Everett Financial Inc v. Primary Residential Mortgage Inc et al
Filing
188
MEMORANDUM OPINION AND ORDER (unsealed version of 183 ). (Ordered by Judge Sidney A Fitzwater on 12/20/2016) (Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
EVERETT FINANCIAL, INC. d/b/a
SUPREME LENDING,
§
§
§
Plaintiff-counterdefendant,
§
§ Civil Action No. 3:14-CV-1028-D
VS.
§
§
PRIMARY RESIDENTIAL
§
MORTGAGE, INC.,
§
§
Defendant,
§
§
and
§
§
BARRY G. JONES, JAMES DURHAM, §
and SHANNON FORTNER,
§
§
Defendants-counterplaintiffs.
§
§
SCOTT EVERETT, individually,
§
§ after the parties agreed that no part needed
Counterdefendant.
§ to remain under seal.
MEMORANDUM OPINION
AND ORDER
In this litigation arising from the departure of three branch managers and other
employees from a large mortgage bank and the ensuing competition between that bank and
the departing managers’ and employees’ new employer, the parties’ cross-motions for partial
summary judgment present questions related to the viability of several contract, tort, and
statutory claims and counterclaims. For the reasons that follow, although the court concludes
that partial summary judgment is warranted in limited respects, it largely denies the motions.
I
This is an action by plaintiff-counterdefendant Everett Financial, Inc. d/b/a Supreme
Lending (“Supreme”) against defendant Primary Residential Mortgage, Inc. (“PRMI”) and
defendants-counterplaintiffs Barry G. Jones (“Jones”), James Durham (“Durham”), and
Shannon Fortner (“Fortner”) (collectively the “Branch Managers”), arising from conduct
related to the Branch Managers’ resignations from Supreme and moves to PRMI. Supreme’s
chief executive officer, Scott Everett (“Everett”), is a counterclaim defendant.1
Supreme is a large mortgage bank with more than 100 branches in 50 states.2 In 2011
Supreme recruited the Branch Managers to leave their positions at two other mortgage banks
and come to Supreme, bringing along their subordinate employees. Supreme’s process for
bringing managers onboard called for advance diligence into each manager’s existing
business at his previous employer. During recruitment, Supreme requested, and the Branch
Managers provided, information about their businesses, including about their loan volume,
expenses, and employees. Supreme and the Branch Managers also discussed how to handle
an eventual exit by the Branch Managers, and Everett stated that they could take their branch
1
Everett is more properly characterized as a third-party defendant. But because
throughout this litigation the parties have referred to Everett as a counterclaim defendant, the
court does so as well in this memorandum opinion and order.
2
Because both sides move for summary judgment, the court will recount the evidence
that is undisputed, and, when it is necessary to set out evidence that is contested, will do so
favorably to the side who is the summary judgment nonmovant in the context of that
evidence. See, e.g., GoForIt Entm’t, LLC v. DigiMedia.com L.P., 750 F.Supp.2d 712, 718
n.4 (N.D. Tex. 2010) (Fitzwater, C.J.) (quoting AMX Corp. v. Pilote Films, 2007 WL
1695120, at *1 n.2 (N.D. Tex. June 5, 2007) (Fitzwater, J.)).
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employees with them, provided that a “smooth transition plan” was in place. Branch
Managers App. [105-30] 1396.3
The Branch Managers joined Supreme in November 2011, along with the majority of
the employees who worked for them at their previous employers. Around that time, two
employment agreements were presented for their signatures. Each Branch Manager executed
a Confidentiality, Inventions and Non-Solicitation Agreement (“Non-Solicitation
Agreement”) with Supreme. The Non-Solicitation Agreement’s terms restricted the Branch
Managers from disclosing or using Supreme’s confidential information and from soliciting
or employing Supreme employees.
1. Confidential Information. Employee recognizes and
acknowledges that he or she will have access to confidential
information of Employer (“Confidential Information”),
including, without limitation, customer information, lists of
suppliers and costs, information regarding proposals, designs,
concepts, sales figures and other information concerning the
business and operations of Employer and other proprietary data
or information, that is valuable, special and a unique asset of
Employer. In addition, Employee will have access to similar
Confidential Information of Employer’s customers. Employee
agrees not to disclose such Confidential Information, except as
may be necessary in the performance of his or her duties, to any
person, firm, corporation, association or entity, nor use such
Confidential Information in any way, either during the term of
his or her employment or at any time thereafter, until he or she
has received the written consent of Employer or until such
Confidential Information becomes public knowledge through no
3
Due to the number of filings that relate to the four pending summary judgment
motions, the court for clarity will identify in brackets the docket number of the brief,
appendix, or other pleading cited. In this instance, for example, the docket number of the
cited appendix is 105-30.
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wrongful act of Employee. Employee shall take such protective
measures as are reasonably necessary to preserve the
confidentiality of such Confidential Information, and exercise
his or her best efforts to prevent unauthorized parties from
gaining access thereto.
...
3. Non-Solicitation
(a) Associations with Co-Workers. Employee agrees that during
his or her employment and for two (2) years following the
termination of his or her employment for any reason, neither he
or she nor his or her affiliates will . . . employ or solicit or
attempt to employ or solicit for any employment any of
Employer’s current employees. Employee and his or her
affiliates will not, either directly or indirectly or by acting in
concert with others, seek to induce or influence any employee
to leave Employer’s employment.
(b) Solicitation of Customers. Employee agrees that during his
or her retention and for two (2) years following the termination
of his or her employment for any reason, neither he, she nor his
or her affiliates will, by himself or herself or by acting in concert
with others, solicit any of Employer’s customers or prospective
customers existing as of the date of termination that Employee
directly serviced, was assigned to, or was responsible for during
the twelve (12) month period immediately preceding termination
of Employee’s employment with Employer. Employee further
agrees not to take any other action to divert business from
Employer or influence any vendor, supplier, customer or
potential customer of Employer to cease doing business with
Employer.
Supreme App. [77-11] 1057, 1058-59 (bold font omitted).
Jones and Durham executed the Non-Solicitation Agreement as presented. But
Fortner crossed out the provisions relating to non-solicitation of Supreme employees and
customers (¶¶ 3(a), 3(b), and 5(b)), and initialed the changes. Fortner signed and returned
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the modified agreement to Supreme. The summary judgment evidence conflicts as to
whether Fortner informed Everett about the changes at the time he signed the NonSolicitation Agreement. Several months later, while Fortner was employed at Supreme, a
Supreme human resources representative contacted him and requested that he sign a nonsolicitation agreement. Fortner declined, explaining that he had deliberately crossed out the
provisions in the Non-Solicitation Agreement because he did not agree to them. After this
exchange, Fortner remained employed at Supreme until he resigned more than a year and a
half later.
At the beginning of their employment, the Branch Managers also signed a second
agreement, called the Producing Branch Manager Agreement (“Branch Manager
Agreement”). The court refers to the most recent version of the Branch Manager Agreement,
signed in January 2014, in this memorandum opinion and order. The Branch Manager
Agreement provides, in relevant part:
3.
RESTRICTIONS: Employee, during the term of his/her
employment, shall not engage in any other real estate or
mortgage related business without the prior written approval of
Supreme and shall devote his/her time, knowledge, skill, and
efforts exclusively to Supreme’s operations and affairs.
Employee shall not alone, or in concert with others, engage in
any pursuit, activity, business or relationship that is, or could be,
in competition with Supreme or is adverse to Supreme’s or
another branch manager’s best interest.
...
9.
CONFIDENTIALITY: Employee agrees that during the
term of employment and thereafter, Employee shall not directly
or indirectly use, disclose, reveal, make available, or
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disseminate to any person who is not an authorized employee of
Supreme Supreme’s Proprietary Information.
...
13.
TERMINATION: . . .
Employee expressly acknowledges and agrees that all loans . . .
originated and contracts obtained by Employee during
Employee’s employment with Supreme are the sole and
exclusive property of Supreme . . . . Upon Employee’s
termination, such loans and contracts shall remain the sole and
exclusive property of Supreme. Without the express written
consent of the Supreme, Employee agrees that Employee shall
take no action of any type to place or divert such loans
originated, and contracts obtained by Employee, to any
competitor or away from Supreme.
