claims of post-purchase (common law) fraud and
constructive fraud. Pine’s alleged evidence of post-purchase fraud relates to the implementation
of capacity licensing, the planned abandonment of UMTS support, and the providing of used
instead of new equipment. (Pine’s Response, pp. 11-12, ¶¶ 11-14; p. 13, ¶¶ 25-26; pp. 15-17, ¶¶
38-46). Pine’s alleged evidence of constructive fraud relates to the claimed omission of failure
8

The theory is almost exclusively applied in the corporate criminal liability context. See United
States v. Bank of New England, N.A., 821 F.2d 844, 856 (1st Cir. 1987). The criminal case upon
which Pine relies, United States v. Philip Morris USA, Inc., 449 F. Supp. 2d 1, 896-98 (D. D.C.
2006), was cast into doubt on appeal where the D.C. Circuit stated it was “dubious of the legal
soundness of the ‘collective intent theory,’” but declined to pass on the merits of the doctrine
because it found the district court did not rely upon it to gauge specific intent necessary to prove
guilt. See United States v. Philip Morris USA, Inc., 566 F.3d 1095, 1122 (D.C. Cir. 2009).
16

rate information as to RRHs, and the failure to advise of having conducted test procedures in
advance of the demonstration to Pine in Jackson Hole, Wyoming. (Pine’s Response, p. 10, ¶¶ 46, 9). Alcatel-Lucent objected to the Court’s consideration of this claim at all because not pled,
and at a minimum not pled with particularity as required by Fed R. Civ. P. 9(b). The Court finds
these objections are well taken.
In determining whether Pine met its burden of pleading fraud with particularity, the Court
looks only to the text of the Petition, which must “‘set forth the time, place and contents of the
false representation, the identity of the party making the false statements and the consequences
thereof.’” Koch v. Koch Indus., Inc., 203 F.3d 1202, 1236 (10th Cir. 2000) (quoting Lawrence
Nat'l Bank v. Edmonds, 924 F.2d 176, 180 (10th Cir. 1991)). In addition to the elements of
common law fraud, to recover for constructive fraud, Pine had to plead and prove (1) that
Alcatel-Lucent owed Pine a legal duty; (2) that Alcatel-Lucent misstated a fact or failed to
disclose a fact to Pine; (3) that Alcatel-Lucent's misstatement or omission was material; (4) that
Pine relied on Alcatel-Lucent's material misstatement or omission; and (5) that Pine suffered
damages as a result of Alcatel-Lucent's material misstatement or omission. Lillard v. Stockton,
267 F. Supp. 2d 1081, 1113 (N.D. Okla. 2003).
The Court finds that neither Pine’s claim for post-purchase fraud, nor the claim of
constructive fraud have been pled, and certainly have not been pled with the particularity
required by Rule 9(b). Pine’s First Amended Petition plainly pleads only fraudulent inducement
and recites only facts that would apply to an inducement claim. As to post-purchase fraud, there
is no allegation anywhere in the pleading as to time, place or substance of the alleged fraudulent
conduct post-purchase, and certainly nothing that would put Alcatel-Lucent on notice of the
existence of that claim.

17

Likewise Pine does not plead constructive fraud with particularity. The First Amended
Petition does not plead a duty, does not plead an omission, and does not plead reliance. A new
claim may not be raised for the first time on summary judgment. Spencer v. Wal-Mart Stores,
Inc., 203 Fed. App'x 193, 195-96 (10th Cir. 2006) (upholding district court's refusal to grant
plaintiff's motion to amend complaint to raise a different theory of negligence first articulated in
plaintiff's response to defendant's motion for summary judgment).
Pine’s proposed Second Amended Complaint, even if allowed, would not save these
claims. In its Motion to File Second Amended Complaint, Pine asserts that it is not raising new
claims, but only providing more particularity for those already pled. (Motion for Leave to File
Seconded Amended Complaint, ¶ 1, Dkt. 117). As the post-purchase fraud and constructive
fraud claims are not pled in the First Amended Petition, they cannot have been added through the
proposed Second Amended Complaint.
Setting aside Pine’s failure to plead, both claims also fail based upon the undisputed
evidence. As to the constructive fraud claim, Oklahoma has not recognized the tort of negligent
misrepresentation or constructive fraud outside the field of banking or securities law. Qassas v.
Daylight Donut Flour Co., LLC, No. 09-CV-0663-CVE-PJC, 2010 WL 2365472, at *12 (N.D.
Okla. June 10, 2010). Pine has not cited contrary authority and has not urged any viable
argument for a change in the law. Thus, the claim cannot proceed in this case involving the sale
of goods and services.
Second, Pine has not come forward with evidence to create a genuine issue of fact for
trial as to the claim. Pine has established no duty owed by Alcatel-Lucent to Pine to provide the
information. While Pine has come forward with evidence that it asked about the failure rate of
remote radio heads due to concerns about lightning strikes (Pine’s Response, p. 10, ¶ 3-4), none

