Rankin Construction National Builders LLC v. Frank H. Reis, Inc.

Filing 62

MEMORANDUM OPINION AND ORDER: Came on for consideration the motion of defendant, Frank H. Reis, Inc. d/b/a The Reis Group, for summary judgment. 40 The court ORDERS that defendant's motion for summary judgment be, and is hereby, granted in part, and plaintiff take nothing on its claims for conversion and damages based on loss of business reputation (including lost profits). (Ordered by Judge John McBryde on 3/12/2018) (bdb)

DiSTfUC;T COTJIZT·-

U.S.
NORTHERN D!STHJCT OF TEXAS

-------1

IN THE UNITED STATES DISTRICT' COURT1-··----- -- ·---NORTHERN DISTRICT OF TEX s
MAR I 2 2018
FORT WORTH DIVISION
L~

i

RANKIN CONSTRUCTION NATIONAL
BUILDERS, L.L.C.,
Plaintiff,

vs.
FRANK H. REIS,
REIS GROUP,

INC. D/B/A THE

Defendant.

!

J

CLEmc, U.S. DlSTRICT COURT
§
§
§
§
§
§
§
§
§
§
§

By _ _~-:::---~-~
Deputy

--~-~-~---~~-------~---------

NO. 4:17-CV-530-A

MEMORANDUM OPINION AND ORDER
Came on for consideration the motion of defendant, Frank H.
Reis,

Inc. d/b/a The Reis Group, for summary judgment. The court,

having considered the motion, the response' of plaintiff, Rankin
Construction National Builders, L.L.C., the reply, the record,
the summary judgment evidence, and applicable authorities, finds
that the motion should be granted in part.
I.

Plaintiff's Claims
Plaintiff filed its original petition in the District Court
of Tarrant County, Texas, 352nd Judicial District. On June 28,
2017, defendant filed its notice of removal, bringing the action
before this court. Ordinarily, the court requires repleading in a

'By order signed March 1, 2018, the court ordered that plaintiff's brief and appendix in support
of its response be stricken. On March 5, 2018, plaintiff filed an amended brief and amended appendix as
directed. The couti granted defendant an oppmiunity to file an amended reply, which it did on March 8,
2018.

case like this one, but that did not happen here. Thus, the
original petition is the operative pleading. Doc. 2 9, Ex. C.
Plaintiff alleges: Plaintiff is a framing contractor that
provides framing and construction-related services to commercial
builders. Liability insurance is required for plaintiff to
conduct its business. Defendant sells insurance products and for
a number of years provided insurance consultation and services to
plaintiff. During the years of 2013 to 2016, defendant through
its employee and/or agent, Damian D'Arpino ("D'Arpino"), sold
numerous polices of Commercial General Lines ("CGL") insurance to
plaintiff for numerous projects. Plaintiff paid premiums in
excess of $100,000.00 to defendant. On March 7, 2016, defendant
delivered to plaintiff a certificate of liability insurance
("certificate") for a CGL policy on a project in New Jersey. In
connection with issuance of the certificate, D'Arpino represented
to plaintiff that the CGL policy was in full force and effect for
the project and that workers compensation insurance was also in
place. On March 12, 2016, plaintiff learned of a fatal accident
at the project' and gave notice to its insurance carrier. It then
learned for the first time that the certificate and other similar

2

The "Doc.

"reference is to the number of the item on the docket in this action.

3

The summary judgment evidence reflects that the project was actually in New York. Doc. 60,
Exs. SS & TT.
2

certificates were fraudulent. Plaintiff discovered that policies
had been allowed to lapse or had been cancelled without notice to
it. Further, plaintiff had paid for policies that were never
purchased on its behalf. As a result of learning that it did not
have insurance coverage, plaintiff was required to stop work on a
number of projects, causing it damage.
Plaintiff asserts causes of action for violation of the
Texas Deceptive Trade Practices-Consumer Protection Act, Tex.
Bus. & Com. Code§§ 17.41-.63 ("DTPA"), violation of the Texas
Insurance Code § 541.051, fraud, and conversion. Doc. 9, Ex. C.
II.
Grounds of the Motion
Defendant says that it is entitled to judgment as to each of
plaintiff's claims. It asserts that neither the DTPA nor the
Texas Insurance Code applies as New York, rather than Texas, law
governs. And, even if Texas law applies, the DTPA does not govern
misrepresentations made after goods have been acquired and
§ 541.051 of the Insurance Code does not govern
misrepresentations regarding the existence of insurance coverage.
Defendant also maintains that plaintiff, as a sophisticated
purchaser of insurance products, cannot establish reliance on any
misrepresentations; thus, the DTPA, insurance, and fraud claims
all fail. And, defendant says that the conversion claim is