Supreme App. [77-11] 1024, 1026-27. Section 11 of the Branch Manager Agreement refers
to an attached Exhibit B, which it identifies as a separate agreement concerning
confidentiality and non-solicitation.
11.
EXHIBIT B: For the consideration as set forth in this
Agreement and as a material inducement to Supreme for the
employment of Employee, the parties hereto covenant and agree
to execute that certain Confidentiality and Non-Solicitation
Agreement attached hereto as Exhibit B and incorporated herein
for all purposes. To the extent the terms of Exhibit B conflict
with this Agreement, the terms of Exhibit B shall control.
Id. at 1026. But although the Branch Manager Agreement contained an Exhibit A, no
Exhibit B was attached.
During their tenure at Supreme, the Branch Managers were responsible for up to 20
branches and 100 employees, referred to as Supreme’s southeast region. They reported
directly to “c-level” Supreme executives. They had access to Supreme information such as
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loan data, daily financial reports, and all Supreme branches’ performance and operations
information.
The Branch Managers came into conflict with Supreme during their tenure.
Disagreements arose about loan interest rates, fees, and whether to cut costs by terminating
employees at their branches. On at least one occasion, Everett told the Branch Managers
they had the choice to leave for another company. These conflicts were exacerbated when
Everett decided to place two branches originally supervised by the Branch Managers (Orange
Beach, Alabama and Daphne, Alabama) under the leadership of a different Supreme
employee, David Redmond (“Redmond”).
In October 2013, while continuing their
employment at Supreme, the Branch Managers began communicating with PRMI about
employment opportunities.
To evaluate the potential move, the Branch Managers provided PRMI information
about their branches’ loans, financial condition, expenses, and employees. Fortner emailed
a Supreme “funding report” to his personal account. Supreme App. [77-11] 1069-1282. This
document listed every loan closed and funded in Supreme’s southeast region in 2013,
including several categories of detailed information about each loan. The Branch Managers
and their employees (who were also evaluating the prospective move) had particular interest
in PRMI’s condo loan business. To evaluate PRMI’s abilities in this area, the Branch
Managers gave PRMI five documents from a Supreme condo transaction to enable PRMI to
run a test. Of these five documents, some were publicly available, but others were not. In
addition to analyzing this condo loan transaction, PRMI also held a conference call with 12
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of the Branch Managers’ employees, who were all still employed at Supreme, to convince
them that PRMI could handle condo transactions.
As the prospective move developed, the Branch Managers recruited the employees
in their branches to come with them. They worked with PRMI to ensure that employees’ job
applications were delivered in advance of a planned mass resignation from Supreme. PRMI
ran background checks on the employees who elected to fill out the applications. All of this
occurred before the Branch Managers or their employees resigned from Supreme. Some of
the employees whom the Branch Managers recruited felt pressured to move, for reasons such
as concern that they would no longer have a job at Supreme if they did not move to PRMI
with their branch. At least one PRMI representative spoke with subordinate employees of
the Branch Managers—while the employees and the Branch Managers were still employed
at Supreme—to provide them information about employment at PRMI. The Branch
Managers coordinated their employees to resign from Supreme at the same time on the same
day, to coincide with the Branch Managers’ notification of their departure to Everett.
In January 2014 the Branch Managers were near a final decision to move their
business to PRMI. Supreme was aware that the Branch Managers were considering leaving.
In a recorded conference call among the Branch Managers and Everett on January 24, Everett
stated that the Branch Managers needed to choose between remaining at Supreme, and
implementing Everett’s preferred reforms, or moving along with their employees to another
company.
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You do have a choice. You have choices. And part—and one
of the choices, Barry, is to say, I think there’s a better mouse
trap for us. I truly want the best for you guys. I want it,
honestly. If that means it’s a f---ing better company out there
that has construction loans and all kinds of flow downs and all
this shit and moves with the market better than we do, I think—I
seriously want the best for you, honestly. If that’s it, then do it.
...
So I think—I personally think the three of you guys should just
have that kind of come-to-Jesus, heart-to-heart conversation
with yourselves and either agree or disagree with me on that,
and then either agree or disagree that Supreme’s the place for
you. And if it is, really believe it and really, really have a f---in’
formalized plan and know the consequences of some of the stuff
that’s going to happen. And if it isn’t, let’s just make a f---in’
plan to get everybody moved with you.
Branch Managers App. [105-2] 148, 149-50 (alterations added).
On January 31, 2014 the Branch Managers officially committed to leave for PRMI.
They informed PRMI’s chief executive officer that morning. They held a conference call
with Everett shortly afterward to inform him of their resignations from Supreme. Durham
began the call by telling Everett that the Branch Managers, together with their employees,
were leaving Supreme, and that all of their licensed employees would tender their
resignations that day. In response, Everett began to address the details of the branches’
transition from Supreme to PRMI, including how to close out loans that were currently in the
pipeline, how to settle the balance of the branches’ profit and loss account with Supreme, and
how to divide up the branches’ office equipment according to who owned it. Everett
reiterated his commitment to make the transition smooth. Everett also offered a piece of
advice.
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If I was you guys, what I would do is I would send a branch
there and I would test the waters before you move a hundred
people and a $30 million massive pipeline. But that’s me. And
so if you want to talk through that strategy, I’m happy to do that
as well.
Branch Managers App. [105-2] 171.
The conference call then turned to how each side would handle contact with
employees who were deciding whether to follow the Branch Managers or remain at Supreme.
Everett stated that a non-solicitation agreement prohibited the Branch Managers from
attempting to take employees outside their branches. Durham agreed and said the Branch
Managers had no intention of soliciting employees from other branches. Durham had stated
earlier in the call that the Branch Managers intended to take the Orange Beach and Daphne
branches as part of their move. They still considered these two branches part of their
business, despite Supreme’s earlier decision to place them under new management.
The topic of soliciting employees continued to come up throughout the call. Durham
reiterated the commitment that the Branch Managers would not solicit anyone outside their
branches. Everett accepted Durham’s assurances as to Durham’s and Fortner’s activities, but
he expressed continuing reservations about whether Jones would comply with the
commitment not to solicit employees outside his own branches. Everett also stated
concerning the Orange Beach and Daphne branches that he intended to encourage those
employees to stay with Supreme up until they resigned. He said he was texting the newlyinstalled Supreme manager (Redmond) to have him speak to the Orange Beach and Daphne
employees about remaining with Supreme. But Everett stated that if other employees
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contacted him about remaining at Supreme, he would do his best to encourage them to go
with the Branch Managers.
Finally, the call turned to how to implement the branches’ transition out of Supreme
while maintaining service to consumers. Everett asked the Branch Managers to “figure out
who’s staying and who’s going” among branch employees. Branch Managers App. [105-2]
180. Everett asked for clarification on who was leaving that day. “So today is the last day
of everyone or just these selective people that we say stay?” Id. at 181. Durham responded
that a plan would be worked out to close on the branches’ loans in progress, move the
employees who would follow the Branch Managers to PRMI, and lay off employees who
were not needed for either. Durham specified that the branches’ underwriters, although
technically Supreme corporate employees, had been invited to come with the Branch
Managers. Everett agreed to this course of action. “So whatever—whatever ones want to
go, absolutely. . . . Even though they are technically right at corporate, they’re really part of
you, so absolutely.” Id. at 184. The call ended with compliments, and Everett told the
Branch Managers that they were welcome to return to Supreme in the future.
Everett continued to coordinate the transition with the Branch Managers after their
resignations on January 31. A subsequent email and text message to the Branch Managers
confirmed Everett’s intent to make the Branch Managers’ and their employees’ transition
smooth. In February Everett asked Fortner via text message what to tell employees who
were contacting Everett about staying with Supreme, and stated that “as I showed u herein
and ALWAYS told u anyone that wants to leave is welcome to leave. I just want everyone
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to have all options open.” Branch Managers App. [105-9] 664 (errors in original). Everett
also texted two branch employees to inform them that they were welcome to come back, and
that he thought they had been wrongly informed that they were not wanted at Supreme. “In
the pasting never reached out because I gave my word to Barry, James, and Shannon that of
they left Supreme they could take whomever they wanted and I would t interfere.” Branch
Managers App. [105-2] 19 (errors in original).
