Square D Company v. House of Power Electric, LC et al
Filing
57
MEMORANDUM OPINION AND ORDER granting 48 MOTION for Summary Judgment Partial, DENYING AS MOOT 52 MOTION for Oral Hearing re: 48 MOTION for Summary Judgment Partial.(Signed by Judge Sim Lake) Parties notified.(chorace)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SQUARE D COMPANY,
Plaintiff,
v.
HOUSE OF POWER ELECTRIC, L.C.,
A Texas Limited Liability
Company, and ALBERT CHLOUBER,
An Individual,
Defendants.
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CIVIL ACTION NO. H-09-3917
MEMORANDUM OPINION AND ORDER
Plaintiff, Square D Company (“Square D”), brings this action
against the defendants, House of Power, L.C. (“HOP”), and Albert
Chlouber, for breach of contract.
Pending before the court are
Square D Company’s Motion for Partial Summary Judgment (Docket
Entry No. 48), and House of Power Electric, L.C.’s Request for
Hearing (Docket Entry No. 52).
For the reasons explained below,
Square D’s motion for partial summary judgment will be granted, and
HOP’s request for hearing will be denied as moot.
I.
Square
D
Undisputed Facts
manufactures
breakers,
a
variety
of
panelboards,
electrical
including
circuit
switches.
Square D distributes its electrical products through a
network of authorized distributors.
load
products
centers,
and
On a case-by-case basis
Square D provides rebates to its authorized distributors for sales
to
certain
approved
customers.1
Authorized
distributors
are
expected to pass along rebated savings to approved customers.2
Square D’s authorized distributors agree to not resell Square D
products to unauthorized distributors or resellers, and Square D’s
approved customers agree to not resell Square D products but,
instead, to use the products themselves.3
Square D monitors the
purchases made by approved customers to ensure that they are only
purchasing
products
that
are
consistent
with
their
business
practices and to ensure adherence to Square D’s policy that
approved customers not resell Square D products.4
HOP is a residential electrical contractor that provides
electrical service for new home construction.5
In 2002 or 2003 HOP
began receiving special rebate pricing for Square D products
purchased from Crawford Electric, and Square D started monitoring
1
Square D Company’s Motion for Partial Summary Judgment
(“Square D’s Motion”), Docket Entry No. 48, p. 3 (citing Exhibit C,
Oral Deposition of Tracy Garner at 83:23-84:7).
2
Id. (citing Exhibit C, Oral Deposition
(“Garner Deposition”) at 90:24-91:8).
of
Tracy
Garner
3
Id. at 2-3 (citing Exhibit C, Garner Deposition at 6:5-10
(“We have policies with . . . our authorized distributors, where
they’re not allowed to purchase from or sell to another reseller;
and so my job is to monitor and make sure the distributors are
adhering to that policy. . .”)).
4
Id. at 3 (citing Exhibit C, Garner Deposition at 16:6-15).
5
Oral Deposition of Albert Chlouber (“Chlouber Deposition”),
Exhibit E to Square D’s Motion, Docket Entry No. 48, pp. 15:1616:15. See also Defendant’s Response to Square D Company’s Motion
for Partial Summary Judgment (“Defendant’s Response”), Docket Entry
No. 51, p. 1 ¶ 2.
-2-
HOP’s rebate-eligible purchases.6
In 2005 HOP’s president, Albert
Chlouber, was asked to sign a document titled: “Square D/Schneider
Electric
Continuous
Pricing
Commitment
Reselling
Policy”
(“Continuous Pricing Commitment”), which provides:
This commitment offers your authorized Square D
distributor continuous special pricing, based on
competitive levels, for your use as an OEM, Contractor or
Industrial customer. Also included in this commitment is
special negotiated pricing for project job business based
on competitive situations. This pricing is to be used
for your application and/or fabrication of equipment, and
does not authorize you to “re-sale” any Schneider
Electric component to any other customer, distributor
and/or reseller.
Failure to follow any of these
guidelines can result in immediate termination of this
commitment. This commitment will be reviewed upon any
change in distributor coverage and/or change of
management or ownership of Subject Company.
This
commitment may be rescinded or changed at Square D’s sole
discretion at any time without notice or cause.7
The document contains a space for “Company name,” which has been
filled in “House of Power Electric,” beneath which the letters OEM
have
been
circled.
Below
the
company
name
is
a
space
for
“Distributor name,” which has been filled in “Crawford Electric.”
Below
the
distributor
name
is
a
space
for
“Customer
Representative,” which has been filled in “Albert Chlouber,” next
to which is a signature space signed by Albert Chlouber, and below
6
Garner Deposition, Exhibit C to Square D’s Motion, Docket
Entry No. 48, p. 24:18-25. See also Defendant’s Response, Docket
Entry No. 51, p. 2 ¶ 3.
7
Exhibit D to Square D’s Motion, Docket Entry No. 48. See
also Garner Deposition, Exhibit C to Square D’s Motion, Docket
Entry No. 48, at 77:4-78:5 and 110:4-6; and Defendant’s Response,
Docket Entry No. 51, pp. 2-3 ¶¶ 5-7.
-3-
which is a space for “Title” that has been filled in “President.”
The document is dated “12-7-05.”
is the following:
Beneath the date in handwriting
“* I must have these back to SQD by the 9th of
December, or the contracts will be cancelled.
Square D continued
Thanks, Gene.”8
to provide Crawford Electric special pricing
for HOP’s purchases.9
In early 2008 Square D asked Chlouber to explain purchases
that appeared to exceed the usual amount for a customer like HOP.10
On September 30, 2008, a caller identifying himself as a former HOP
employee contacted Square D to report that HOP was reselling
Square D products.