18

of its personnel could testify what they were told, if anything, about such failure rates and none
could testify beyond anything other than speculation that they followed up on such inquiry. (See
Alcatel-Lucent’s Reply, pp. 4-5 and the deposition transcripts of Whisenhunt, Callaham and
Brown attached as Exs. 2, 4 and 5 thereto). Further, the described information undisputedly
relates to remote radio heads in South Korea with concerns as to humidity, and not to lightning
strikes in Oklahoma. As a result, Pine has failed to establish materiality or reliance as well. See
Dobbs v. Wyeth Pharmaceuticals, 848 F. Supp. 2d 1335, 1340-41 (W.D. Okla. 2012)
(concluding that doctor did not rely upon allegedly false statements by pharmaceutical
manufacturer that antidepressant medication would cure depression as required for fraudulent
misrepresentation claim by patient's wife following patient's suicide where doctor testified she
did not select the drug based on its alleged cure for depression, could not recall defendant's sales
representative suggesting that the drug's remission rate was greater than that of other
antidepressants, and did not review material given to her by the manufacturer in deciding to
prescribe the drug).
As to the claimed failure to tell Pine that Alcatel-Lucent had performed testing in
advance to select the best sites from which to demonstrate the equipment, and the claimed failure
to advise of engineering problems with the system, the Court finds that Pine’s conclusions from
the emails are supposition unsupported by any facts. See Faragalla v. Douglas County Sch., Dist.
RE 1, 411 Fed. App’x 140, 157 (10th Cir. 2011); see also First Nat’l Bank & Trust Co. of Vinita
v. Kissee, 1993 OK 96, ¶ 8, 859 P.2d 502, 505 (“A party cannot merely rely upon conjecture or
suppositions . . . because such is not sufficient to create a substantial controversy when the party
moving for summary judgment has introduced evidence showing the existence of facts which
would preclude recovery by the party against whom the motion was made.”). In regard to the

19

alleged engineering issues, the only testimony offered concerns engineering issues which did not
relate to the Alcatel-Lucent equipment (Alcatel-Lucent’s Reply, p. 5, n.6). Finally, in regard to
the testing, Alcatel-Lucent has submitted evidence from David Fritz as well as a PowerPoint
prepared by Fritz which establishes that Pine was told the testing was done prior to the
demonstration to Pine. (Alcatel-Lucent’s Reply, p. 5). Pine does not refute that evidence.
The post-purchase fraud claim fails because Pine has not come forward with proof to
satisfy each element of the claim. More specifically, like Pine’s fraudulent inducement claim
above, Pine’s claims of implementation of capacity licensing, the intent to abandon UMTS
support, and the claim of used equipment are at most, promises of future performance and Pine
has offered no evidence that the person who is alleged to have made the underlying promise did
not intend to perform (or knew it to be false). Further, as to the equipment allegation, there is no
evidence any equipment was actually used, rather the emails support the fact that when problems
were encountered with the identified items of equipment or component parts of equipment,
Alcatel-Lucent raised questions internally to satisfy itself as to what was provided. (Pine’s
Response, p. 15, ¶¶ 38-46). Pine’s supposition that the equipment was used is not sufficient
evidence to go to a jury on a fraud claim. See Kissee, 1993 OK 96, ¶ 8.
For all of the above stated reasons, the Court finds that Pine fails as a matter of law to
come forward with sufficient evidence to create a genuine issue for trial as to each element of its
claim for fraudulent inducement. Further, the Court finds the claims for constructive fraud or
post-purchase fraud are not pled, and finds the motion to amend futile as the pled allegations and
the proof offered in opposition to summary judgment fail to raise a genuine issue of fact for trial.
Thus, Alcatel-Lucent’s Motion for Summary Judgment on fraud is GRANTED.

20

C.

Breach of Contract
1.