Supreme brings this action against PRMI and the Branch Managers. As relevant here,
Supreme alleges claims against the Branch Managers for breach of contract, breach of
fiduciary duty, conspiracy, and aiding and abetting, and against PRMI for tortious
interference with contract, tortious interference with prospective business relations, unjust
enrichment, conspiracy, and aiding and abetting. And as relevant here, the Branch Managers
assert counterclaims against Supreme and Everett for fraudulent inducement, fraud, negligent
misrepresentation, and promissory estoppel, and counterclaims against Supreme only for
breach of contract, violation of Tex. Civ. Prac. & Rem. Code Ann. § 143.001, invasion of
privacy, unjust enrichment, money had and received, declaratory judgment, and attorney’s
fees under Tex. Bus. & Comm. Code Ann. § 15.51. The following motions are pending for
decision: PRMI’s motion for partial summary judgment; the Branch Manager’s motion for
partial summary judgment; Supreme and Everett’s motion for partial summary judgment
against the Branch Managers; and Supreme and Everett’s motion for partial summary
judgment against PRMI. The Branch Managers and PRMI have filed objections to some of
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the summary judgment evidence on which Supreme and Everett rely.4
II
Each movant’s summary judgment burden depends on whether it is moving for relief
on a claim or defense for which it will have the burden of proof at trial. To be entitled to
summary judgment on a claim or defense for which it will have the burden of proof, a party
“must establish ‘beyond peradventure all of the essential elements of the claim or defense.’”
Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F. Supp. 943, 962 (N.D. Tex. 1995)
(Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). This
means that it must demonstrate that there are no genuine and material fact disputes and that
it is entitled to summary judgment as a matter of law. See Martin v. Alamo Cmty. Coll. Dist.,
353 F.3d 409, 412 (5th Cir. 2003). “The court has noted that the ‘beyond peradventure’
standard is ‘heavy.’” Carolina Cas. Ins. Co. v. Sowell, 603 F.Supp.2d 914, 923-24 (N.D.
Tex. 2009) (Fitzwater, C.J.) (quoting Cont’l Cas. Co. v. St. Paul Fire & Marine Ins. Co.,
2007 WL 2403656, at *10 (N.D. Tex. Aug. 23, 2007) (Fitzwater, J.)).
When the summary judgment movant will not have the burden of proof at trial on a
specific claim or defense, the party need only point the court to the absence of evidence of
any essential element of the opposing party’s claim or defense. See Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the moving party does so, the nonmovant must go beyond
4
Also pending are six motions to exclude and strike designated experts, filed by PRMI
and the Branch Managers. These motions will be decided separately from the instant
motions for partial summary judgment.
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its pleadings and designate specific facts demonstrating that there is a genuine issue for trial.
See id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per
curiam). An issue is genuine if the evidence is such that a reasonable jury could return a
verdict for the party with the burden of proof. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). The nonmovant’s failure to produce proof as to any essential element
renders all other facts immaterial. TruGreen Landcare, L.L.C. v. Scott, 512 F.Supp.2d 613,
623 (N.D. Tex. 2007) (Fitzwater, J.).
Summary judgment is mandatory where the
nonmoving party fails to meet this burden. Little, 37 F.3d at 1076.
III
As a threshold matter, the court addresses objections filed by the Branch Managers
and PRMI to some of the summary judgment evidence on which Supreme and Everett rely.
A
The Branch Managers and PRMI object that statements in Everett’s declaration that
Supreme had no notice of interlineations in Fortner’s Non-Solicitation Agreement lack
foundation, are conclusory, and are not within Everett’s personal knowledge. Supreme
responds that Everett was the chief executive officer of Supreme when the Branch Managers
signed their Non-Solicitation Agreements, and he had knowledge of hiring procedures.
Fortner in fact acknowledged that Everett had personal knowledge of the interlineations. The
court overrules this objection, concluding that this evidence is admissible.5
5
Other objections—to the form of the Everett declaration and to a missing exhibit—
have been resolved by agreement and through an amendment of Everett’s declaration.
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B
The Branch Managers and PRMI object that two of Supreme and Everett’s exhibits,
Exhibits 21 and 23, contain small print that makes them illegible. Because the court does not
rely on the small-print portions of the exhibits in this memorandum opinion and order, the
court overrules this objection as moot.
The Branch Managers and PRMI object on the ground that Exhibit 32 contains
handwritten notes. Because these notes are not relied on in this memorandum opinion and
order, this objection is also overruled as moot.
The Branch Managers and PRMI object that Exhibits 65 and 66 are emails that
identify attachments, but do not include the attachments with the exhibits. Because these
exhibits are not relied in this memorandum opinion and order, this objection is also overruled
as moot.6
C
The Branch Managers and PRMI also object on the ground that Supreme and Everett
have submitted some exhibits and parts of exhibits that they do not cite in their motions and
briefs. They maintain that the court should strike the exhibits and pages that Supreme and
Everett do not cite in their opening brief. The court overrules this objection.
Supreme and Everett Combined Resp. to Ds. Objs. [148] 2-3.
6
Other objections to the authentication of 17 exhibits relied on by Supreme and
Everett were resolved by agreement of the parties. See Supreme and Everett Combined
Resp. to Ds. Objs. [132] 2.
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The authority on which PRMI and the Branch Managers rely only establishes that a
party must adequately cite the summary judgment evidence on which it relies. See Ragas v.
Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998); Perez v. Johnson, 122 F.3d 1067,
1067 (5th Cir. 1997); Forsyth v. Barr, 19 F.3d 1527, 1536-37 (5th Cir. 1994). If a party
includes summary judgment evidence in the record that it does not adequately cite, the court
need not—indeed, typically does not—consider that evidence when deciding the summary
judgment motion. But that is not a basis to exclude the evidence in response to an evidence
objection. Instead, as here, it is a basis for the court not to consider uncited evidence when
making its rulings.7 Therefore, this objection is overruled.
D
Finally, the Branch Managers and PRMI object to statements in the affidavit of Rick
Hogle (“Hogle”). They contend that nine of the sixteen paragraphs in this affidavit are
conclusory, vague, or lack sufficient foundation to show that the information is within
Hogle’s personal knowledge. In particular, they contend that Hogle’s characterization of
certain documents and information as “confidential” or “proprietary” is a legal conclusion.
7
Fed. R. Civ. P. 56 “saddles the non-movant with the duty to ‘designate’ the specific
facts in the record that create genuine issues precluding summary judgment, and does not
impose upon the district court a duty to survey the entire record in search of evidence to
support a non-movant’s opposition.” Arrieta v. Yellow Transp., Inc., 2008 WL 5220569, at
*2 n.3 (N.D. Tex. Dec. 12, 2008) (Fitzwater, C.J.) (quoting Jones v. Sheehan, Young & Culp,
P.C., 82 F.3d 1334, 1338 (5th Cir. 1996)), aff’d sub nom., Hernandez v. Yellow Transp., Inc.,
670 F.3d 644 (5th Cir. 2012). “[T]he court is not obligated to comb the record in search of
evidence that will permit a nonmovant to survive summary judgment.” Id. (citing Adams v.
Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006)).
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Supreme and Everett respond that, according to the affidavit, Hogle is the chief strategic
officer of Supreme, and, in this role, he has personal knowledge of the information that
Supreme regards or treats as confidential.
Whether information is confidential or proprietary is a legal conclusion. See
Orthoflex, Inc. v. ThermoTek, Inc., 986 F.Supp.2d 776, 811 (N.D. Tex. 2013) (Fitzwater,
C.J.), appeal docketed, No. 16-11381 (5th Cir. Sept. 16, 2016). The objection to the Hogle
affidavit is therefore sustained to the extent that it states a legal conclusion about what
information is confidential or proprietary.8
IV
The court now turns to Supreme’s claims against the Branch Managers.
A
Supreme moves for summary judgment as to liability on its breach of contract claim
against the Branch Managers, and the Branch Managers cross-move for summary judgment.