Later that day Square D terminated HOP’s
ability to receive rebate pricing from Crawford Electric.11
In
October of 2008 Chlouber sent an e-mail to Square D stating “[i]t
is obvious that I made a mistake with resale of the product.”12
8
Continuous Pricing Commitment, Exhibit D to Square D’s
Motion, Docket Entry No. 48. See also Defendant’s Response, Docket
Entry No. 51, pp. 2-3 ¶¶ 5-7; and Chlouber Deposition, Exhibit E to
Square D’s Motion, Docket Entry No. 48, p. 98:14-19 (identifying
Gene Brenner as Crawford Electric’s outside sales associate and
HOP’s main contact).
9
Garner Deposition, Exhibit C to Square D’s Motion, Docket
Entry No. 48, at 106:4-21. See also Defendant’s Original Answer to
Plaintiff’s Original Complaint, Docket Entry No. 6, p. 2 ¶ 13.
10
Square D’s Motion, Docket Entry No. 48, pp. 7-8 (citing
Exhibit F, February 11-13, 2008, e-mail exchange between Square D’s
Leslie McFarland and HOP’s Albert Chlouber).
11
Id. at 8 (citing Exhibit C, Garner Deposition at 29:23-25 and
115:4-117:13).
12
Id. (citing Exhibit I, Chlouber e-mail of Oct. 9, 2008). See
also Chlouber Deposition, Exhibit E to Square D’s Motion, Docket
(continued...)
-4-
II.
Standard of Review
Summary judgment is authorized if the movant establishes that
there is no genuine dispute about any material fact and the law
entitles it to judgment.
Fed. R. Civ. P. 56(c).
Disputes about
material facts are “genuine” if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2511 (1986).
The
Supreme Court has interpreted the plain language of Rule 56(c) to
mandate the entry of summary judgment “after adequate time for
discovery and upon motion, against a party who fails to make a
showing
sufficient
to
establish
the
existence
of
an
element
essential to that party’s case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v. Catrett, 106 S.Ct.
2548, 2552 (1986).
A party moving for summary judgment “must
‘demonstrate the absence of a genuine issue of material fact,’ but
need not negate the elements of the nonmovant’s case.”
Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
If
the moving party meets this burden, Rule 56(c) requires the
nonmovant to go beyond the pleadings and show by affidavits,
depositions, answers to interrogatories, admissions on file, or
other admissible evidence that specific facts exist over which
there is a genuine issue for trial. Id. (citing Celotex, 106 S.Ct.
12
(...continued)
Entry No. 48, p. 57:1-9 (acknowledging that HOP resold Square D
products via the Internet to Breakers Unlimited and individuals).
-5-
at 2553-2554).
In reviewing the evidence “the court must draw all
reasonable inferences in favor of the nonmoving party, and it may
not make credibility determinations or weigh the evidence.” Reeves
v. Sanderson Plumbing Products, Inc., 120 S.Ct. 2097, 2110 (2000).
Factual controversies are to be resolved in favor of the nonmovant,
“but only when . . . both parties have submitted evidence of
contradictory facts.”
Little, 37 F.3d at 1075.
III.
Analysis
Square D argues that partial summary judgment should be
granted on liability for its breach of contract claim because HOP
resold Square D products in breach of the Continuous Pricing
Commitment signed by HOP’s President, Albert Chlouber.13 HOP argues
that Square D is not entitled to partial summary judgment on its
breach of contract claim because the Continuous Pricing Commitment
is not a valid contract, and because there are genuine issues of
material fact for trial.14
Both parties cite Texas law in support
of their arguments and therefore agree that Texas law applies to
Square D’s breach of contract claim.15
A.
Texas Law of Contract Formation and Construction
In Texas, “the essential elements of a breach of contract
claim are: (1) the existence of a valid contract;
13
Id. at 9.
14
Defendant’s Response, Docket Entry No. 51, p. 4 ¶ 10.
15
Square D’s Motion, Docket Entry No. 48, p. 9; Defendant’s
Response, Docket Entry No. 51, pp. 5-6 ¶¶ 13-14 and p. 10 ¶ 20.
-6-
(2) performance or tendered performance by the plaintiff;
(3) breach of the contract by the defendant; and
(4) damages sustained by the plaintiff as a result of the
breach.”
Mullins v. TestAmerica, Inc., 564 F.3d 386, 418 (5th Cir. 2009)
(citing Aguiar v. Segal, 167 S.W.3d 443, 450 (Tex. App. -- Houston
[14th Dist.] 2005, pet. denied)).
binding contract are:
The elements of a valid and
(1) an offer, (2) an acceptance, (3) a
meeting of the minds, (4) each party’s consent to the terms, and
(5) execution and delivery of the contract with the intent that it
be mutual and binding.
Roman v. Roman, 193 S.W.3d 40, 50 (Tex.
App. -- Houston [1st Dist.] 2006, pet. denied), cert. denied, 128
S.Ct. 1662 (2008). “Consideration is also a fundamental element of
every valid contract.”
Id.
See also Texas Farm Bureau Cotton
Ass’n v. Stovall, 253 S.W. 1101, 1105 (Tex. 1923) (recognizing that
“a contract must be based on a valid consideration, and that a
contract in which there is no consideration moving from one party,
or no obligation upon him, lacks mutuality, is unilateral, and
unenforceable”).
promises”
and
“Consideration is a bargained for exchange of
“consists
contracting parties.”
of
benefits
and
detriments
to
the
Federal Sign v. Texas Southern University,
951 S.W.2d 401, 408-09 (Tex. 1997), superseded on other grounds by
Tex. Govt. Code §§ 260.001-008.
“The detriments must induce the
parties to make the promises and the promises must induce the
parties to incur the detriments.”