Whether Pine has Come Forward with Sufficient Evidence of Defect

Alcatel-Lucent also seeks summary judgment on Pine's breach of contract and breach of
warranty claims. Alcatel-Lucent argues that both claims fail because Pine has not offered
sufficient evidence to create a question of fact as to defect. Alcatel-Lucent alternatively argues
that even if fact issues exist as to a defect, Pine’s sole remedy is the return and repair or replace
provision of the Supply Agreement, and that it has fully complied with that provision by
replacing all equipment returned by Pine.
As an initial matter, because the Court has ruled in Alcatel-Lucent’s favor as to the
fraudulent inducement claim, the provisions of the Supply Agreement govern this dispute. Texas
law controls claims arising under the Agreement,9 and since the Agreement is predominantly for
the sale of goods, Texas' version of Article 2 (Sales) of the Uniform Commercial Code, and
cases interpreting it, serve as the governing law. Westech Eng'g, Inc. v. Clearwater Constructors,
Inc., 835 S.W.2d 190, 197 (Tex. App. 1992) (citing Tex. Bus. & Com. Code Ann. § 2.102).
While breach of contract and breach of warranty are generally separate and distinct
claims under Texas law and the UCC,10 proof of non-conformity is an essential element of both.

9

Under Oklahoma choice-of-law principles, “‘a contract will be governed by the laws of the
state where the contract was entered into unless otherwise agreed and unless contrary to the law
or public policy of the state where enforcement of the contract is sought.’” Days Inns Worldwide
v. Mandir, Inc., 393 F. Supp. 2d 1240, 1247 (W.D. Okla. 2005) (quoting Williams v. Shearson
Lehman Bros., Inc. 1995 OK CIV APP 154, ¶ 14, 917 P.2d 998, 1002). The Agreement was
executed in Texas and includes a choice-of-law clause providing that Texas law would govern.
Therefore, Texas law applies to both Pine’s breach of contract and breach of warranty claims.
10
“The remedies for breach of contract are set forth in section 2.711, and are available to a buyer
‘[w]here the seller fails to make delivery.’ . . . . The remedies for breach of warranty, however,
are set forth in section 2.714, and are available to a buyer who has finally accepted goods, but
discovers that the goods are defective in some manner.” Sw. Bell Telephone Co. v. FDP Corp.,
811 S.W.2d 572, 576 (Tex. 1991) (quoting Tex. Bus. & Com. Code §§ 2.711(a) and cmt. 1,
2.714). Notably, here, Alcatel-Lucent urges that the warranty provisions of the Supply
21

See Tex. Bus. & Com. Code § 2.607(d) (“The burden is on the buyer to establish any breach with
respect to the goods accepted”); Tex. Bus. & Com. Code § 2.601 (providing that a buyer may
only reject goods if the goods or tender of delivery fail in any respect to conform to the contract).
Therefore, to recover for breach of contract and breach of warranty, Pine has the burden of
proving the equipment failed to conform to the Agreement. Great Am. Prods. v. Permabond
Int'l, a Div. of Nat'l Starch & Chem. Co., 94 S.W.3d 675, 681 (Tex. App. 2002) (noting that to
recover for breach of warranty, the buyer must prove that the goods failed to comply with the
affirmations of fact or promise set forth in the warranty); C.J.S. Sales § 312; 4 David Frisch,
Lawrence's Anderson on the Uniform Commercial Code § 2-601:48 (2d ed. 1994-2014)
(recognizing that the buyer bears the burden of proving the goods delivered failed to conform to
the express or implied terms of the contract).
In the Agreement, Alcatel-Lucent warranted that, for a period of 12 months from
equipment acceptance, the equipment and software shall, (a) under normal use and service, be
free from defects in material and workmanship, and (b) materially conform to Alcatel-Lucent's
specifications in effect on the date of shipment. See Agreement, ¶¶ 7.1, 7.2. Alcatel-Lucent
argues that Pine has not come forward with such proof.
The Court must first consider what evidence is necessary to establish defect. “‘Texas law
does not generally recognize a product failure standing alone as proof of a product defect.’”
Omni USA, Inc. v. Parker-Hannifin Corp., --- F. Supp. 2d ----, 2013 WL 4063007, at *24 (S.D.
Tex. Aug. 8, 2013) (quoting Cooper Tire & Rubber Co. v. Mendez, 204 S.W.3d 797, 807 (Tex.
2006)). “A conclusory statement of an expert witness is insufficient to create a question of fact
to defeat summary judgment.” Id. (quoting McIntyre v. Ramirez, 109 S.W.3d 741, 749 (Tex.

