Unitech Energy Tools Limited v. Nabors Drilling Technologies USA, Inc d/b/a Canrig Drilling Technology
Filing
67
MEMORANDUM OPINION AND ORDER granting in part and denying in part 50 MOTION for Summary Judgment, granting in part and denying in part 57 MOTION to Exclude Evidence or Testimony (Scheduling Conference set for 7/31/2020 at 02:00 PM in Courtroom 9B before Judge Sim Lake.) (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 1 of 30
United States District Court
Southern District of Texas
ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
UNITECH ENERGY TOOLS LIMITED,
Plaintiff,
§
§
§
§
§
NABORS DRILLING TECHNOLOGIES
§
USA, INC. d/b/a CANRIG DRILLING §
I
David J. Bradley, Clerk
§
v.
TECHNOLOGY
July 23, 2020
LTD. '
CIVIL ACTION NO. H-18-0852
§
§
Defendant.
§
MEMORANDUM OPINION AND ORDER
Plaintiff Unitech Energy Tools Limited ("Unitech") asserts
breach of contract, promissory estoppel, and quantum meruit claims
against defendant Nabors Drilling Technologies USA,
Canrig Drilling Technology, Ltd.
("Canrig"). 1
Inc. d/b/a
Pending before the
court are Defendant's Motion for Final Summary Judgment ("Canrig's
MSJ")
(Docket Entry No.
Evidence
or
Testimony
50) and Defendant's Motion to Exclude
Contradicting
Plaintiff's
Corporate
Representative Testimony ("Canrig's Motion to Exclude") (Docket
Entry No. 57).
For the reasons explained below, the court will
grant in part and deny in part Canrig's motions.
Plaintiff, Unitech Energy Tools Limited's Original Complaint
("Complaint"), Docket Entry No. 1, pp. 6-9. All page numbers for
docket entries in the record refer to the pagination inserted at
the top of the page by the court's electronic filing system,
1
CM/ECF.
Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 2 of 30
I.
Case Background
Unitech is a supplier of drilling equipment parts based in
China. 2
Canrig is a manufacturer of complex automatic drilling
equipment and rig components for use in the oil and gas industry.
In 2013 Unitech began providing machining services to Canrig. 3
agreed between the parties,
materials
("forgings")
spindles,
and
As
Canrig supplied Unitech with raw
that Unitech then machined into quills,
sleeves
("Parts")
and
returned
to
Canrig. 4
Eventually, Canrig asked Unitech if it could supply turnkey Parts,
the
difference
being
that
Unitech
would
be
responsible
for
purchasing the forgings. 5
Unitech's corporate representative testified that the parties
entered into a verbal agreement with the following initial terms:
(1) Unitech was responsible for purchasing the forgings on behalf
of Canrig;
(2)
Canrig would pick the forging suppliers Unitech was
to use, dictate the terms and conditions of Unitech's purchases of
forgings with those suppliers, and be responsible for quality and
inspection work regarding the forgings;
(3)
Unitech did not have to
pay the suppliers until Canrig paid Unitech for the finished Parts;
Dennis Joe Deposition Transcript, Exhibit
Docket Entry No. 50-4, p. 2.
2
Purchase Orders,
No. 51, p. 1.
3
Exhibit
1
5
Id.
-2-
to Canrig's MSJ,
to Canrig's MSJ,
Dennis Joe Deposition Transcript, Exhibit
Docket Entry No. 50-4, p. 2.
4
4
4
Docket Entry
to Canrig's MSJ,
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(4) Canrig would initially accept twenty finished Parts per month
and would eventually accept forty finished Parts per month; and
( 5)
the agreement lasted forever unless both parties agreed to
terminate it. 6
The parties exchanged emails evidencing this
initial agreement, but the emails have been lost due to Canrig's
document retention policy. 7
The initial agreement was modified
once to increase the number of Parts Canrig would eventually accept
from forty to eighty. 8
Canrig was aware that Unitech would have to
purchase new equipment in order to manufacture forty or more Parts
per month. 9
There was a lead time of a year to eighteen months between the
time Unitech obtained the forgings in China and delivered the
finished product to Canrig in Houston. 10 To better account for this
time-lag, Canrig would provide Unitech with rolling forecasts a
year to eighteen months in advance of its expected demand for
Parts. 11
Unitech would purchase forgings in accordance with the
Id. at 5-6, 8-9, 15. The parties dispute additional terms of
the initial agreement as discussed below.
6
Id. at 6; Counsel Emails, Exhibit 7 to Plaintiff's Motion for
Sanctions for Spoilation of Evidence ("Unitech's Motion for
Sanctions"), Docket Entry No. 30-7, pp. 2-3.
7
Dennis Joe Deposition Transcript, Exhibit
Docket Entry No. 50-4, p. 6.
8
4
to Canrig's MSJ,
Id. at 5; John Schultz Deposition Transcript, Exhibit 3 to
Canrig's MSJ, Docket Entry No. 50-3, p. 20.
9
Doug Campbell Deposition Transcript, Exhibit
MSJ, Docket Entry No. 50-8, p. 4.
10
11
Id.