Id. at 409.
For example, in
Federal Sign the Texas Supreme Court found that a valid, binding
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contract existed where the plaintiff promised to build scoreboards
in exchange for the defendant’s promise to pay for them. The Court
explained that the parties’ promises “represented the respective
benefits and detriments, or the bargained for exchange, necessary
to satisfy the consideration requirement.”
However,
when
illusory
promises
are
Id.
all
that
support
a
purported bilateral contract there is no mutuality of obligation
and, thus, there is no contract.
A promise is illusory when it
fails to bind the promisor, who retains the option of discontinuing
performance. See Light v. Centel Cellular Co. of Texas, 883 S.W.2d
642, 645 (Tex. 1994), partly overruled on other grounds by Alex
Sheshunoff Management Services, L.P. v. Johnson, 209 S.W.3d 644
(Tex. 2006).
Under Texas law “[i]f the written instrument is so worded that
it can be given a certain or definite meaning or interpretation,
then it is not ambiguous and the court will construe the contract
as a matter of law.”
1983).
Coker v. Coker, 650 S.W.2d 391, 394 (Tex.
“A contract, however, is ambiguous when its meaning is
uncertain and doubtful or it is reasonably susceptible to more than
one meaning.”
Id. (citing Skelly Oil Co. v. Archer, 356 S.W.2d
774, 778 (Tex. 1962)).
“Whether a contract is ambiguous is a
question of law for the court to decide by looking at the contract
as a whole in light of the circumstances present when the contract
was entered.”
Id.
Unambiguous contracts are enforced as written,
and “in the ordinary case, the writing alone will be deemed to
-8-
express the intention of the parties.”
Sun Oil Co. (Delaware) v.
Madeley, 626 S.W.2d 726, 728 (Tex. 1981).
A contract is not
ambiguous merely because of a simple lack of clarity, or because
the
parties
proffer
conflicting
interpretations
of
a
term.
DeWitt County Electric Co-op, Inc. v. Parks, 1 S.W.3d 96, 100 (Tex.
1999).
Parol evidence is not admissible for the purpose of
creating an ambiguity.
Universal C.I.T. Credit Corp. v. Daniel,
243 S.W.2d 154, 157 (Tex. 1951).
However, when application of the
pertinent rules of contract interpretation to the face of the
instrument leaves it genuinely uncertain which one of two or more
meanings is the proper meaning, the contract is ambiguous.
Id.
“Only where a contract is first determined to be ambiguous may the
courts consider the parties’ interpretation, and admit extraneous
evidence to determine the true meaning of the instrument.” KelleyCoppedge, Inc. v. Highlands Insurance Co., 980 S.W.2d 462, 464
(Tex. 1998) (quoting National Union Fire Ins. Co. of Pittsburgh, PA
v. CBI Industries, Inc., 907 S.W.2d 517, 520 (Tex. 1995) (citations
omitted)).
B.
Application of Texas Law to the Undisputed Facts
In support of its argument that it is entitled to partial
summary judgment on its breach of contract claim, Square D argues
that the Continuous Pricing Commitment is a valid, enforceable
contract.
Square D explains that (1) “it is undisputed that
Square D and House of Power entered into a valid and binding
-9-
agreement,”16 (2) “[u]nder the plain and unambiguous terms of the
Agreement,
House
of
Power
promised
not
to
resell
Square
D
products,”17 (3) “[n]o one disputes that Square D provided special
pricing during the pendency of the Agreement,”18 and (4) “House of
Power does not dispute that it resold Square D products . . .
during the term of the Contract.”19
HOP argues that Square D is not entitled to partial summary
judgment on its breach of contract claim because the Continuous
Pricing Commitment is not a contract as a matter of law, and
because there are genuine issues of material fact for trial on the
remaining elements of Square D’s breach of contract claim.
HOP
also argues that if a contract exists, Square D waived its right to
enforce the contract.20
1.
Undisputed Facts Establish Existence of a Valid Contract
Square D argues that the existence of a valid, enforceable
contract is evidenced by (a) the unambiguous provisions in the
Continuous Pricing Commitment, and (b) incontrovertible judicial
admissions made in Defendant’s Original Answer to Plaintiff’s
Original Complaint (Docket Entry No. 6).
In support of its
16
Square D’s Motion, Docket Entry No. 48, p. 9.
17
Id. at 13.
18
Id. at 16.
19
Id. at 16-17.
20
Defendant’s Response, Docket Entry No. 51, pp. 4-9 ¶¶ 11-18.
-10-
argument that the existence of a valid, enforceable contract is
evidenced by the unambiguous provisions in the Continuous Pricing
Commitment, Square D argues that it
promised to provide continuous special pricing to House
of Power’s authorized distributor in exchange for House
of Power’s promise not to resell Square D products.
Square D’s promise is expressly and unambiguously set
forth in the following provision: “This commitment offers
your authorized Square D distributor continuous special
pricing, based on competitive levels, for your use as an
OEM, Contractor or Industrial customer. Also included in
this commitment is special negotiated pricing for project
job business based on competitive situations.”
In return, House of Power promised not to resell
Square D products.
House of Power’s promise is made
explicit several times in the Agreement. For instance:
#
The Agreement provides that the special
pricing is for House of Power’s use as a
contractor;
#
The Agreement elaborates that the pricing is
to be used for House of Power’s application;
and
#
The Agreement expressly states that resales of
Square D products are not authorized.
Thus, under the plain and unambiguous language of
the Agreement, House of Power promises to use Square D
products for its applications only and not resell the
products to other customers, distributors or resellers.
