Digital Recognition Network, Inc. v. Accurate Adjustments, Inc. et al

Filing 119

Memorandum Opinion and Order... The court ORDERS that plaintiff's motion for partial summary judgment be, and is hereby, granted in part; defendants' liability on plaintiff's breach of contract claim be, and is hereby, established; d efendants take nothing on their counterclaim against plaintiff, and such counterclaim be, and is hereby, dismissed. The court ORDERS that, except as granted herein, the motion for partial summary judgment be, and is hereby, denied. The court determines that there is no just reason for delay in, and hereby directs, entry of final judgment as to the dismissal of defendants' counterclaim. (Ordered by Judge John McBryde on 3/8/2016) (wxc)

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U.S. IJISTIUCT CO!JIU
NORTHERN lliSTII.ICTOFTEXo\S

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NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION

Cl.F:RK, U.S. DISTRICT COUilT

DIGITAL RECOGNITION NETWORK,
INC.,

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Plaintiff,

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vs.

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NO. 4:14-CV-903-A

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ACCURATE ADJUSTMENTS, INC.,
ET AL.,

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Defendants.

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MEMORANDUM OPINION AND ORDER
Came on for consideration the motion of plaintiff, Digital
Recognition Network, Inc., for partial summary judgment. The
court, having considered the motion, the response of defendants,
Accurate Adjustments, Inc., Coastline Recovery Services, Inc.,
After Hours Auto Recovery, and Solid Solutions 24/7, Inc., the
reply, the record, the summary judgment evidence, and applicable
authorities, finds that the motion should be granted in part as
set forth herein.
I.

Grounds of the Motion
Plaintiff appears to contend 1 that it is entitled to
judgment on defendants' antitrust, breach of contract, and DTPA

'Plaintiffs motion itself is fairly succinct; however, the brief in support is rather confusing,
discussing in the "summary" section only a few of the claims and containing a rambling discussion in the
"argument and authorities" section. Defendants' response is likewise unhelpful, reordering the discussion
of plaintiff's grounds and separating the recitation of summary judgment evidence from the discussion of
applicable law.

i
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claims and that it is entitled to judgment against defendants for
breach of contract. Plaintiff also says it is entitled to
judgment on its affirmative defenses of novation and accord and
satisfaction. And, it seeks an award of attorney's fees and
expenses under the DTPA.
II.
Applicable Legal Principles
Rule 56(a) of the Federal Rules of Civil Procedure provides
that the court shall grant summary judgment on a claim or defense
if there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.
P. 56(a)
(1986).

Fed. R. Civ.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
The movant bears the initial burden of pointing out to

the court that there is no genuine dispute as to any material
fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986).

The movant can discharge this burden by pointing out the absence
of evidence supporting one or more essential elements of the
nonmoving party's claim,

"since a complete failure of proof

concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial."

Id. at 323.

Once the movant has carried its burden under Rule 56(a), the
nonmoving party must identify evidence in the record that creates
a genuine dispute as to each of the challenged elements of its

2

case.

Id. at 324; see also Fed. R. Civ. P. 56(c)

asserting that a fact

is genuinely disputed must support
citing to particular parts of materials in

the assertion by
the record

("A party

• II )

•

If the evidence identified could not lead

a rational trier of fact to find in favor of the nonmoving party
as to each essential element of the nonmoving party's case, there
is no genuine dispute for trial and summary judgment is
appropriate.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 u.s. 574, 587, 597 (1986).
Sys.,

In Mississippi Prot. & Advocacy

Inc. v. Cotten, the Fifth Circuit explained:
Where the record, including affidavits,
interrogatories, admissions, and depositions could not,
as a whole, lead a rational trier of fact to find for
the nonmoving party, there is no issue for trial.

929 F. 2d 1054, 1058

(5th Cir. 1991).

The standard for granting a motion for summary judgment is
the same as the standard for rendering judgment as a matter of
law.'

Celotex Corp., 477 U.S. at 323.

If the record taken as a

whole could not lead a rational trier of fact to find for the
non-moving party, there is no genuine issue for trial.
Matsushita, 475 U.S. at 597; see also Mississippi Prot. &
Advocacy Sys.,

929 F.2d at 1058.

'In Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir. 1969) (en bane), the Fifth Circuit
explained the standard to be applied in determining whether the comt should enter judgment on motions
for directed verdict or for judgment notwithstanding the verdict.
3

III.

Analysis
A.

Breach of Contract
Each side claims that the other breached the contract

between them. The motion addresses both plaintiff's breach of
contract claims against defendants and their counterclaim against
plaintiff. Preliminary to determining breach is the matter of the
terms of the pertinent contract. Plaintiff relies on the terms of
the 2014 license agreements, which defendants say incorporates
certain oral agreements. As defendants point out, the integration
clause of the 2014 license agreement contains wording slightly
different from the norm. It states:
This Agreement supersedes all prior Agreements, whether
written, not oral, between the parties with respect to
the subject matter and constitutes (along with any
documents delivered pursuant to this Agreement) a
complete and exclusive statement of the terms of the
agreement between the parties with respect to its
subject matter.
~'

Doc. 3 88 at 168 (emphasis added) . Defendants want this

language to mean that the license agreements are subject to
alleged oral agreements between them and plaintiff. However, that
reading would ignore the remainder of the sentence, which clearly
refers to the writing and any documents delivered pursuant to the
agreement as the complete and exclusive statement of its terms.