“‘The elements of a claim for breach of contract are: (1) the existence of a valid contract; (2)
performance or tendered performance by the plaintiff; (3) breach of the contract by the
defendant; and (4) damages to the plaintiff resulting from that breach.’” Hunn v. Dan Wilson
Homes, Inc., 789 F.3d 573, 579 (5th Cir. 2015) (quoting Foley v. Daniel, 346 S.W.3d 687,
690 (Tex. App. 2009, no pet.)). Supreme alleges that the Branch Managers breached the
8
The Branch Managers and PRMI make several other objections to each of nine
paragraphs in the Hogle affidavit. To the extent not addressed above, these other objections
are overruled as moot or as lacking merit.
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Non-Solicitation Agreement and the Branch Manager Agreement when they used or
disclosed Supreme’s confidential information, solicited Supreme employees, and engaged
in business activity adverse to Supreme’s best interest. The Branch Managers maintain that
the Non-Solicitation Agreement is unreasonable and must be reformed; that, with respect to
Fortner, the non-solicitation provisions were never agreed to; and that Supreme’s claim is
barred by waiver and other affirmative defenses.
B
1
The Branch Managers’ contention that provisions of the Non-Solicitation Agreement
are overbroad and unreasonable and must be reformed is a legal question that must be
resolved before addressing other breach of contract arguments. Texas law requires covenants
not to compete to contain reasonable limits as to geographical area and scope of activity.
Tex. Bus. & Com. Code Ann. § 15.50(a) (West 2011). This requirement applies to employee
non-solicitation agreements. Marsh USA Inc. v. Cook, 354 S.W.3d 764, 768 (Tex. 2011).
If a non-solicitation agreement is held to be unreasonable, no damages can be awarded for
a breach that occurred before it was reformed by the court. See Tex. Bus. & Com. Code Ann.
§ 15.51(c); Alliantgroup, L.P. v. Feingold, 803 F.Supp.2d 610, 621 (S.D. Tex. 2011).
2
The Branch Managers contend that the Non-Solicitation Agreement is unreasonable
under Texas law because it contains no geographical limitation, contains no exception for
employees who worked with the Branch Managers before joining Supreme, and restrains
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undefined “affiliates” of the Branch Managers. On the issue of geographical limitation,
Supreme responds that, although the Non-Solicitation Agreement lacks a geographical
limitation, other inherent limitations in restrictive covenants have been held to be an adequate
substitute. See Gallagher Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654 (Tex.
App. 2009, pet. denied). Supreme maintains that the employee non-solicitation provisions
were inherently limited to Supreme employees, and that the Branch Managers were still free
to recruit other people in the mortgage business to join them at PRMI. According to
Supreme, this limitation is sufficient to make the Non-Solicitation agreement reasonable
under Texas law. See Merritt Hawkins & Assocs., LLC v. Gresham, 79 F.Supp.3d 625, 63940 (N.D. Tex. 2015) (Solis, C. J.).
The Branch Managers reply that a restraint on soliciting all Supreme employees is still
too broad to be reasonable; that a reasonable covenant would be limited to only those
employees with whom the Branch Managers had contact at Supreme, leaving the Branch
Managers free to solicit other Supreme employees; that employee solicitation covenants are
governed by the same reasonableness standard as client solicitation covenants, see Marsh,
354 S.W.3d at 768; and that client solicitation covenants must be limited to clients with
whom the employees had personal contact, see Peat Marwick Main & Co. v. Haass, 818
S.W.2d 381, 388 (Tex. 1991). The Branch Managers therefore maintain that a restraint
against soliciting all Supreme employees, including those with whom they never had contact,
is unreasonable.
The Branch Managers have not identified an authority holding that it is unreasonable
- 19 -
to restrain solicitation of all current employees at a company of Supreme’s size. And it is not
clear that the Supreme Court of Texas would extend its reasonableness analysis of client
solicitation covenants to operate identically with respect to employee solicitation covenants.
For example, although the Branch Managers rely on Haass, in that case the client solicitation
restriction at issue would have required the departing partner to “in effect, take a prospective
client’s accounting history” to determine if the client had been served by his previous firm.
Haass, 818 S.W.2d at 387 (internal quotation marks omitted). By contrast, in this case, the
restriction only applies to soliciting current Supreme employees. This court has previously
held that an employee non-solicitation covenant extending to all current employees is a
reasonable protection of the employer’s interest in maintaining its employees. Merritt
Hawkins, 79 F.Supp.3d at 639-40 (upholding covenant against soliciting all employees). The
court therefore holds that the Non-Solicitation Agreement is not invalid for lack of a
geographical or similar limitation.
3
As for the Branch Managers’ other two arguments against the reasonableness of the
Non-Solicitation Agreement, neither has force. The Branch Managers argue that employee
non-solicitation agreements must contain a carve-out that permits them to solicit employees
with whom they worked before joining Supreme. But the only case that supports this
argument does not explain the court’s reasoning for this particular statement, nor does it
contain the text of the covenant that it was reforming. See Alliantgroup, L.P. v. Feingold,
2009 WL 1357209, at *2 (S.D. Tex. May 11, 2009). This court is therefore unable to decide
- 20 -
how it applies, if at all, to the facts of this case.
The Branch Managers also maintain that prohibiting their “affiliates” from soliciting
Supreme employees makes the covenant’s scope unreasonably broad, and might, for
example, prohibit any employee of a Branch Manager’s subsequent employer from recruiting
a Supreme employee. Supreme responds that the term “affiliates” is only meant to prevent
indirect solicitation by the Branch Managers, such as through use of another as an agent to
accomplish what the Branch Managers cannot do themselves. Supreme also posits that a
contract should not be interpreted to create an unreasonable result. “If a contract is
susceptible to two constructions, one of which would render it valid and the other invalid,
the construction validating it must prevail.” Hackberry Creek Country Club, Inc. v.
Hackberry Creek Home Owners Ass’n, 205 S.W.3d 46, 56 (Tex. App. 2006, pet. denied).
The court agrees for these reasons that the restraint on soliciting Supreme employees by
Branch Managers’ “affiliates” does not render the Non-Solicitation Agreement unreasonably
broad. Accordingly, the court concludes as a matter of law that the Non-Solicitation
Agreement is not unreasonable under Texas law, and that the Branch Managers are not
entitled to summary judgment dismissing Supreme’s breach of contract claim on this basis.
C
The Branch Managers maintain that Fortner is entitled to summary judgment
dismissing Supreme’s claim that he breached the non-solicitation provisions in the NonSolicitation Agreement because he never agreed to them. They maintain that, by crossing
out the applicable sections in his agreement and later explicitly refusing to sign another
- 21 -
version with the same subject, he did not assent to these terms. Supreme responds that,
because Supreme did not counter-initial or receive notice of Fortner’s interlineations, these
changes do not form part of the Non-Solicitation Agreement. Supreme also contends that
Fortner fraudulently concealed these changes, preventing them from forming part of the
contract.
And it maintains that Fortner’s Branch Manager agreement, signed later,
incorporates the Non-Solicitation Agreement by reference.
Supreme is not entitled to summary judgment based on its first argument because a
reasonable jury could only find that Fortner’s actions in crossing out and initialing his
changes to the non-solicitation provisions establish his intent not to be bound by them. See
Hous. Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 470-72
(Tex. 2011) (holding that deletions in printed agreement were indicative of parties’ intent).
Supreme’s
second
argument—that
Fortner
fraudulently
concealed
his
interlineations—also fails. There is an issue of fact whether Fortner informed Everett of his
interlineations at the time he signed the agreement. But the summary judgment evidence
would only permit a reasonable jury to find that, when Fortner was asked again to sign a
similar agreement, he declined, explaining that he had deliberately crossed out the provisions
related to non-solicitation in the Non-Solicitation Agreement because he did not agree to
them. Supreme continued to employ Fortner for more than a year and a half after he refused
for a second time to agree to the non-solicitation terms.
Supreme’s third argument—that Fortner’s Branch Manager Agreement incorporated
the Non-Solicitation Agreement by reference—fails because the summary judgment evidence
- 22 -
establishes that Exhibit B was described as a separate agreement, not as part of the Branch
Manager Agreement, and no Exhibit B was attached to the Branch Manager Agreement.