House of Power incurred the detriment of promising not to
resell Square D products in order to enjoy the benefit of
special pricing. And Square D incurred the detriment of
allowing special pricing in order to enjoy the benefit of
ensuring that its products would be purchased by House of
Power as an end-user and would not be resold to
unauthorized sources. Fed. Sign, 951 S.W.2d at 409.
The parties therefore formed a valid and binding
Agreement, as is reflected in the title of their
contract, which is “Continuous Pricing Commitment.” By
using the word “commitment,” the parties objectively
manifested their intent to be bound.
See BLACK’S LAW
-11-
DICTIONARY (9th ed. 2009) (defining “commitment” as “[a]n
agreement to do something in the future”).21
HOP argues that the Continuous Pricing Commitment is not a
valid contract but, instead, (1) “is a UNILATERAL statement of
Square D’s intention to provide price breaks to a customer (House
of Power) through Square D’s distributor (Crawford Electric),”22
(2) “is illusory because by its very wording it could end at the
whim of Square D at any time, for any reason . . . or no reason,
and
without
obligation.”24
cause,”23
and
(3)
“contains
no
mutuality
of
HOP explains that although Square D argues that the
Continuous Pricing Commitment
calls itself a “commitment,” it could be “rescinded or
changed at Square D’s sole discretion at any time without
notice or cause” (quoting the Square D Policy). Simply
put, there was no commitment and no contract whatsoever
based upon the wording of the document.
. . .
The Square D Policy is illusory because by its very
wording it could end at the whim of Square D at any time,
for any reason . . . or no reason, and without cause.
Because
the
document
is
subject
to
unilateral
modification or rescission it is, necessarily, illusory.
Because it is illusory there can be no contract.
Plaintiff, by way of its Motion for Partial Summary
Judgment, contends that the Square D Policy is a
bargained for bilateral contract.
“When illusory
promises are all that support a purported bilateral
contract, there is no contract.”
Light v. Centel
21
Square D’s Motion, Docket Entry No. 48, pp. 10-12.
22
Defendant’s Response, Docket Entry No. 51, p. 4 ¶ 11.
23
Id. at 5 ¶ 13.
24
Id. ¶ 14.
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Cellular Company of Texas, 883 S.W.2d 642, 645 (Tex.
1994); Vanegas v. American Energy Services, 302 S.W.3d
299, 302 (Tex. 2009). The “commitment” by Square D to
provide “continuous special pricing” in the Square D
Policy was illusory because it could be unilaterally
withdrawn at any time for any reason without recourse.
The Square D Policy contains no mutuality of
obligation. Square D could choose at any time, without
reason, to cancel its “commitment” without ANY
consequence to Square D. Indeed, Square D was able to
“opt out” of its “obligation” (commitment) unilaterally.
As drafted, the only party capable of breaching would be
House of Power. If there is no mutuality of obligation
there can be no contract.
In re: Palm Harbor Homes,
Inc., 195 S.W.3d 672, 644; Sterling Computer [Systems of
Texas, Inc. v. Texas Pipe Bending Co., 507 S.W.2d 282
(Tex. Civ. App. -- Houston [14th Dist.] 1974, writ
ref’d)].25
In support of its argument that the Continuous Pricing Commitment
is not a valid contract HOP cites Sterling Computer Systems of
Texas, Inc. v. Texas Pipe Bending Co., 507 S.W.2d 282 (Tex. Civ.
App. -- Houston [14th Dist.] 1974, writ ref’d); Light v. Centel
Cellular Co. of Texas, 883 S.W.2d 642 (Tex. 1994), overruled on
other grounds by Alex Sheshunoff Management Services, L.P. v.
Johnson, 209 S.W.3d 644 (Tex. 2006); Vanegas v. American Energy
Services, 302 S.W.3d 299 (Tex. 2009); and In re Palm Harbor, Inc.,
195 S.W.3d 672 (Tex. 2006).26
In Sterling Computer, 507 S.W.2d 282, a contract-for-services
case, the Texas Court of Appeals held that a contract failed for
want of mutuality as a matter of law because it contained an
25
Id. at 4-6 ¶¶ 11, 13-14.
26
Id.
-13-
express provision that not only limited the plaintiff’s liability
for
failing
to
perform
its
contractual
obligations
to
the
defendant, but also contained no requirement that the plaintiff
make a reasonable effort to perform the services for which the
defendants had contracted.
In Light, 883 S.W.2d at 644, a covenant-not-to-compete case,
the Texas Supreme Court held that consideration for a promise, by
either the employee or the employer in an at-will employment,
cannot be dependent on a period of continued employment. The Court
reasoned that “[s]uch a promise would be illusory because it fails
to
bind
the
promisor,
who
always
retains
the
option
of
discontinuing employment in lieu of performance.” Id. at 645. The
Court reasoned that “[w]hen illusory promises are all that support
a purported bilateral contract, there is no contract.”
Id.
However, the Court noted that “[i]f only one promise is illusory,
a unilateral contract can still be formed; the non-illusory promise
can serve as an offer, which the promisor who made the illusory
promise can accept by performance.”
Id. at 645 n.6.
In Vanegas, 302 S.W.3d at 301-02, an employment case, the
Texas Supreme Court cited the principle noted in Light, 883 S.W.2d
at 645 n.6, in support of its holding that a company’s offer to
split proceeds from a sale or merger with original employees who
remained at the company until such sale or merger was a nonillusory offer for a unilateral contract that was accepted by the
original employees who remained employed at the time of the merger
-14-
because those employees had performed their originally illusory
promise to stay employed until such merger occurred.
The Court
reiterated that
a unilateral contract may be formed when one of the
parties makes only an illusory promise but the other
party makes a non-illusory promise.
The non-illusory
promise can serve as the offer for a unilateral contract,
which the promisor who made the illusory promise can
accept by performance.