3

defective in that plaintiff cannot trace any particular funds
paid that defendant is wrongfully withholding. In addition,
defendant maintains that plaintiff cannot establish any damages.
III.
Applicable Summary Judgment 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.

Fed. R. Civ.

P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
(1986).

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
case.

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

asserting that a fact .

.

("A party

is genuinely disputed must support

4

the assertion by
the record

citing to particular parts of materials in
'

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. 4

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.

4

111 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 court should enter judgment on motions
for directed verdict or for judgment notwithstanding the verdict.

5

IV.
Analysis
A.

Which State's Law Applies
Defendant maintains that New York, rather than Texas, law

should apply to the claims asserted by plaintiff. In making the
determination, the court applies the choice of law rules of the
forum state. Mayo v. Hartford Life Ins. Co., 354 F.3d 400, 403
(5th Cir. 2004). Texas applies the most significant relationship
test. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 420

(Tex.

1984). In a case concerning fraud and misrepresentation, as here,
the court considers, among other things, the domicile of the
parties, where the representations took place, and where the
plaintiff received the representations and relied upon them. GJP,
Inc. v. Ghosh, 251 S.W.3d 854, 884
pet.).

(Tex. App.--Austin 2008, no

Where two parties are located in different states, the

state where the reliance occurred generally determines the choice
of law. Id. at 885; Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349,
356

(Tex. App.--Houston [14th Dist.) 2003, no pet.) (place of

reliance outweighs places of making and receiving
misrepresentation) . And, place of financial loss will usually be
of greatest concern to the plaintiff's home state. Tracker
Marine, 108 S.W.3d at 356.

6

Here, plaintiff is a citizen of Texas and defendant is a
citizen of New York. Defendant made the misrepresentations at
issue in New York and they were received and relied upon by
plaintiff in Texas. Plaintiff does business in Texas as well as
New York and suffered injuries here when it had to stop work on
local projects as well as the project in New York. Although the
event that gave rise to the discovery of the misrepresentations
occurred in New York, that factor does not outweigh the nexus of
the claims with Texas. See W.R. Grace & Co. v. Continental Cas.
Co., 896, 873

(5th Cir. 1990) (injured party did not care who paid

as long as the claim was paid) . Under a Texas choice of law
analysis, Texas law applies based on the facts of this case.
B.

DTPA Claim
Defendant next argues that plaintiff is not a "business

consumer" under the DTPA because its claims are based on posttransaction representations and not on statements made when
plaintiff sought or acquired goods or services. Doc. 41 at 6-7.
Generally, post-transaction representations could not be a
producing cause of damages. Texas Cookie Co. v. Hendricks &
Peralta,

Inc., 747 S.W.2d 873, 880

(Tex. App.--Corpus Christi

1988, writ denied).
Here, the summary judgment evidence at least raises a fact
issue as to whether the misrepresentations at issue were a

7

producing cause of damage to plaintiff. Plaintiff has shown that
it relied on defendant to obtain insurance coverage and defendant
repeatedly represented that it had done so and that plaintiff had
coverage for its various projects. Provision of the certificates
of insurance was part of the service and not merely incidental to
it. Texas Cookie Co., 747 S.W.2d at 877. And, plaintiff was
injured because it relied on the representations that it had
coverage when it did not. Royal Globe Ins. Co. v. Bar
Consultants, Inc., 577 S.W.2d 688, 694
C.

(Tex. 1979).

Insurance Code Claim
Defendant says that plaintiff cannot establish a violation

of the Insurance Code based on a disclosure or failure to
disclose information regarding the fact or lapse of coverage.
Doc. 41 at 7-9. Specifically, it argues that an insured is
charged with knowledge that it must pay policy premiums and if it
failed to do so it cannot rely on representations made as to
coverage post-termination. Schindler v. Mid-Continent Life Ins.
Co., 768 S.W.2d 331, 334

(Tex. App.--Houston [14th Dist.] 1989,

no writ). In response, plaintiff argues that defendant was
obligated to inform it of impending termination for failure to
pay premiums, Kitching v. Zamora, 695 S.W.2d 553, 554

(Tex.