Accordingly, Supreme is not entitled to summary judgment with respect to its breach
of contract claim against Fortner. Instead, Fortner is entitled to summary judgment
dismissing Supreme’s claim that he breached the non-solicitation provisions of the NonSolicitation Agreement.
D
Supreme contends that it is entitled to summary judgment establishing that the Branch
Managers are liable for breaching the Non-Solicitation Agreement and the Branch Manager
Agreement. Summary judgment is only proper, however, if the Branch Managers cannot
establish each element of their affirmative defense of waiver.
1
Under Texas law, waiver is “an intentional relinquishment of a known right or
intentional conduct inconsistent with claiming that right.” Jernigan v. Langley, 111 S.W.3d
153, 156 (Tex. 2003) (per curiam) (quoting Sun Exploration & Prod. Co. v. Benton, 728
S.W.2d 35, 37 (Tex. 1987)). “The elements of waiver are: (1) an existing right, benefit, or
advantage; (2) knowledge, actual or constructive, of its existence; and (3) actual intent to
relinquish the right, which can be inferred from conduct.” First Interstate Bank v. Interfund
Corp., 924 F.2d 588, 595 (5th Cir.1991) (citation omitted). To effectively waive a right, a
party must have knowledge of all material facts. Trinet Corporate Realty Trust Inc. v.
Microsoft Corp., 2004 WL 1217936, at *4 (N.D. Tex. June 2, 2004) (Fitzwater, J.) (citing
- 23 -
Mo.-Kan.-Tex. R.R. Co. v. Heritage Cablevision of Dall., 783 S.W.2d 273, 280 (Tex. App.
1989, no pet.)). “Waiver is ordinarily a question of fact. Where the facts and circumstances
are admitted or clearly established, however, the question becomes one of law.” Tenneco,
Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996) (citations omitted); see Jernigan,
111 S.W.3d at 156–57 (citation omitted).
2
The Branch Managers contend that Supreme, by its conduct both during the Branch
Managers’ employment and after they had resigned, waived its rights under the NonSolicitation Agreement and the Branch Manager Agreement. The Branch Managers maintain
that the information they disclosed to PRMI had been represented as belonging to them as
part of their business within the larger Supreme business. They contend that when they were
recruited by Supreme in 2011 from their previous firms, Supreme requested, and they
provided, information similar to that which Supreme now characterizes as confidential. And
the Branch Managers posit that, in relation to a separate contractual right, Everett told them
that, if they left Supreme in the future, they could take their branch employees with them,
provided only that a “smooth transition plan” was in place. Branch Managers App. [105-30]
1396.
The Branch Managers also maintain that Everett continued to waive Supreme’s rights
after he had been informed of their resignations. According to the summary judgment
evidence, during the January 31, 2014 conference call, soon after receiving confirmation that
the Branch Managers were resigning along with all their employees, Everett told the Branch
- 24 -
Managers that he would encourage all branch employees to stay with the Branch Managers
to ensure their success. During the same call, Everett made plans for the transition of
accounts and equipment to the Branch Managers’ new business. Discussion of nonsolicitation agreements during this call only addressed their application to Supreme
employees outside the Branch Managers’ region. Everett did not object to the departure of
employees within the region, even after being informed that the Branch Managers intended
their entire region to resign that day, suggesting that Everett was aware that the employees
had already been solicited. That day, and in the ensuing weeks, Everett continued to
coordinate details of the Branch Managers’ transition via email and text messages. The
Branch Managers contend that these representations and actions show an intent to relinquish
Supreme’s rights against employee solicitation and disclosure of information about the
branches.
Supreme responds that, when the actions in question occurred, it did not have full
knowledge of the material facts, such as of the confidential information disclosed, and the
extent of solicitation. Supreme posits that the Branch Managers concealed material facts,
limiting their ability to invoke waiver. The court holds that the summary judgment evidence
is sufficient to raise a genuine issue of material fact as to whether Everett had the necessary
knowledge of all material aspects of the Branch Managers’ actions to support a finding of
waiver.9
9
“When this court denies rather than grants summary judgment, it typically does not
set out in detail the evidence that creates a genuine issue of material fact.” Valcho v. Dall.
- 25 -
Supreme also contends that Everett’s statements to the Branch Managers were not a
clear and unequivocal waiver, as required by law. But the case that Supreme relies on is
about waiving notice of acceleration of a promissory note, and its requirement of “clear and
unequivocal” waiver is based on a line of cases about commercial paper that do not apply
here. Schuhardt Consulting Profit Sharing Plan v. Double Knobs Mountain Ranch, Inc., 468
S.W.3d 557, 569 (Tex. App. 2014, pet. denied) (citing Shumway v. Horizon Credit Corp.,
801 S.W.2d 890, 893 (Tex. 1991)). Supreme also contends that the Branch Managers could
not have reasonably relied on oral representations that contradicted provisions of their written
employment contracts. But since reasonable reliance is not an element of waiver, it is not
clear how this argument bears on the essential elements of waiver. See Interfund, 924 F.2d
at 595.
3
Supreme’s arguments at best demonstrate that there are genuine fact issues as to some
elements of the Branch Managers’ waiver defense. See Tenneco, 925 S.W.2d at 643; Alford,
Meroney & Co. v. Rowe, 619 S.W.2d 210, 214-15 (Tex. Civ. App 1981, writ ref’d n.r.e.)
(affirming jury’s finding that accounting firm waived contractual rights when it acquiesced
in partner’s departure). Because the Branch Managers have raised genuine issues of material
fact as to each element of the affirmative defense of waiver, and Supreme cannot recover for
Cnty. Hosp. Dist., 658 F.Supp.2d 802, 812 n.8 (N.D. Tex. 2009) (Fitzwater, C.J.) (citing
Swicegood v. Med. Protective Co., 2003 WL 22234928, at *17 n.25 (N.D. Tex. Sept. 19,
2003) (Fitzwater, J.)).
- 26 -
breach of contract if the Branch Managers prevail at trial on their waiver defense, the court
denies Supreme’s motion for summary judgment on its breach of contract claims against the
Branch Managers.10
V
The court now turns to Supreme’s motion for partial summary judgment establishing
that the Branch Managers are liable for breach of fiduciary duty.
A
Employment relationships impose some fiduciary duties. See Johnson v. Brewer &
Pritchard, P.C., 73 S.W.3d 193, 201-02 (Tex. 2002). And employment contracts protecting
the employer’s confidential information, in particular, impose a fiduciary duty on the
employee. See Advanced Nano Coatings, Inc. v. Hanafin, 478 Fed. Appx. 838, 847 (5th Cir.
2012) (per curiam). An employee planning to compete with his employer may not “(1)
appropriate the company’s trade secrets; (2) solicit his employer’s customers while still
10
Supreme’s brief contains a footnote stating that it
also moves for partial summary judgment on the [Branch]
Managers’ affirmative defenses of equitable estoppel,
promissory estoppel, quasi estoppel, ratification, modification,
release, implied consent, and acquiescence, novation, and
excuse to extent that each presumes or requires proof that
Supreme or Everett consented/waived/acquiesced/released/
ratified any of the claims asserted by Plaintiff in this lawsuit.
Supreme Br. [74] 28 n.9. But because this request is not included in Supreme’s motion or
adequately supported in the text of Supreme’s brief, this request is not properly before the
court and will not be addressed. See N.D. Tex. Civ. R. 56.3(a)(1).
- 27 -
working for his employer; (3) solicit the departure of other employees while still working for
his employer, or (4) carry away confidential information, such as customer lists.” Abetter
Trucking Co. v. Arizpe, 113 S.W.3d 503, 512 (Tex. App. 2003, no pet.).
Supreme contends that the Branch Managers breached their fiduciary duties by taking
Supreme’s confidential information, soliciting the departures of their branch employees, and
engaging in conduct designed to hurt Supreme. The Branch Managers respond that Supreme
authorized their actions, citing Everett’s statements similar to those supporting their
affirmative defense of waiver. They posit that it is no breach when the principal has
authorized the act. See Curry v. Pickett, 2010 WL 3353952, at *6 (Tex. App. Aug. 26, 2010,
no pet.). The Branch Managers also maintain that, while the common law imposes fiduciary
obligations on an employee who plans to compete with his employer, parties are free to
define the scope of their fiduciary relationships, including by limiting common-law duties.