Vanegas, 302 S.W.3d at 302 (citing Light, 883 S.W.2d at 645 n.6,
and Sheshunoff v. Johnson, 209 S.W.3d 644 (Tex. 2006)).
The Court
explained that
[t]he issue turns on the distinction between
bilateral and unilateral contracts.
“A bilateral
contract is one in which there are mutual promises
between two parties to the contract, each party being
both a promisor and a promisee.” Hutchings v. Slemons,
141 Tex. 448, 174 S.W.2d 487, 489 (1943) (quoting
RESTATEMENT (FIRST) OF CONTRACTS § 12). A unilateral
contract, on the other hand, is “created by the promisor
promising a benefit if the promisee performs.
The
contract becomes enforceable when the promisee performs.”
Plano Surgery Ctr. v. New You Weight Mgmt. Ctr., 265
S.W.3d 496, 503 (Tex.App.—Dallas 2008, no pet.); see also
Light, 883 S.W.2d at 645 n. 6; 1 RICHARD A. LORD,
WILLISTON ON CONTRACTS § 1.17 (4th ed. 2007) (“A
unilateral contract occurs when there is only one
promisor and the other party accepts, not by mutual
promise, but by actual performance or forbearance.”).
Both Sheshunoff and Light concerned bilateral contracts
in which employers made promises in exchange for
employees’ promises not to compete with their companies
after termination. Sheshunoff, 209 S.W.3d at 649 (“ASM
promised to disclose confidential information and to
provide specialized training under the Agreement, and
Johnson
promised
not
to
disclose
confidential
information.”); Light, 883 S.W.2d at 645 (“When illusory
promises are all that support a purported bilateral
contract, there is no contract.”) (emphasis added). . .
Our discussion in footnote six of Light was confined to
situations where a non-illusory promise could salvage an
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otherwise ineffective bilateral contract by transforming
it into a unilateral contract, enforceable upon
performance.
Vanegas, 302 S.W.3d at 302.
In Palm Harbor, 195 S.W.3d at 672, an agreement-to-arbitrate
case, the Texas Supreme Court held that an agreement to arbitrate
with the manufacturer of a manufactured home that provided the
manufacturer a unilateral, unrestricted right to terminate was not
illusory because the manufacturer was a third-party beneficiary to
the contract between the seller and the purchasers who was not
required to provide independent consideration for the arbitration
agreement.
“[i]f
there
HOP merely cites Palm Harbor for the principle that
is
no
mutuality
of
obligation
there
can
be
no
contract.”27
In this case the Continuous Pricing Commitment expressly
provides that “[t]his commitment may be rescinded or changed at
Square D’s sole discretion at any time without notice or cause.”28
This language provided Square D an unlimited, unilateral right to
change and/or rescind its commitment to provide special pricing to
Crawford Electric for HOP’s purchases of Square D products without
recourse for HOP.
Since the Continuous Pricing Commitment did not
bind Square D to provide special pricing to Crawford Electric for
HOP purchases, Square D’s promise to provide such pricing was
27
Id. at 6 ¶ 14.
28
Continuous Pricing Commitment,
Motion, Docket Entry No. 48.
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Exhibit
D
to
Square
D’s
illusory because Square D could never breach the commitment, and
HOP could never enforce the commitment against Square D in the
event that Square D decided to change or rescind HOP’s special
pricing.
Therefore, relying on Sterling Computer, Light, Vanegas,
and Palm Harbor, HOP argues that because Texas courts have held
that an unlimited, unilateral right to rescind a bilateral contract
renders
the
contract
void
for
want
of
mutuality,
i.e.,
consideration, the language in the Continuous Pricing Commitment
that provides Square D an unlimited, unilateral right to change or
rescind the commitment requires the court to find as a matter of
law that the Continuous Pricing Commitment is not a valid contract.
HOP’s
argument
is
not
persuasive,
however,
because
as
explained by the Texas Supreme Court in both Light, 883 S.W.2d at
645 n.6, and Vanegas, 302 S.W.3d at 302, “if only one promise [in
a
purportedly
bilateral
contract]
is
illusory,
a
unilateral
contract can still be formed; the non-illusory promise can serve as
an offer, which the promisor who made the illusory promise can
accept by performance.”
Id. at 645 n.6.
The undisputed facts of
this case present just such a situation, i.e., a situation “where
a non-illusory promise could salvage an otherwise ineffective
bilateral contract by transforming it into a unilateral contract,
enforceable upon performance.”
Vanegas, 302 S.W.2d at 302.
Here, the Continuous Pricing Commitment purports to create a
bilateral contract pursuant to which Square D promised to provide
special pricing for HOP’s purchases in exchange for HOP’s promise
-17-
not to resell Square D products.
However, Square D’s promise was
illusory because the Continuous Pricing Commitment reserved to
Square D an unlimited, unilateral right to change or rescind HOP’s
special pricing at any time for any reason without recourse for
HOP.
Although HOP contends that the Continuous Pricing Commitment
did not unambiguously obligate HOP to not resell Square D products,
for the reasons explained below in § III.B.2, the court disagrees.
Consequently, HOP’s non-illusory promise to not resell Square D
products can be interpreted as an offer, which Square D -- the
promisor who made the illusory promise -- accepted by performance,
i.e., by providing Crawford Electric special pricing for HOP
purchases of Square D products.
With Square D’s performance as
consideration, the provisions of the Continuous Pricing Commitment
are valid and enforceable as to the Square D products for which HOP
received special pricing.
In other words, HOP received considera-
tion for its non-illusory promise to not resell Square D products
when Square D provided special pricing for HOP’s purchases of
Square D products.