1985), that it relied on defendant to do so, and that defendant
never notified plaintiff of the pertinent cancellation notices.

8

The summary judgment evidence plaintiff cites at least raises a
fact issue as to this ground.
D.

Fraud
To establish fraud, plaintiff must show that defendant made

a misrepresentation of a material, existing fact with the intent
that plaintiff act upon it, that plaintiff acted in reliance on
the misrepresentation, and that plaintiff thereby suffered
injury. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of
Am., 341 S.W.3d 323, 337 (Tex. 2011). Defendant's argument is
that plaintiff cannot show reliance. The bulk of the argument is
devoted to New York law, which the court has determined is not
applicable. And, the issue of whether plaintiff's reliance was
reasonable is a fact issue.
E.

Conversion
Conversion is the wrongful exercise of dominion and control

over another's property in denial of or inconsistent with his
rights. Waisath v. Lack's Stores, Inc., 474 S.W.2d 444, 446 (Tex.
1971) . To establish a claim for conversion, plaintiff must show
that:

(1) plaintiff owned or had possession of certain property;

(2) defendant unlawfully and without authorization assumed and
exercised control over the property to the exclusion of or
inconsistent with plaintiff's rights;

(3) plaintiff demanded

return of the property; and (4) defendant refused to return the

9

property. Tex. Integrated Conveyor Sys., Inc. v. Innovative
Conveyor Concepts, Inc., 300 S.W.3d 348, 365-66 (Tex. App.-Dallas 2009, pet. denied). Money is subject to conversion only
when it can be described or identified as a specific chattel, not
where an indebtedness may be discharged by payment of money
generally. Estate of Townes v. Townes, 867 S.W.2d 414, 419 (Tex.
App.--Houston [14th Dist.) 1993, writ denied). That is,
[a)n action for conversion of money will lie where the
money is "(1) delivered for safe keeping; (2) intended
to be kept segregated; (3) substantially in the form in
which it is received or an intact fund; and (4) not the
subject of a title claim by the keeper."
Id., 867 S.W.2d at 419-20
719, 727

(quoting Edlund v. Bounds, 842 S.W.2d

(Tex. App.--Dallas 1992, writ denied)).

Despite plaintiff's argument to the contrary, this is simply
not the type of case where a claim for conversion can be
asserted.
F.

Damages
Defendant maintains that plaintiff cannot pursue its damages

claim because it failed to comply with its obligation to disclose
a computation of each category of damages as required by Fed. R.
Civ. P. 26(a) (1) (A) (iii). As defendant notes, plaintiff only
referred to "a loss of business reputation• and not to lost
profits as a category of damages for which it seeks recovery.
Doc. 9, Ex. Cat 8,

~

40. Plaintiff's initial disclosures

10

describe the necessity of a good reputation for obtaining
business and say that the loss of an average contract would
represent lost profits of "about $500,000.00." Doc. 42 at 133.
But no manner of calculation of loss of reputation, or any other
damages for that matter, is set forth and plaintiff has
apparently not supplemented its disclosures. Plaintiff does not
cite any authority to support the contention that the disclosures
are sufficient.
Separately, defendant refers to damages for loss of
plaintiff's business reputation and lost profits and says that
plaintiff does not have evidence to support either category. Doc.
41 at 16-18. Plaintiff must point to objective facts, figures,
and data from which these damages can be ascertained. Atlas Copco
Tools, Inc. v. Air Power Tool & Hoist, Inc., 131 S.W.3d 203, 206
(Tex. App.--Fort Worth 2004, pet. denied). Plaintiff has not made
any attempt to do so. Rather, it simply relies on the conclusory
statements of its owner. Doc. 60 at 106.

v.
Order
The court ORDERS that defendant's motion for summary
judgment be, and is hereby, granted in part, and plaintiff take
nothing on its claims for conversion and damages based on loss

11

of business reputation (including lost profits)
SIGNED March 12, 2018.

12