Agreement provide the remedy for both claims because the Agreement provides that the return
and repair procedures are the sole remedy for non-conforming goods under the Agreement.
22

2003)); see also Bro-Tech Corp. v. Purity Water Co. of San Antonio, Inc., 681 F. Supp. 2d 791,
795 n.3 (W.D. Tex. 2012) (noting that buyer “failed to raise a fact issue on the existence of a
defect because product failure alone is not proof of defect”); Prompt Elec. Supply Co., Inc. v.
Allen-Bradley, Co. 492 F. Supp. 344, 347 (E.D.N.Y. 1980) (granting seller's motion for summary
judgment on a claim that goods were damaged or defective because the buyer's “wholly
unsubstantiated claim and bald assertion that the goods were damaged fail[ed] to raise a genuine
issue as to any material fact.”).
The case of Omni USA, Inc. v. Parker-Hannifin Corp., --- F. Supp. 2d ----, 2013 WL
4063007 (S.D. Tex. Aug. 8, 2013) is instructive. In Omni, the buyer sued for breach of warranty,
claiming the seller manufactured and delivered defective oil seals used in gearboxes for
agricultural irrigation systems. Id. at *1, 8. The buyer claimed the gearboxes were leaking oil in
the field because of a problem in design or manufacturing of the seals. Id. at *8. In granting the
seller's motion for summary judgment, the court concluded that the buyer “fail[ed] to identify
and support with admissible evidence a defect or deficiency or shortcoming in the . . . seals that
caused the leakage, an essential element” of its claim for breach of warranty. Id. at *24. The
buyer's corporate representative testified that he was not aware of any defects with the seals. Id.
at *9. To prove defect, the buyer relied primarily upon its mechanical engineering expert's
opinion. Id. The court reasoned the expert failed to identify a defect because he could not
pinpoint the probable source of the leak. Id. at *8. He testified instead that the leaks could be
caused by a number of possible factors. Id. The court recognized that under Texas law, “product
failure standing alone” is not proof of a product defect.

Id. at *24.

Furthermore, “‘[a]

conclusory statement of an expert witness is insufficient to create a question of fact to defeat
summary judgment.’” Id. (quoting McIntyre v. Ramirez, 109 S.W.3d 741, 749 (Tex. 2003). The

23

buyer's conclusory statements of defect, without evidence of the cause of the alleged failures,
were not enough to raise a genuine issue of material fact concerning defect. Id.
It is Alcatel-Lucent’s position that Pine has provided only conclusory evidence the
equipment did not work, without identifying any deficiency or shortcoming in the equipment. In
response, Pine puts forward three categories of factual information which it claims is sufficient
to raise a question for trial: statements from the report of proffered expert Jonathan Reeves, the
testimony of Pine employees, and internal emails of Alcatel-Lucent. The Court finds this
evidence does not rise beyond general claims of product failure or unspecified claims of
problems which are insufficient as a matter of law. (Pine’s Response, ¶ 22, p. 7, ¶¶ 39-44, pp. 1617).11
Pine first cites to the report of its proffered expert Jonathan Reeves. In its Reply Brief,
Alcatel-Lucent argued that Reeves’s opinions were inadmissible and therefore should not be
considered on summary judgment under Fed. R. Civ. P. 56(c)(2) because he was not timely
identified as an expert in chief as stated in Alcatel-Lucent’s Motion to Exclude Reeves (Dkt.
217). The expert disclosure and report deadline in this case was November 6, 2013. No report
was provided by Mr. Reeves at that time. Instead, Plaintiffs submitted a report on the rebuttal
deadline of December 6 which Alcatel-Lucent urges is comprised of almost entirely new
opinions which were required to be provided on the November 6 deadline. Alcatel-Lucent also
notes that Reeves’ December 6th expert report fails to comply with Rule 26(a)(2)(B)(i-ii) in that
Reeves did not include the basis and reasons for his opinions, much less the facts or data he
considered in forming them. (See Def. Motion To Strike, Dkt. 217). The Court finds these
11