See Strebel v. Wimberly, 371 S.W.3d 267, 284-85 (Tex. App. 2012, pet. denied).
Supreme replies that authorization requires knowledge of all material facts, which it
contends it did not have at the time of Everett’s statements.
B
As the court has already held above, the summary judgment evidence raises genuine
issues of material fact as to whether Everett knew that the Branch Managers’ actions were
part of a normal departure in the industry. Supreme also argues in reply that Everett did not
authorize the Branch Managers’ actions because his promises of support for their exit were
conditioned on being informed in advance. This argument also turns on a genuine issue of
- 28 -
material fact considering the summary judgment evidence that Everett repeated these
assurances after he was informed on January 31 that the entire region would be resigning that
day.
Supreme also appears to argue that it is undisputed that the Branch Managers breached
their fiduciary duties by engaging in deception and coercion when soliciting employees.
Supreme argues that the Branch Managers only respond to this contention with self-serving
affidavits. But Supreme has not established beyond peradventure that the Branch Managers
breached their fiduciary duties by engaging in deception and coercion of branch employees.
For example, the subordinate employee testimony that Supreme cites generally establishes
that the Branch Managers touted the move to their employees according to how the move
was planned. Under the plan, each branch was to move to PRMI as a unit. Each branch
employee would assume some risk of losing his or her job by declining to work for PRMI
when the entire branch, as a unit, was otherwise doing so. Supreme’s evidence, coupled with
the proof on which the Branch Managers rely, does not establish Supreme’s breach of
fiduciary duty claim under the heavy “beyond peradventure” standard. See Sowell, 603
F.Supp.2d at 923-24.11 Accordingly, Supreme is not entitled to summary judgment on its
claim against the Branch Managers for breach of fiduciary duty.
11
See supra note 9.
- 29 -
VI
Supreme next moves for summary judgment on its conspiracy and aiding and abetting
claims against the Branch Managers.
Conspiracy is a derivative claim based on an underlying tort. Ernst & Young, L.L.P.
v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 583 (Tex. 2001). Liability for conspiracy is
impossible unless an underlying tort has been proved. Id. Likewise, aiding and abetting is
also a derivative claim based on an underlying tort. Id. For summary judgment purposes,
Supreme’s conspiracy and aiding and abetting claims are based on the underlying tort of
breach of fiduciary duty.12 Because Supreme is not entitled to summary judgment against
the Branch Managers on the underlying tort of breach of fiduciary duty, it has likewise failed
to demonstrate beyond peradventure that it is entitled to summary judgment establishing its
claims against them for conspiracy and aiding and abetting.
The Branch Managers cross-move for summary judgment on Supreme’s claims of
conspiracy and aiding and abetting to the extent they are based on a breach of contract, and
not on an underlying tort. Because the record shows that Supreme may be able to recover
against the Branch Managers on at least one underlying tort, they are not entitled to partial
summary judgment on this basis.
12
Supreme’s summary judgment brief contains one sentence in which it argues that
the Branch Managers are liable for slander per se, and it cites the elements of slander per se.
Supreme Br. [74] 21. Because this single sentence does not establish the Branch Managers’
liability, and slander per se is not a claim included in Supreme’s operative amended
complaint, this argument does not affect the question whether Supreme has established an
underlying tort.
- 30 -
VII
The court now turns to Supreme’s claims against PRMI. PRMI moves for summary
judgment on Supreme’s claims of tortious interference with contract, tortious interference
with prospective business relations, and unjust enrichment. Supreme moves for partial
summary judgment establishing that PRMI is liable on its claims for conspiracy and aiding
and abetting.
VIII
PRMI moves for summary judgment on Supreme’s tortious interference with contract
claim.
A
“The elements of a cause of action for tortious interference with an existing contract
are (1) the existence of a contract subject to interference, (2) a willful and intentional act of
interference, (3) such act was a proximate cause of damage and (4) actual damage or loss
occurred.” Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 926 (Tex. 1993). In addition,
“the interfering party must have ‘actual knowledge of the contract or business relation in
question, or knowledge of facts and circumstances that would lead a reasonable person to
believe in existence of the contract or business relationship.’” Amigo Broad., LP v. Spanish
Broad. Sys., Inc., 521 F.3d 472, 490 (5th Cir. 2008) (quoting Steinmetz & Assocs., Inc. v.
Crow, 700 S.W.2d 276, 277-78 (Tex. App. 1985, writ ref’d n.r.e.)). A summary judgment
movant’s burden is heavy when arguing a defendant’s knowledge of, and intent to interfere
with, a contract, because this element turns, at least in part, on the defendant’s credibility.
- 31 -
Wohlstein v. Aliezer, 321 S.W.3d 765, 772 (Tex. App. 2010, no pet.).
B
1
PRMI moves for summary judgment as to any tortious interference with contract
claim premised on the non-solicitation provisions of Fortner’s Non-Solicitation Agreement.
Because, as the court explains above, the summary judgment evidence establishes that
Fortner did not agree to these provisions, PRMI is entitled to summary judgment dismissing
any tortious interference claim premised on PRMI’s alleged interference with these
provisions of Fortner’s Non-Solicitation Agreement with Supreme. See supra § IV(C).
2
PRMI moves for summary judgment as to any tortious interference claim based on the
Non-Solicitation Agreement, contending that the agreement is unreasonable and overbroad
under Texas law. Because, as the court holds above, the Non-Solicitation Agreement is not
overbroad or unreasonable as a matter of law, PRMI is not entitled to summary judgment on
this basis. See supra § IV(B).
3
PRMI moves for summary judgment on any tortious interference claim based on the
non-solicitation provisions of the Branch Managers’ employment contracts with Supreme,
contending that there is no evidence of PRMI’s knowledge or intent. PRMI maintains that
it did not know of any non-solicitation provisions, or of any facts that would reasonably lead
it to believe they existed. Supreme responds that the summary judgment evidence establishes
- 32 -
that PRMI’s own standard hiring practices would lead it to know or suspect that nonsolicitation provisions existed in the Branch Managers’ employment contracts. The court
holds that there is a genuine issue of material fact concerning whether PRMI had knowledge
of, and intent to interfere with, the non-solicitation provisions in Supreme employment
contracts.13 See Wohlstein, 321 S.W.3d at 772. Accordingly, the court denies PRMI’s
motion for partial summary judgment in this respect.
IX
PRMI moves for summary judgment on Supreme’s tortious interference with
prospective business relations claim.
A
To prevail on a claim for tortious interference with prospective
business relations, the plaintiff must establish that (1) there was
a reasonable probability that the plaintiff would have entered
into a business relationship with a third party; (2) the defendant
either acted with a conscious desire to prevent the relationship
from occurring or knew the interference was certain or
substantially certain to occur as a result of the conduct; (3) the
defendant’s conduct was independently tortious or unlawful; (4)
the interference proximately caused the plaintiff injury; and (5)
the plaintiff suffered actual damage or loss as a result.
Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013).
PRMI contends that it is entitled to summary judgment because there is no evidence
that it had knowledge of Supreme’s prospective business opportunities and no evidence that
PRMI interfered with them; that it believed Supreme did not object to transferring some
13
See supra note 9.
- 33 -
loans that were currently in its pipeline, in the best interest of the borrower; and that any
interference was merely an incidental result of legitimate actions pursued for other reasons,
and thus was not intentional.
Supreme responds that PRMI interfered with loans that were in Supreme’s pipeline
when the Branch Managers departed, with Supreme’s condo loan business for the southeast
region, and with Supreme’s future employee recruiting. In support of the first contention,
Supreme cites evidence of loans that originated with Supreme but were closed by PRMI,
including some within a few days of the loan officers’ moves from Supreme to PRMI. In
support of the second contention, Supreme argues that PRMI’s acquisition of Supreme’s
condo loan units was accomplished through the independently unlawful means of using
Supreme’s confidential information to run tests in advance.
B
Supreme’s response and summary judgment evidence are sufficient to raise a genuine
issue of material fact as to whether PRMI acted with knowledge or intent of taking
Supreme’s prospective business, whether PRMI’s conduct was independently tortious or
unlawful, and the other required elements of Supreme’s claim.14 See Coinmach, 417 S.W.3d
at 923. Accordingly, the court denies PRMI’s motion for partial summary judgment in this
respect.