3

The "Doc." reference is to the number of the item on the court's docket in this action.
4

The "not" was obviously intended to be "or" and any other reading
would render the provision nonsensical. See, e.g., Restatement
(Second) of Contracts,

§

203(a). In addition, the license

agreement provides that it cannot be amended, supplemented, or
otherwise modified except by written agreement signed by the
parties.

~.

Doc. 88 at 86. Further, although two of the

defendants added a handwritten note below their signatures, the
notes simply reflect that other handwritten' changes to the
agreement (referred to as "addendums") were made pursuant to a
certain email and later verbal discussions with plaintiff. Id. at
88 & 170. They do not support the contention that there was an
oral agreement that rendered major portions of the license
agreement, including the covenant not to compete, a nullity. But,
in any event, the parol evidence rule and doctrine of integration
would preclude its enforcement. Beijing Metals & Minerals
Imp./Exp. Corp. v. Am. Bus. Ctr., Inc., 993 F.2d 1178, 1182-83
(5th Cir. 1993); Jack H. Brown & Co. v. Toys "R" Us, Inc., 906
F.2d 169, 176 (5th Cir. 1990).
As for plaintiff's breach of contract claims against
defendants, the summary judgment evidence establishes that

4

The comi notes that defendants claim to have made a change to a typewritten provision in the
agreement, Doc. 88 at 15 & 74, which leads the court to wonder how the "not oral" came to be included
in the integration clause. The summary judgment evidence indicates that at least one earlier typewritten
agreement had been surreptitiously changed by a defendant. Doc. 102 at 66-67.
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defendants violated the license agreements' by collecting
confidential information through their admitted use of the socalled "sync tool" both before and after plaintiff terminated the
agreements.' In addition, Accurate admits that it allowed another
repossession company to use the sync tool. Doc. 88 at 11. And,
defendants have continued to use plaintiff's proprietary
materials to collect data since termination of the agreements.
As for defendants' counterclaim with regard to breach of
contract, they have not come forward with any summary judgment
evidence to establish that plaintiff violated the agreements that
preceded the license agreement. 7 (In fact,

they do not directly

address this matter. In response to plaintiff's novation
argument, they refer only to their counterclaim, which is not
summary judgment evidence. Doc. 101 at 49.) And, as for the 2014
license agreements, the law is clear that defendants• breach
relieved plaintiff of the obligation to continue to perform under

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The arguments that the license agreements were invalid are unavailing. The summary judgment
evidence shows that the patties considered them binding. Stanissis v. DynCorp Int'L LLC, No. 3: 14-CV2736-D, 2015 WL 9478184, at *8 (N.D. Tex. Dec. 29, 2015). The agreements are supported by
consideration. Northern Nat. Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 607 (Tex. 1998). And, the
enforceability of the limitation of liability provision does not impact the claims assetted here, as that
provision simply need not be enforced. See Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 722 (5th Cir.
1995); Mansfield Heliflight. Inc. v. Bell/Agusta Aerospace Co., LLC, 507 F. Supp. 2d 638, 645-46 (N.D.
Tex. 2007).
'It is clear that this tool allowed each defendant to have access to confidential information
collected by the others.
7

Th us, a discussion of novation and accord and satisfaction is not necessary.
6

the agreements. Mustang Pipeline Co. v. Driver Pipeline Co., 134
S.W.3d 195, 196 (Tex. 2004) . 8
B.

Deceptive Trade Practices
Plaintiff maintains that defendants cannot prevail on their

claims under the Texas Deceptive Trade Practices-Consumer
Protection Act

("DTPA"), Tex. Bus. & Com. Code§§ 17.41-.63,

because such claims are barred by limitations or, alternatively,
because defendants cannot establish reliance on any laundry list
deceptive representation or that plaintiff engaged in any
unconscionable act.' As defendants note, their counterclaim is
deemed timely. Tex. Civ. Prac. & Rem. Code § 16.069. And, in any
event, some of the representations upon which they rely took
place within two years of the filing of the counterclaim.
However, defendants have not pointed to any summary judgment
evidence to establish a genuine fact issue as to the substance of
their DTPA claims.
As evidence of unconscionable actions, defendants cite to
certain pages of the summary judgment appendices, but the pages
they cite do not support the allegations. Doc. 101 at 30-31. They
cite no act or practice that took advantage of their lack of