Pine appears to assert in its Statement of Additional Material Facts that Alcatel-Lucent
provided insufficient support and training services in breach of the Agreement but did not brief
the issue in its Argument and Authorities section. The Court therefore finds Pine did not raise a
genuine issue for trial for breach of the services portion of the Agreement.
24

arguments are well taken and that any affirmative testimony of Mr. Reeves is inadmissible under
Rule 56(c). See also Omni, 2013 WL 4063007, at *24. However, even if Reeves’ testimony were
admissible, he does not analyze or explain the cause of any equipment defect or even purport to
be qualified to do so. (See Reeves’ Rpt, Ex. 6 to Pine’s Response; Def. Motion to Exclude, Dkt.
No. 215). As stated in Omni, supra, conclusory evidence of experts is not evidence of defect. Id.
For all of these reasons, Mr. Reeves’ opinion is not evidence of defect which raises a genuine
material issue for trial.
In its opening and reply briefs, Alcatel-Lucent cited to the deposition testimony of Pine
employees in which they failed to identify a defect in any piece of equipment and/or claimed that
they bought a network and it did not work. (Alcatel-Lucent’s Motion, Fact ¶ 22; Alcatel-Lucent’s
Reply, p. 2). In response, Pine attached additional testimony of Pine employees Whisenhunt,
Brown and Shiro. The Court finds this testimony likewise does not constitute proof of defect. In
the cited testimony, Mr Whisenhunt testifies there were storms, the sites quit working, and there
were delays in equipment returns. (Ex. 8 to Pine’s Response). Mr. Shiro testifies the sites did not
consistently perform as expected, but provided no specifics as to a specific piece of equipment or
problem. (Ex. 9 to Pine’s Response). The testimony to which Pine cited for Mr. Brown does not
address these issues. (Ex. 10 to Pine’s Response).
In the Surreply, Pine attaches additional testimony from Mr. Whisenhunt’s deposition
and also from a separate deposition where Mr. Whisenhunt was proffered as a lay expert on
various aspects of the project and argues that such testimony evidences clear defects in the
“Alcatel UMTS Network.” (Pine’s Surreply at ¶ 1). The Court finds the cited testimony does not
establish defect. The testimony relates to the return and repair of equipment and demonstrates no
evidence of defect. (Ex. 1 to Pine’s Surreply). In his lay expert deposition, Mr. Whisenhunt

25

testified he does not know if any of the RRH’s were defective (Id. at 5), he never tested any of
the equipment (Id. at 28), he does not know why any of the cell tower equipment allegedly failed
(Id. at 36-37), he does not have any documentation of how frequently cell tower equipment
allegedly failed (Id. at 38-39), and that he did not know whether any particular hardware or
software component was defective (Id. at 58).
The Alcatel-Lucent emails can be characterized as nothing more than internal discussions
troubleshooting issues during the deployment of the Project. While some use language such as
defective cards or failed equipment, they do not purport to be a finding that any piece of
equipment was specifically defective or failed to conform to specifications. If component parts of
the equipment - usually a card – quite working, the card was replaced and the equipment
continued to work. A fair reading of the email shows that Alcatel-Lucent is trying to bring up the
network and investigating issues as they arise. As noted, supposition is insufficient evidence to
defeat summary judgment. See Kissee, 1993 OK 96, ¶ 8.
Pine also asserts it is not obligated to prove defect as to each individual piece of
equipment because it bought a network. Alcatel-Lucent argues that Pine does not create a
disputed fact as to the purchase of a network. Alcatel-Lucent asserts that Pine rejected its
proposal to deploy a turn-key network, and instead, chose to purchase only part of the offered
equipment and services. (Alcatel-Lucent's Motion, ¶ 11). Pine cites to documents discussing the
fact that Pine bought an end-to-end solution but does not establish or inform the Court as to how
that changes its obligation to prove defect as to each good purchased. (Pine’s Response, p. 6, ¶
10; p. 9, ¶ 2). Further, Pine admits that it elected to self-install a part of the equipment. (Pine’s
Response, p. 6, ¶ 10). And, Pine sues for rejection of goods, relying upon its rejection letter.
(First Amended Petition, ¶ 13; Ex. 10 to Alcatel-Lucent’s Motion). Pine’s rejection letter did not

26

identify or reject a network; rather it specifically identified and rejected each piece of equipment
purchased. (Id.) This is consistent with Pine’s purchase orders which purchased individual pieces
of equipment. Therefore, the Court finds Pine is obligated to prove defect as to each piece of
equipment returned. The record is devoid of such proof.
Finally, even if the Court did not conclude Pine is obligated to prove defect as to each
piece of equipment rejected, the Court further finds Pine has not established defect of the
network as required by the above cited authorities. Pine’s proof is only that the network did not
work (Alcatel-Lucent’s Motion, ¶ 22; Alcatel-Lucent’s Reply, pp. 7-8).12 Pine’s allegation the
network did not function, when it is responsible for installation of certain equipment, fails to
establish defect of a network. See Omni, 2013 WL 4063007, at *9 (no probability or conclusion
of defect is established where other possible causes of failure exist).
As a matter of law, therefore, the Court holds that Pine’s breach of contract and warranty
claims do not present a question for trial because Pine has not established evidence of the
essential element of defect.
2.