14
See supra note 9.
- 34 -
X
PRMI next moves for summary judgment on Supreme’s claim for unjust enrichment.
To the extent that a cause of action for unjust enrichment is recognized in Texas, it
requires that the defendant have profited at the plaintiff’s expense. See HECI Exploration
Co. v. Neel, 982 S.W.2d 881, 891 (Tex. 1998). PRMI points to the absence of evidence that
PRMI profited or was enriched from the Branch Managers’ (or their employees’) work at
PRMI, and it contends that it in fact has lost money as a result of employing them. Supreme
has not responded to this ground of PRMI’s motion.
Although Supreme’s failure to respond to this ground of PRMI’s motion does not
permit the court to enter a “default” summary judgment on PRMI’s unjust enrichment claim,
see, e.g., Tutton v. Garland Independent School District, 733 F. Supp. 1113, 1117 (N.D. Tex.
1990) (Fitzwater, J.), “[a] summary judgment nonmovant who does not respond to the motion
is relegated to [his] unsworn pleadings, which do not constitute summary judgment
evidence,” Bookman v. Shubzda, 945 F. Supp. 999, 1002 (N.D. Tex. 1996) (Fitzwater, J.)
(citing Solo Serve Corp. v. Westowne Associates, 929 F.2d 160, 165 (5th Cir. 1991)).
Moreover,
[i]f a party fails . . . to properly address another party’s assertion
of fact as required by Rule 56(c), the court may . . . (2) consider
the fact undisputed for purposes of the motion [and] (3) grant
summary judgment if the motion and supporting
materials—including the facts considered undisputed—show
that the movant is entitled to it[.]
Rule 56(e)(2), (3). Accordingly, because Supreme has not raised a genuine issue of material
- 35 -
fact as to its claim for unjust enrichment, the court grants PRMI’s motion in this respect and
dismisses the unjust enrichment claim.
XI
Supreme moves for summary judgment as to liability on its claims against PRMI for
conspiracy and aiding and abetting.
These derivative claims are based on PRMI’s
participation in an underlying tort: the Branch Managers’ breach of fiduciary duty. See Ernst
& Young, 51 S.W.3d at 583. As the court holds above, Supreme is not entitled to summary
judgment establishing that the Branch Managers breached their fiduciary duty. See supra
§ V. Accordingly, because Supreme has not yet established the underlying tort, Supreme is
not entitled to summary judgment against PRMI based on its claim for conspiracy or aiding
and abetting. See Ernst & Young, 51 S.W.3d at 583.
PRMI moves for summary judgment on Supreme’s claims for conspiracy and aiding
and abetting to the extent they are based on a breach of contract, and not on an underlying
tort. Because the record shows that Supreme may be able to recover against PRMI on at least
one underlying tort, PRMI is not entitled to partial summary judgment on this basis.
XII
The court now turns to the Branch Managers’ counterclaims against Supreme and
Everett. Supreme and Everett move for summary judgment on eleven of the Branch
Managers’ counterclaims.
- 36 -
XIII
Supreme and Everett first move for summary judgment on the Branch Managers’
counterclaims for fraudulent inducement, fraud, negligent misrepresentation, and promissory
estoppel.
A
Supreme and Everett maintain that each of these claims fails as a matter of law for
lack of reasonable reliance. They contend that, under Texas law, a party cannot reasonably
rely on representations directly contradicted by a written contract.
Supreme and Everett argue, and the Branch Managers do not dispute, that actual and
justifiable reliance on representations outside the written contract is an essential element of
fraudulent inducement, fraud, negligent misrepresentation, and promissory estoppel. See
Ernst & Young, 51 S.W.3d at 577 (fraud); TMI, Inc. v. Brooks, 225 S.W.3d 783, 793 (Tex.
App. 2007, pet. denied) (fraudulent inducement); Ortiz v. Collins, 203 S.W.3d 414, 421 (Tex.
App. 2006, no pet.) (fraud, negligent misrepresentation, and promissory estoppel). Supreme
and Everett also maintain, and the Branch Managers again do not dispute, that the
representations identified in the Branch Managers’ counterclaims are each directly
contradicted by terms in the written contracts (i.e., the Non-Solicitation Agreement and the
Branch Manager Agreement). Finally, Supreme posits that, under Texas law, a party cannot
reasonably rely on representations that are directly contradicted by a written contract. See
Nat’l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 424-25 (Tex. 2015).
The Branch Managers respond that the written contracts’ merger clauses and clauses
- 37 -
preventing oral modification do not preclude reasonable reliance on Supreme’s extrinsic
statements. See Ital. Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323,
331 (Tex. 2011). They also maintain that reliance can only be disclaimed in clear and
unequivocal language. See id. And they attempt to distinguish Westergren, asserting that
the plaintiff in that case remained willfully ignorant of the written contract by declining to
read it, whereas the Branch Managers read their employment contracts and discussed them
with Supreme representatives Everett and Hogle. See Westergren, 453 S.W.3d at 425.
B
Italian Cowboy Partners, the case on which the Branch Managers primarily rely, is
inapposite because it concerns representations about a matter unaddressed in a written lease
contract (the condition of the building leased). See Ital. Cowboy Partners, 341 S.W.3d at
337. The Branch Managers’ counterclaims, in contrast, are about representations that
contradicted the terms of the written contract: confidentiality, solicitation, and rights to
clients and property. In addition, the Branch Managers cannot circumvent the holding in
Westergren that “a party to a written contract cannot justifiably rely on oral
misrepresentations regarding the contract’s unambiguous terms.” Westergren, 453 S.W.3d
at 424. The Branch Managers’ choice to rely on Everett’s representations, despite the
conflicting language in the written contracts, is analogous to the Westergren plaintiff’s
choice not to read the contract. See id. at 425. If anything, the Branch Managers’ continued
reliance on Everett’s oral representations after reading the conflicting written contracts was
even less justified than the reliance held to be unjustified in Westergren.
- 38 -
Because the Branch Managers have failed to adduce legally sufficient evidence of
reasonable reliance—a required element of their counterclaims for fraudulent inducement,
fraud, negligent misrepresentation, and promissory estoppel—Supreme and Everett are
entitled to partial summary judgment dismissing these counterclaims.
XIV
Supreme next moves for summary judgment on the Branch Managers’ counterclaim
for breach of contract.
A
In this claim, the Branch Managers allege that Supreme orally agreed to pay them any
remaining balance in their region’s profit and loss (“P&L”) and reserve accounts if they
decided to leave Supreme. Supreme moves for partial summary judgment on the basis that
the alleged oral agreement is inadmissible parol evidence extrinsic to the Branch Managers’
written compensation agreement, which is Exhibit A to the Branch Manager Agreement
(“Exhibit A”). See Rosas v. U.S. Small Bus. Admin., 964 F.2d 351, 355 (5th Cir. 1992).
Supreme also maintains that the alleged oral agreement is a modification unsupported by
consideration. See Arthur J. Gallagher & Co. v. Dietrich, 270 S.W.3d 695, 702 (Tex. App.
2008, no pet.).
The Branch Managers respond that Supreme’s promise to pay them the balance of
their region’s P&L and reserve accounts when they left Supreme was a collateral agreement
on a matter not covered by their compensation agreement. Although Texas law bars parol
evidence that contradicts an unambiguous integrated contract, it recognizes an exception for
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a collateral agreement that is not inconsistent with the integration. ERI Consulting Eng’rs,
Inc. v. Swinnea, 318 S.W.3d 867, 875 (Tex. 2010). Such a collateral agreement is not
required to be supported by separate consideration if it is “such an agreement as might
naturally be made as a separate agreement by parties situated as were the parties to the
written contract.” Hubacek v. Ennis State Bank, 317 S.W.2d 30, 32-33 (Tex. 1958) (quoting
Restatement of Contracts § 240 (1932)); see Swinnea, 318 S.W.3d at 875-76.
In reply, Supreme emphasizes that Exhibit A is the exclusive source of compensation
rights, that the P&L and reserve account payments sought by the Branch Managers are a
form of compensation, and that Exhibit A by its terms could only be modified in writing.