As the Texas Supreme Court explained in
Hutchings, 174 S.W.2d at 489:
“Though a contract be void for lack of mutuality at
the time it is made, and while it remains wholly
executory, yet, when there has been even a part
performance by the party seeking to enforce the same, and
in such part performance such party has rendered services
or incurred expense contemplated by the parties at the
time such contract was made, which confers even a remote
benefit on the other party thereto, such benefit will
constitute an equitable consideration, and render the
entire contract valid and enforceable.”
-18-
Accordingly, the court concludes that the undisputed facts of this
case establish as a matter of law that a valid contract was formed
pursuant to the Continuous Pricing Commitment when the non-illusory
promise that HOP made not to resell Square D products became
enforceable by Square D’s performance of the illusory promise that
Square D made to provide Crawford Electric special pricing for HOP
purchases of Square D products.
2.
HOP Fails to Raise Genuine Issues of Material Fact
Square D argues that the undisputed facts establish that HOP
breached the parties’ valid contract because, pursuant to the
Continuous Pricing Commitment, HOP unambiguously promised not to
resell Square D products; Square D performed its obligations under
the Continuous Pricing Commitment; and HOP breached its obligations
under the Continuous Pricing Commitment by reselling Square D
products.29
Asserting that the Continuous Pricing Commitment is
ambiguous as a matter of law, HOP argues that many issues of
disputed fact preclude granting Square D’s motion for partial
summary judgment.30
(a)
HOP Unambiguously Promised Not to Resell Square D
Products for which HOP Received Special Pricing
HOP argues that the Continuous Pricing Commitment is ambiguous
as
a
matter
29
of
law
because
it
is
subject
to
a
myriad
of
Square D’s Motion, Docket Entry No. 48, pp. 13-17.
30
Defendant’s Response, Docket Entry No. 51, pp. 6-8 ¶¶ 15-17,
and p. 10 ¶ 20.
-19-
interpretations.31
HOP
explains
that
the
Continuous
Pricing
Commitment could reasonably be interpreted (1) “to be a unilateral
commitment
by
customer,”32
Square
(2)
“to
D
to
provide
admonish
its
favorable
customer
pricing
against
to
a
reselling
Square D products, but not REQUIRE the customer to not resell,”33
(3) “to have as the sole consequence of reselling a cancellation of
special pricing,”34 and (4) “to mean that House of Power could not
hold itself out as an authorized reseller of Square D Products.”35
HOP does not cite any language in the Continuous Pricing Commitment
in support of these suggested interpretations, and the court finds
none.
Instead, the court concludes that by signing the Continuous
Pricing Commitment HOP’s president, Albert Chlouber, unambiguously
acknowledged and agreed that the special pricing being offered to
HOP’s authorized distributor (Crawford Electric) for HOP purchases
was for HOP’s “use as an OEM, Contractor, or Industrial customer,”
and that “[t]his pricing [wa]s to be used for [HOP’s] application
and/or fabrication of equipment, and [did] not authorize [HOP] to
‘re-sale’
any
[Square
D]
component
to
any
other
customer,
31
Id. at 10 ¶ 20. See also Defendant’s Response to Square D
Company’s Reply in Support of Its Motion for Partial Summary
Judgment, Docket Entry No. 54, p. 5.
32
Defendant’s Response, Docket Entry No. 51, p. 10 ¶ 20.
33
Id.
34
Id.
35
Id.
-20-
distributor and/or reseller.”36
By signing the Continuous Pricing
Commitment, Chlouber unambiguously promised to use the Square D
products that it purchased pursuant to the special pricing commitment for HOP’s own work and not to resell Square D products to any
other customer, distributor, and/or reseller.
See Coker, 650
S.W.2d at 394 (under Texas law the interpretation of an unambiguous
contract is a question of law for the court to decide by “looking
at the contract as a whole in light of the circumstances present
when the contract was entered”); Sun Oil, 626 S.W.2d at 728
(unambiguous contracts are enforced as written); and DeWitt County,
1 S.W.3d at 100 (a contract is not ambiguous merely because the
parties to an agreement proffer conflicting interpretations).
Alternatively, even if the Continuous Pricing Commitment were
ambiguous as to the obligations imposed on HOP, HOP has failed to
cite
any
evidence
from
which
a
reasonable
fact-finder
could
conclude Chlouber’s signature on the Commitment did not obligate
HOP not to resell Square D’s products.
HOP argues that Chlouber
testified only that “sales were ‘frowned upon’, NOT that any sales
were in violation of any agreement that Square D erroneously claims
existed.”37
Nevertheless, HOP fails to cite any specific testimony
in support of this contention, and the court concludes that the
following testimony of Chlouber refutes HOP’s argument:
36
Continuous Pricing Commitment,
Motion, Docket Entry No. 48.
37
Exhibit
D
to
Square
D’s
Defendant’s Response, Docket Entry No. 51, p. 7 ¶ 15(j).
-21-
Q.
Did you sign [the Continuous Pricing Commitment] on
or around 12/7/05?
A.
Yes.
Q.
That’s a fair assumption?
A.
Yes.
Q.
Okay.
And what was your understanding of the
document at the time, if you recall?
A.
Basically Square D gave this to Crawford and wanted
me to sign it for some reselling issues.
Q.
What were the reselling issues?
A.
Well, Square D doesn’t want you to resell.
Q.
Doesn’t want you to resell their products once
you’ve purchased them from Crawford?
A.
Correct.
Q.
Or from anybody else?
A.
Correct.
Q.
Was that your understanding at the time that you
signed this?
A.
Yes.
Q.
And it continues to be your understanding today?
A.
Yes.
Q.
Okay. And was it your understanding between the
time you signed it and as you sit here today?
A.
Yes.
Q.
Okay.
You never deviated from that and thought
Square D thinks it’s okay for House of Power to
resell its products?