Alcatel-Lucent’s Claim that the Sole Remedy is the Supply Agreement

Alcatel-Lucent argues alternatively that even if Pine were able to establish the equipment
or network did not conform to contract specifications, its remedy is limited to repair and
replacement of defective goods under ¶ 7.3 of the Agreement, which provides:
7.3
If any of the equipment is not as warranted in this Article, then (a)
Purchaser shall obtain from Alcatel a Material Return Authorization (“MRA”)
and return the Equipment and MRA to Alcatel's designated repair facility, and (b)
Alcatel shall repair or replace the Equipment and return it to Purchaser's point of
shipment. . . . If, after the exercise of commercially reasonable efforts by Alcatel
to repair or replace any Equipment or correct any Software, Alcatel determines
12

Pine also failed to provide any evidence to show that Alcatel-Lucent had agreed to specific
deadlines and that it was missing those deadlines, or make any argument as to breach separate
from the claim of defect.
27

that the Product cannot be repaired, replaced or corrected, then Alcatel may, in its
sole discretion, refund to Purchaser the Purchase Price of the Product, less a
reasonable adjustment for beneficial use.
Agreement, ¶ 7.3.
The Agreement expressly provides that the remedy of ¶ 7.3 is exclusive:
7.5
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO
THE CONTRARY, THE PROVISIONS OF THIS ARTICLE CONSTITUTE
PURCHASER’S SOLE REMEDY UNDER THIS AGREEMENT WITH
RESPECT TO ANY DEFECTIVE PRODUCT, DOCUMENTATION OR
SERVICES. EXCEPT AS OTHERWISE PROVIDED IN THIS ARTICLE,
ALCATEL MAKES NO WARRANTY OF ANY KIND WITH RESPECT TO
ANY PRODUCT, DOCUMENTATION OR SERVICES, AND ALCATEL
DISCLAIMS ANY AND ALL IMPLIED WARRANTIES RELATING
THERETO, INCLUDING, BUT NOT LIMITED TO, ANY AND ALL IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY
INTENDED OR PARTICULAR PURPOSE.
Agreement, ¶ 7.5 (emphasis original).
Texas law and the UCC honor contractual provisions, like ¶¶ 7.3 and 7.5 of the
Agreement, which limit the measure of damages recoverable for the sale of goods to repair and
replacement of non-conforming goods. Tex. Bus. & Com. § 2.719(a)(2). The parties' right to
negotiate limited remedies parallels the basic contracts principle of freedom of contract, which is
fundamental to the UCC. See Tex. Bus. & Com. Code § 1.302(a), cmt. 1. Berge Helene Ltd. v.
GE Oil & Gas, Inc., 830 F. Supp. 2d 235, 273 (S.D. Tex. 2011), superseded in part on other
grounds, 896 F. Supp. 2d 582 (S.D. Tex. 2012).
As an initial matter, the Court notes Pine’s Response Brief does not contest AlcatelLucent’s position that the return and repair or replace provision of the Supply Agreement is
Pine’s sole remedy for all claims under the Agreement. Therefore, those facts and arguments are
deemed admitted. Instead, Pine argues the failure of essential purpose exception of Tex. Bus. &
Com. Code § 2.719(b). (Pine's Response, p. 29).