'Plaintiff does acknowledge that, pursuant to the course of dealing between the parties, it was
two months in arrears in making revenue share payments to defendants and has not paid sums due from
June 1, 2014, through September 19,2014.
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The court is not considering any additional arguments made for the first time in plaintiffs reply.
7

knowledge, ability, capacity, or experience to a grossly unfair
degree. Tex. Bus. & Com. Code§ 17.45(5). The agreement not to
compete was signed freely by defendants and had been part of
their deal with plaintiff before the license agreements were
executed. Defendants have not shown that the provision was
unenforceable. By signing the license agreements, defendants were
only postponing the inevitable once they ceased doing business
with plaintiff.
As for the alleged misrepresentations, the evidence cited is
to the effect that plaintiff may have overpaid in some instances
and underpaid in others and that some affiliates had trouble
understanding how payments were calculated. Doc. 102 at 86-87.
229. Moreover, plaintiff would try to rectify incorrect payments
if brought to its attention. Doc. 103 at 400; Doc. 102 at 138.
Certainly, plaintiff anticipated that the new methodology to be
applied under the license agreements would be more precise. Doc.
102 at 229.
Defendants say in a footnote that plaintiff's request for
attorney's fees under the DTPA should be denied given the "ample
evidence" in support of their claims. Doc. 101 at 34, n. 8.
Although the court does not agree, the court is not making an
award at this time, leaving for trial the proving up of the
necessary elements of such recovery.

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C.

Antitrust Claim
As the court has previously noted, Doc. 65, the elements of

a claim for monopolization are (1)the possession of monopoly
power in the relevant market and (2) the willful acquisition or
maintenance of that power as distinguished from growth or
development as a consequence of a superior product, business
acumen, or historic accident. Eastman Kodak Co. v. Image Tech.
Servs., Inc., 504 U.S. 451, 481 (1992). To have standing to
assert an antitrust claim, one must suffer an antitrust injury;
that is, the damages must flow from anticompetitive conduct. L-3
Communications Integrated Sys., L.P. v. Lockheed Martin Corp.,
No. 3:07-CV-0341-B, 2008 WL 4391020, at *3
2008); Nat'l Athletic Trainers' Ass'n,

(N.D. Tex. Sept. 29,

Inc. v. Am. Phys. Therapy

Ass'n, No. 3:08-CV-0158-G, 2008 WL 4146022, at *4 (N.D. Tex.
Sept. 9, 2008).
Here, defendants rely exclusively on the report of their
expert, Jesse David, to establish their antitrust claim. As
plaintiff points out, the report is not competent summary
judgment evidence and does not raise a fact issue for trial. The
report is not verified. See Provident Life & Ace. Ins. Co. v.
Gael, 274 F.3d 984, 1000 (5th Cir. 2001); Highland Capital Mgmt.
L.P. v. Bank of Am .. N.A., No. 3:10-CV-1632-L, 2013 WL 4502789,
at *6 (N.D. Tex. Aug. 23, 2013), aff'd, 574 F. App'x 486 (5th

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Cir. 2014). Defendants' offer to add an affidavit'' to the effect
that all of the statements and opinions in the report are true
and accurate "to the best of [the expert's] personal knowledge
and belief" does not make the report admissible. Fed. R. Civ. P.
56(c) (4); Carter v. Ranatza, No. 13-797, 2015 WL 1457523, at *4
(M.D. La. Mar. 30, 2015). Moreover, the report is replete with
hearsay, general allegations and self-serving conclusions that do
not present competent summary judgment evidence. Galindo v.
Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); PanIslamic Trade Corp. v. Exxon Corp., 632 F.2d 539, 556 (5th Cir.
1980). And, based on the report itself, the court is not
satisfied that the expert would be allowed to testify at trial in
any event.
Defendants have failed to come forward with competent
summary judgment evidence to establish the relevant market and
plaintiff's ability to control prices and exclude competition.
See Doc. 107 at 8-17.

(Defendants' own testimony would tend to

establish that plaintiff's market share came about as a result of
a superior product and perhaps business acumen.) Nor have they

10

The document alleged to be an affidavit does not contain a jurat and is actually a declaration
under 28 U.S.C. § 1746. Doc. 110 at 4.

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shown an antitrust injury based on the theory they have
pleaded. 11 Id.

IV.
Order
For the reasons discussed herein,
The court ORDERS that plaintiff's motion for partial summary
judgment be, and is hereby, granted in part; defendants'
liability on plaintiff's breach of contract claim be, and is
hereby, established; defendants take nothing on their
counterclaim against plaintiff, and such counterclaim be, and is
hereby, dismissed. The court ORDERS that, except as granted
herein, the motion for partial summary judgment be, and is
hereby, denied.
The court determines that there is no just reason for delay
in, and hereby directs, entry of final judgment as to the
dismissal of defendants' counterclaim.
SIGNED March 8, 2016.

"In particular, defendants have noi pleaded that plaintiff's agreements with lenders and
forwarders illegally restrict competition. Doc. 52 at 58-60.
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