Supreme cites several cases rejecting collateral-agreement arguments in cases with written
compensation contracts. See Hughes v. Sams, 2008 WL 4724436, at *2-4 (S.D. Tex. Oct.
24, 2008); David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 451 (Tex. 2008); Ledig v. Duke
Energy Corp., 193 S.W.3d 167, 179 n.10 (Tex. App. 2006, no pet.).
B
In each of the cases Supreme cites, the proponent of the collateral agreement sought
payment (or discharge) of a form of compensation that fell explicitly within the terms of the
written contract—not a different interest that might likely have been the subject of a
collateral agreement. See Hughes, 2008 WL 4724436, at *2-4 (salary); Haden, 266 S.W.3d
at 451 (legal fees); Ledig, 193 S.W.3d at 179 n.10 (bonus). In the instant case, by contrast,
Supreme has not shown why the P&L and reserve accounts should be considered
“compensation,” within Exhibit A’s exclusive domain, rather than a separate interest covered
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by a collateral agreement. The Branch Managers have introduced summary judgment
evidence, such as the January 31, 2014 conference call with Everett, that would enable a
reasonable jury to find that Supreme considered these accounts to be something other than
compensation. A reasonable jury could find that Supreme made an oral agreement, collateral
to and consistent with Exhibit A, to pay the Branch Managers any remaining balance in their
P&L and reserve accounts upon their departure from Supreme. Therefore, Supreme is not
entitled to summary judgment on the Branch Managers’ counterclaim for breach of
contract.15
XV
The Branch Managers’ brief states that they are withdrawing their counterclaims
relating to Supreme’s entry on a computer used by Durham. Branch Managers Br. [104] at
47, n.215. Accordingly, the Branch Managers’ counterclaims under common law invasion
of privacy and Tex. Civ. Prac. & Rem. Code Ann. § 143.001 are deemed withdrawn.
XVI
The Branch Managers’ brief acknowledges that unjust enrichment is not a valid cause
of action.
Branch Managers Br. [104] at 47.
15
Accordingly, the Branch Managers’
Supreme’s reply brief asserts that the Branch Managers have abandoned parts of
their breach of contract counterclaim other than as based on the P&L and reserve accounts.
But the other parts identified (security deposits, February rents, charges for equipment,
commissions for loans) appear to be amounts that the Branch Managers contend should have
been applied to the P&L balance, and then paid to them. See Countercl. ¶ 74. The court
therefore declines to hold at this procedural stage that the Branch Managers have abandoned
these parts of their breach of contract counterclaim.
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counterclaim for unjust enrichment is dismissed with prejudice.
XVII
Supreme moves for summary judgment on the Branch Managers’ counterclaim for
money had and received as to the balance of the P&L and reserve accounts. Supreme argues
that money had and received is a quasi contractual action that cannot be pursued when a
written contract governs the subject matter asserted. See Amoco Prod. Co. v. Smith, 946
S.W.2d 162, 164-65 (Tex. App. 1997, no pet.). Consistent with its theory on the breach of
contract counterclaim, Supreme contends that the recovery sought in this counterclaim is a
type of compensation, governed exclusively by Exhibit A, and therefore no quasi contractual
action can be sustained.
The courts holds that Supreme is not entitled to summary judgment on the Branch
Managers’ counterclaim for money had and received because the summary judgment
evidence would permit a reasonable jury to find that the money sought in this counterclaim
is not compensation, but is a separate interest. See supra § XIV(B).
XVIII
Supreme moves for summary judgment on the Branch Managers’ counterclaim for
declaratory judgment.
A
The Branch Managers seek a declaratory judgment that (i) any non-solicitation
provisions do not apply to the Branch Managers’ regional employees or corporate
underwriters, (ii) any non-solicitation provisions are unenforceable or ineffective, (iii) the
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Branch Managers did not violate contracts or law by soliciting employees, and (iv) the
Branch Managers client and customer lists are not property of Supreme. Their declaratory
judgment counterclaim is based on the federal Declaratory Judgment Act (“DJA”), which
provides that, “[i]n a case of actual controversy within its jurisdiction, . . . any court of the
United States, upon the filing of an appropriate pleading, may declare the rights and other
legal relations of any interested party seeking such declaration, whether or not further relief
is or could be sought.” 28 U.S.C. § 2201.
B
Federal courts have broad discretion to grant or refuse declaratory judgment. Torch,
Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991). “Since its inception, the [DJA] has been
understood to confer on federal courts unique and substantial discretion in deciding whether
to declare the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). The
DJA is “an authorization, not a command.” Public Affairs Assocs., Inc. v. Rickover, 369 U.S.
111, 112 (1962). It gives federal courts the competence to declare rights, but does not
impose a duty to do so. Id.
Supreme maintains that they are entitled to summary judgment because this
counterclaim is a mirror image of the issues that will be resolved in other claims in the
lawsuit. See Redwood Resort Props., LLC v. Holmes Co., 2007 WL 1266060, at *2-5 (N.D.
Tex. Apr. 30, 2007) (Fitzwater, J.). The Branch Managers respond that a declaration of the
scope of the Non-Solicitation agreement is necessary to define the parties’ rights going
forward.
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This court has often declined in its discretion to adjudicate declaratory judgment
actions that are duplicative of other claims in the same case. See, e.g., Metcalf v. Deutsche
Bank Nat’l Trust Co., 2012 WL 2399369, at *9 (N.D. Tex. June 26, 2012) (Fitzwater, C.J.)
(noting that declaratory judgment action should be dismissed because it duplicated plaintiffs’
quiet title claim); Kougl v. Xspedius Mgmt. Co. of DFW, L.L.C., 2005 WL 1421446, at *4
(N.D. Tex. June 1, 2005) (Fitzwater, J.) (denying as redundant a declaratory judgment claim
seeking contract interpretation where this would be resolved as part of breach of contract
action); 6 Charles Alan Wright, et al., Federal Practice & Procedure § 1406, at 30-31 (3d
ed. 2010) (“When the request for declaratory relief brings into question issues that already
have been presented . . . a party might challenge the counterclaim on the ground that it is
redundant and the court should exercise its discretion to dismiss it.”). It has also declined
to do so when the declaratory judgment action is merely the mirror image of another claim.
See, e.g., Evanston Ins. Co. v. Graves, 2013 WL 4505181, at *1 (N.D. Tex. Aug. 23, 2013)
(Fitzwater, C.J.).
The court declines in its discretion to entertain the Branch Managers’ counterclaim
for declaratory judgment because it holds above that the Non-Solicitation Agreement does
not require reformation, see supra § IV(B); the two-year sunset of this agreement following
the Branch Managers’ resignation has already passed; the other issues raised in the
counterclaim will be resolved in the course of adjudicating other claims in this case; the
scope and enforceability of the non-solicitation provisions, as well as the lawfulness of the
Branch Managers’ solicitation, will be determined in the course of deciding Supreme’s
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claims for breach of contract; and the ownership of client and customer lists will be
determined when deciding Supreme’s claims for breach of contract, misappropriation of trade
secrets, and breach of fiduciary duty. Accordingly, Supreme is entitled to summary judgment
dismissing the Branch Managers’ declaratory judgment counterclaim.
XIX
Supreme moves for summary judgment on the Branch Managers’ counterclaim for
attorney’s fees under Tex. Bus. & Com. Code Ann. § 15.51. This provision authorizes an
award of attorney’s fees where an employer knew that a non-compete covenant was
unreasonable and sought to enforce the covenant to a greater extent than necessary to protect
its goodwill or other business interest. Id. §15.51(c). The Branch Managers’ counterclaim
alleges that Supreme’s actions fell within this provision when it attempted to enforce the
Non-Solicitation Agreement.
Because the court holds above that the non-solicitation provisions of the NonSolicitation Agreement are not unreasonable as a matter of law, see supra § IV(B), the
Branch Managers cannot satisfy a required element of their counterclaim for attorney’s fees
under § 15.51. Supreme is entitled to summary judgment dismissing this counterclaim.
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*
*
*
Accordingly, the parties’ motions for partial summary judgment are granted in part
and denied in part.
SO ORDERED.
December 6, 2016.
_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE
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