28

“[T]here are . . . ‘relatively few situations where a remedy [such as the repair or replace
provision] can fail of its essential purpose.’” Riegel Power Corp. v. Voith Hydro, 888 F.2d 1043,
1045 (4th Cir. 1989) (quoting 1 White & Summers, Uniform Commercial Code § 602 (3d ed.
1988)). The most often relied upon argument that a remedy failed of its essential purpose, and
the one relied upon by Pine here, is where the “seller is unwilling or unable to repair the
defective goods within a reasonable period of time.” Berge Helene Ltd., 830 F. Supp. 2d 235 at
271. The question of whether a remedy fails of its essential purpose can be one of law for the
court. See Henderson v. Ford Motor Co., 547 S.W.2d 663, 669 (Tex. App. 1977); Lankford v.
Rogers Ford Sales, 478 S.W.2d 248, 251 (Tex. App. 1972).
Pine does not dispute Alcatel-Lucent’s statement that all equipment Pine returned to them
was replaced. (Pine’s Response, p. 8, ¶ 24). Where a party repairs and replaces all items as set
forth in the agreement, the failure of essential purpose exception does not apply. See Fredonia
Broadcasting Corp., Inc. v. RCA Corp., 481 F.2d 781, 798 (5th Cir. 1973), overruled on other
grounds, Riquelane Valdez v. Leisure Res. Group, Inc., 810 F.2d 1345 (5th Cir. 1987) (finding
limited remedy did not fail of its essential purpose where the “facts clearly show[ed] that
[Defendant] obeyed the limitation by repairing and replacing items which [Plaintiff] claim[ed]
were defective”); Lankford, 478 S.W. 2d at 251 (concluding as a matter of law that limited
remedy did not fail of its essential purpose where defects were repaired on each occasion;
Henderson, 547 S.W.2d at 669 (same).
Pine’s primary argument is that it bought a network which did not work, and does not
fully analyze the timing of the return and replacement of the individual pieces of returned
equipment. (Pine’s Response, pp. 28-29). Under Pine’s theory, those individual returns are
immaterial. However, Pine does argue Alcatel-Lucent delayed too long in returning the

29

equipment. (Pine’s Response, p. 13, ¶ 24). But, the undisputed facts reflect that Pine did not
purchase a services level agreement which would have required parts to be returned immediately.
Rather, the undisputed evidence is that the return time Pine selected was “best efforts” with a
target of 60 days or 45 days (the actual period is in dispute). (Alcatel-Lucent’s Motion, ¶ 12,
Pine’s Response, p. 7, ¶ 11). While Alcatel-Lucent did not meet those target dates on the first
returns, it thereafter did meet target dates on all other returned equipment. (Ex. 11 to AlcatelLucent’s Motion). Pine has not shown that these delays were material or unreasonable in the
entire context of this project, nor is that the subject of its opposition.
Further, limited remedies are analyzed differently in commercial sales between
sophisticated parties involving complex equipment like the present. In such cases, “‘the repair or
replacement clause may simply mean that the seller promises to use his best efforts to keep the
goods in repair and in working condition and that the buyer must put up with the inconvenience
and loss of down time.’” Riegal Power Corp., 888 F.2d at 1046 (quoting 3 Hawkland, Uniform
Commercial Code Series 447 (1984)).

The Fifth Circuit has held that agreed-upon risks

negotiated by sophisticated commercial entities like the parties here should not be disturbed,
particularly where the transaction involves highly complex or innovative goods that are in some
ways experimental. See Employers Ins. of Wausau v. Suwannee River Spa Lines, Inc., 866 F.2d
752, 779 (5th Cir. 1989); Riegel Power Corp., 888 F.2d at 1046. This Court refuses to disturb
the agreed-upon allocation of risk. The Court finds that in the context of this commercial sale
between two sophisticated parties, the period of time for return was not unreasonable and did not
cause the remedy to fail of its essential purpose.
The undisputed evidence is that the only equipment returned by Pine is that stated on the
chart attached by Alcatel-Lucent as Exhibit 11 to its Summary Judgment Brief. All such

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equipment was returned to Pine pursuant to the contract.13 (Alcatel-Lucent’s Motion, ¶¶ 23-24).
Therefore, the Supply Agreement remedies control and are satisfied as a matter of law. Pine has
returned no other equipment and has proven no defect requiring replacement of goods.
Therefore, Pine’s breach of contract and breach of warranty claims fail as a matter of law under
the sole remedy of the Agreement.
D.

Damages

1.

The Supply Agreement Limitation of Damages Provision

Alcatel-Lucent argues that under all scenarios alleged by Pine in any pleading, Pine may
recover no more than the amount paid for the equipment under the contract. Alcatel-Lucent
claims that Pine's request for lost profits, wasted time, wasted cost of subcontracted work, and
punitive damages are all precluded expressly by the Supply Agreement.
The LIMITATION OF LIABILITY provision of the Agreement, prominently states:
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY, (A) NEITHER ALCATEL NOR ANY OF ALCATEL'S
SUPPLIERS OR LICENSORS SHALL HAVE ANY LIABILITY TO
PURCHASER FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL OR
SPECIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, ANY LOST
REVENUES OR PROFITS) ARISING OUT OF THIS AGREEMENT, AND (B)
ALCATEL'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS
AGREEMENT (OTHER THAN LIABILITY FOR PERSONAL INJURY
CLAIMS) SHALL NOT EXCEED THE PURCHASE PRICE OF THE
PRODUCT OR SERVICES THAT ARE THE SUBJECT OF SUCH CLAIM.