A.
Correct.38
38
Square D’s Motion, Docket Entry No. 48, pp. 5-6 (citing
Exhibit E, Chlouber Deposition at 37:23-38:25).
-22-
Based on these excerpts from Chlouber’s deposition, the court
concludes
that
no
reasonable
fact-finder
could
conclude
that
Chlouber’s signature on the Continuous Pricing Commitment did not
obligate HOP not to resell Square D’s products.
(b)
HOP Fails to Raise Fact Issues Regarding Square D’s
Performance and/or HOP’s Breach
Square D argues that the undisputed facts establish (1) that
Square D performed its contractual obligation to provide special
pricing for HOP’s purchases of Square D products,39 and (2) that HOP
breached its contractual obligation not to resell the Square D
products purchased at special prices.40
Square D cites Garner’s
deposition as evidence that Square D provided special pricing for
HOP’s purchases of Square D products, and Chlouber’s deposition
testimony as evidence that HOP breached its contractual obligation
not to resell the Square D products that HOP purchased at special
prices by selling Square D products via the Internet.41
testified
that
“[Square
D]
set
up
special
pricing
Garner
so
that
[Square D’s authorized distributor] Crawford Electric could sell to
House of Power.”42
39
Id. at 16.
40
Id. at 16-17.
41
Chlouber testified as follows:
Id.
42
Garner Deposition, Exhibit C to Square D’s Motion, Docket
Entry No. 48, p. 106:15-17.
-23-
Q
Mr. Chlouber, I understand that House of Power did
sell -- resell some Square D products between 2005
and 2008. Is that a correct understanding?
A
Yes.
Q
To whom did House of Power resell Square D products
during that time period?
A
“We sold it to a company called Breakers Unlimited.
And
some
miscellaneous
individuals
on
the
Internet.”43
HOP
responds
that
“[m]any
of
the
‘facts’
set
forth
Plaintiff’s Motion as undisputed are in fact disputed.”44
in
In the
list of allegedly disputed facts contained in HOP’s response to
Square D’s motion HOP argues that there are genuine issues of
material fact for trial as to whether HOP received special pricing
for the Square D products that HOP purchased, and whether HOP
breached an agreement not to resell Square D products.
For
example, HOP asserts that
(1)
“Garner [] testified that Crawford Electric was the
one who determined the price to be charged for
products it sells to House of Power;”45
(2)
“Square D . . . claims that the rebates given to
Crawford were to be passed along to House of Power.
This is disputed . . .;”46
43
Chlouber Deposition, Exhibit E to Square D’s Motion, Docket
Entry No. 48, p. 57:1-9.
44
Defendant’s Response, Docket Entry No. 51, p. 6 ¶ 15.
45
Id. ¶ 15(a).
46
Id. ¶ 15(d).
-24-
(3)
“Square D claims that the
competitive and favorable.
. . .;”47 and
pricing is highly
This is disputed
(4)
“Square D alleges that Mr. Chlouber made an
admission in an email that ‘he made unauthorized
sales of Square D products.’
This quote is an
allegation of Square D and NOT an admission by
Mr. Chlouber. The language misstates the contents
of the email, which speaks for itself. The issue
raised by Square D creates a question of fact.”48
The court is not persuaded that any of the evidence cited by
HOP constitutes evidence from which a reasonable fact-finder could
conclude that Square D failed to perform its contractual obligation
to provide special pricing for HOP’s purchases of Square D products
from Crawford Electric, or that HOP did not breach its contractual
obligation not to resell the Square D products that it purchased at
special prices. To the contrary, the Chlouber e-mail referenced in
HOP’s motion shows that HOP purchased Square D products at special
prices and that HOP resold Square D products. The October 9, 2008,
e-mail is from HOP’s Chlouber to a Square D employee, and it states
in pertinent part:
It is obvious that I made a mistake with resale of the
product, but as you know we were a growing start up
company and needed the cash flow. . . I now see that this
was a huge mistake and I am very sorry it has caused a
problem with Crawford Electric and Square D.
My main concern as always is getting Crawford paid in
full. To do this I will need to complete hundreds of
jobs with Square D product. I would like to ask that
Square D allow us to purchase the following items so that
we can complete these current projects . . .
47
Id. ¶ 15(e).
48
Id. at 7 ¶ 15(k).
-25-
In return, I agree to not sell any Square D merchandise,
return all unused materials once projects are completed,
and make sure all information about special contract
pricing and resale is kept within management at House of
Power.49
Moreover, in the “Summary of Facts” included in its response to
Square D’s motion, HOP acknowledges both that it received special
pricing for purchases of Square D product and that it resold
Square D products via the Internet.
HOP states that Square D
put the House of Power account at Crawford Electric on a
company rebate program.
The program allowed Crawford
Electric to receive a rebate from Square D on each of the
House of Power purchases from Crawford Electric of
Square D products. Crawford Electric would in turn pass
along at least some of the savings to House of Power
through reduced pricing. . .50
HOP also states that “[f]rom time to time Mr. Chlouber would sell
some of House of Power’s stock of Square D products to others.”51
These statements in HOP’s response to Square D’s motion are
sufficient to establish that Square D did, in fact, perform it’s
contractual obligation to provide special pricing for HOP purchases
from Crawford Electric, and that HOP did, in fact, breach its
contractual obligation not to resell Square D products.
Based on this evidence, the court concludes that HOP is unable
to cite any evidence from which a reasonable fact-finder could
conclude
that
Square
D
failed
to
perform
its
contractual
49
Exhibit I to Square D’s Motion, October 9, 2008, e-mail from
HOP’s Albert Chlouber to Crawford Electric’s Jason Vaughn, Docket
Entry No. 48.