13

Alcatel-Lucent acknowledges that two pieces of equipment were still outstanding because they
were returned approximately 30 days before Pine tendered the equipment back to AlcatelLucent. (Alcatel-Lucent’s Motion, ¶ 24). Alcatel-Lucent had no obligation under those
circumstances to return the equipment to Pine as it had been rejected with the rest. Pine makes no
argument to the contrary.
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Under Texas law and the UCC, incidental and consequential damages may be so limited
or excluded. Tex. Bus. & Com. Code § 2.719(c); Morgan Bldgs. & Spas, Inc. v. Humane Soc'y
of Se. Tex., 249 S.W.3d 480, 491-92 (Tex. App. 2008).14
The Court has found the fraud claim fails as a matter of law,15 and the Agreement’s
Limitation of Liability provision governs and precludes Pine’s claim for lost profits, wasted time
and expense, and punitive damages.

14

Pine argues for the first time in its Surreply, by incorporating by reference its Response to
Alcatel-Lucent’s Motion in Limine #10, that the limitation of liability provision in the Supply
Agreement is unenforceable because (1) it is unconscionable, and (2) the failure of essential
purpose of the return and repair remedy renders the limitation of liability provision void.
(Response to Motion in Limine #10 at 2.) The Court declines to address these arguments
because this is an impermissible use of a surreply brief. See LCvR 7.1(k); Beaird v. Seagate
Tech., Inc., 145 F.3d 1159, 1164 (10th Cir. 1998); Green v. New Mexico, 420 F.3d 1189, 1196
(10th Cir. 2005). These arguments do not respond to new matter in Alcatel-Lucent’s Reply.
Pine should have raised the arguments in its Response to Motion for Summary Judgment.
Still, the Court finds that the limitation of liability is not unconscionable. “Where the
transaction is commercial and between sophisticated parties, courts are especially likely to
enforce liability limits for consequential damages.” Berge Helene Ltd. v. GE Oil & Gas, Inc.,
830 F. Supp. 2d 235, 274 (S.D. Tex. 2011). This rule applies in this case. Pine’s argument that it
will be left without a remedy if the repair and replacement remedy fails of its essential purpose is
incorrect. Available remedies in that event are the price paid under the contract pursuant to Tex.
Bus. & Com. Code § 2.711 for breach of contract or the difference in the value of the goods as
warranted and received under § 2.714 for breach of warranty, subject to other applicable
agreements of the parties.
Further, the Court agrees with the great weight of authority that, in cases involving
commercial contracts between sophisticated parties, where a limited remedy fails of its essential
purpose, such a failure does not invalidate a separate provision in an agreement excluding
liability for consequential damages. See Employers Ins. of Wausau v. Suwannee River Spa Lines,
Inc., 866 F.2d 752, 778 (5th Cir. 1989); McNally Wellman Co. v. N.Y. State Elec. & Gas Corp.,
63 F.3d 1188, 1197 (2d Cir. 1995); S.M Wilson & Co. v. Smith Int’l, Inc., 587 F.2d 1363, 1375
(9th Cir. 1978); Electro-Matic Prods., Inc. v. Prime Computers, Inc., No. 88-1790, 1989 WL
99044 (6th Cir. Aug. 28, 1989); Eastman Chemical Co. v. Niro, Inc., 80 F. Supp. 2d 712, 721-22
(S.D. Tex. 2000); Ritchie Enters. v. Honeywell Bull, Inc., 730 F. Supp. 1041, 1049 (D. Kan.
1990).
15
Even if evidence of all elements of the fraudulent inducement claim existed sufficient to create
a question of fact for the jury, the limitation of liability provision would control to limit those
damages. The alleged fraudulent inducement occurred in 2008 and the limitation of liability
provision was entered into in 2005. There is no allegation of fraudulent inducement in 2005.
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CONCLUSION
Based on the foregoing reasons, Defendant’s Motion for Summary Judgment is
GRANTED.
IT IS SO ORDERED this 29th day of January, 2014.

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