50
Defendant’s Response, Docket Entry No. 51, p. 1 ¶ 3.
51
Id. at 3 ¶ 7.
-26-
obligations to provide special pricing for HOP’s purchases, or that
HOP fulfilled its contractual obligation not to resell Square D
products purchased at special prices.
Accordingly, the court
concludes that HOP has failed to raise a genuine issue of material
fact for trial as to these issues.
3.
HOP Fails to Raise Fact Issue as to Waiver
HOP argues that the doctrine of waiver bars Square D’s breach
of contract claim because Square D knew that HOP was reselling
Square D products as early as 2004 and no later than 2007 but,
instead of enforcing HOP’s promise not to resell Square D products,
continued to provide Crawford Electric special pricing for HOP’s
purchases of Square D products.52
As evidence that Square D
intentionally relinquished a known right to enforce HOP’s promise
not to resell Square D products, HOP cites the deposition testimony
of Square D’s Garner:
Q.
And so I take it that since you closely monitor
those and you’ve been monitoring them closely since
2004, well, you knew for a good, long time that
House of Power was buying more circuit breakers
than needed for the load centers they were
purchasing, correct? . . .
A.
We knew that House of Power was buying excess
circuit breakers. We went to them and asked them
what was going on, and they offered explanations
that we relied upon.
Q.
. . . And how long did you do that?
52
Id. at 8 ¶ 18. See also Defendant’s Response to Square D
Company’s Reply in Support of Its Motion for Partial Summary
Judgment, Docket Entry No. 54, pp. 3-4 ¶¶ 10-15.
-27-
A.
For four years.
Q.
And at any time before the end of 2008, did you
ever know that they were doing something with those
circuit breakers other than what they told you they
were doing?
A.
Yes.
Q.
When did that happen?
A.
That happened in the Breakers Unlimited lawsuit.
Q.
And when would that have been?
A.
2007, sometime in 2007.
Q.
So, from 2007 onwards, you continued to sell at the
special price, knowing that House of Power was
using the circuit breakers in a manner that they
were not telling you about, correct?
A.
On advice of our attorney, we --
Q.
No, don’t tell me that.
A.
It’s the truth.
Q.
Okay.
A.
Our attorney advised us.
Q.
Again, I don’t necessarily think I want to hear
that part.
. . .
Q.
You can just answer the question, you either did or
you didn’t continue to -- and I’m not going to ask
you why.
A.
Yes, we did
attorney.53
53
continue,
on
the
advice
of
our
Garner Deposition, Exhibit C to Square D’s Motion, pp. 93:16-
95:4.
-28-
Waiver consists of full knowledge of a known right and
intentional relinquishment of that known right.
See United States
Fidelity and Guaranty Co. v. Bimco Iron and Metal Corp., 464 S.W.2d
353, 357 (Tex. 1971) (citing Massachusetts Bonding & Ins. Co. v.
Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex. 1967) (“Waiver
has been frequently defined as an intentional relinquishment of a
known right or intentional conduct inconsistent with claiming
it.”)). See also Addicks Services, Inc. v. GGP-Bridgeland, LP, 596
F.3d 286, 298 (5th Cir. 2010) (quoting Sun Exploration & Production
Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987)).
The court is not
persuaded that Garner’s testimony constitutes evidence from which
a reasonable fact-finder could conclude that Square D intentionally
relinquished a known right to enforce HOP’s promise not to resell
Square D products. On the contrary, Garner testified that Square D
began watching HOP’s purchases in 2004 because Square D knew that
HOP was purchasing an excess amount of breakers.
Garner also
testified that Square D went to HOP and asked HOP what was going
on, and that HOP offered explanations for the excess purchases on
which Square D relied. Garner testified that in 2007 when Square D
learned through another lawsuit that HOP was selling Square D
products to Breakers Unlimited, on advice of counsel Square D
continued to provide special pricing for HOP purchases.
HOP has
not cited a case in which under analogous facts a court has
determined that the conduct Garner described evidences an intent to
relinquish a known right to enforce a contract.
-29-
Moreover, e-mails
that Square D’s Leslie McFarland exchanged with HOP’s Chlouber in
February of 2008 undisputedly establish that Square D never stopped
asking HOP to explain what appeared to be excess product purchases,
and that instead of admitting that HOP was reselling Square D
products, Chlouber responded to Leslie McFarland’s inquiry with
business-related explanations.54 For these reasons the court is not
persuaded that HOP has cited any evidence from which a reasonable
fact-finder could conclude that Square D intentionally relinquished
its right to enforce HOP’s promise to not resell Square D products.
Accordingly, the court concludes that HOP has failed to raise a
genuine issue of material fact for trial on its affirmative defense
of waiver.
C.
HOP’s Request for a Hearing is Moot
Because the facts and legal arguments are adequately presented
in the materials before the court, the court has concluded that
oral argument would not aid the decisional process.
Accordingly,
House of Power Electric, L.C.’s Request for Hearing (Docket Entry
No. 52) will be denied as moot.
IV.
Conclusions and Order
For the reasons explained above, Square D Company’s Motion for
Partial Summary Judgment (Docket Entry No. 48) is GRANTED. Because
54
See Exhibit F to Square D’s Motion, Docket Entry No. 48,
February 11-13, 2008, e-mail exchange between Square D’s Leslie
McFarland and HOP’s Albert Chlouber.
-30-
the court has been able to resolve Square D’s motion for partial
summary judgment without a hearing, House of Power Electric, LC’s
Request for Hearing (Docket Entry No. 52) is DENIED as MOOT.
SIGNED at Houston, Texas, on this 7th day of December, 2011.
SIM LAKE
UNITED STATES DISTRICT JUDGE
-31-
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