-3-
8
to Canrig's
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parties' initial agreement to meet Canrig's forecasted demand. 12
The parties agreed to a price for the forecasted Parts when the
forecast was provided. 13
Approximately three months prior to
delivery, Canrig would issue a purchase order for the amount of
finished
Parts
it
needed. 14
The
parties
operated
with
the
understanding that if Canrig's forecasted demand exceeded its
actual demand, Canrig would purchase any finished Parts and the
parties would negotiate a resolution regarding any forgings or
partially finished Parts. 15
In 2014 and 2015 Canrig stopped payment on all outstanding
purchase orders with Unitech and refused to pay for any forgings
Unitech had already purchased based on Canrig's forecasts . 16 Canrig
also refused to pay for the additional equipment Unitech purchased
in anticipation of Canrig's increased future demand of eighty Parts
per month. 17
On March 19, 2018, Unitech filed this action seeking damages
for the new equipment, forgings it had purchased based on Canrig's
forecasting,
Parts
in
various
stages
of
completion,
unpaid
12Id.
15
Id. at 4-5.
Id. at 20-21; Affidavit of Darren Lesage, Exhibit 2 to
Unitech's Motion for Sanctions, Docket Entry No. 30-2, pp. 2-3.
16
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invoices, and an amount Unitech paid one of its suppliers as a
result of a lawsuit in China.18
On February 27, 2020, Canrig filed
its Motion for Summary Judgment.19
On March 18,
2020, Unitech
responded.20 On March 25, 2020, Canrig replied and filed its Motion
to Exclude.21
On April 14, 2020, Unitech responded to the Motion
to Exclude.22
On April 21, 2020, Canrig replied.23
II.
Standard of Review
Summary judgment is appropriate if the movant establishes that
there is no genuine dispute about any material fact and the movant
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
Disputes about material facts are genuine "if the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party."
18
19
Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510
Complaint, Docket Entry No. 1, pp. 9-10.
Canrig's MSJ, Docket Entry No. 50.
Plaintiff's Response to Defendant's Motion for Summary
Judgment ("Unitech's Response to MSJ"), Docket Entry No. 53.
20
canrig's Motion to Exclude, Docket Entry No. 57; Defendant's
Objections to Plaintiff's Summary Judgment Evidence and Reply in
Support of Defendant's Motion for Summary Judgment ("Canrig's Reply
in Support of MSJ"), Docket Entry No. 58.
21
Plaintiff's Response to Defendant's Motion to Exclude
Evidence or Testimony Contradicting Plaintiff's Corporate
Representative Testimony ("Unitech's Response to Motion to
Exclude"), Docket Entry No. 61.
22
Canrig's Reply in Support of Defendant's Motion to Exclude
Evidence ("Canrig's Reply in Support of Motion to Exclude"), Docket
Entry No. 62.
23
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(1986).
The moving party is entitled to judgment as a matter of
law if "the nonmoving party has failed to make a sufficient showing
on an essential element of her case with respect to which she has
the burden of proof."
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 bane) (per curiam) (quoting
Celotex, 106 s. Ct. at 2553).
"If the moving party fails to meet
this initial burden, the motion must be denied, regardless of the
nonmovant' s response."
Id. If the moving party meets this burden,
Rule 56 © 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�
The nonmovant
"must do more than simply show that there is some metaphysical
doubt as to the material facts."
Matsushita Electric Industrial
Co., Ltd. v. Zenith Radio Corp., 106 S. Ct. 1348, 1356 (1986).
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).
The court resolves factual controversies in favor of the nonmovant,
"but only when there is an actual controversy, that is, when both
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parties have submitted evidence of contradictory facts."
Little,
37 F.3d at 1075.
III.
A.
Analysis24
Scope of Unitech's Evidence
Canrig
argues
that
Unitech
should
be
precluded
from
introducing any evidence that contradicts the testimony of its
corporate representative, Dennis Joe ("Joe"). Specifically, Canrig
argues that Unitech should be held to the following admissions
allegedly made by Joe:
(1) there was agreement between the parties
with four terms; (2) the alleged agreement was modified on one
occasion, to increase quantity from twenty to forty Parts each
month; (3) Unitech did not verify the extent of Canrig's agents'
purported authority;
(4) Unitech made some profit off
Parts
purchased by Canrig, but cannot quantify the profit; (5) Unitech
cannot quantify its damages and has not had to pay for forgings;
and (6) Unitech cannot quantify its damages regarding the new
equipment it purchased.25
Under Federal Rule of Civil Procedure 30(b)(6), in a notice or
subpoena a litigant "may name as the deponent a public or private
corporation, a partnership, an association, a governmental agency,
or other entity and must describe with reasonable particularity the
The court assumes Texas law governs this dispute as the
parties both favorably cite to Texas authority.
24
25
Canrig's Motion to Exclude, Docket Entry No. 57, pp. 6-11.
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matters
for
examination.
The
designate one or more officers,
. . . ."
named
organization
directors,
Fed. R. Civ. P. 30(b)(6).
must
then
or managing agents
The designated persons "must
testify about information known or reasonably available to the
organization."
Id.
"[T]he deponent must make a conscientious good-faith endeavor
to designate the persons having knowledge of the matters sought by
the party noticing the deposition and to prepare those persons in
order that they can answer fully, completely,
unevasively, the
questions posed as to the relevant subject matters."
Brazos River
Authority v. GE Ionics, Inc., 469 F.3d 416, 433 (5th Cir. 2006)
(internal alterations and quotation marks omitted) (quoting Bank of
New York v. Meridien BIAO Bank Tanzania Ltd., 171 F.R.D. 135, 151
(S.D.N.Y.
1997)).
"When a corporation produces an employee
pursuant to a rule 30(b)(6) notice, it represents that the employee
has the authority to speak on behalf of the corporation with
respect to the areas within the notice of deposition."
Id.
These
principles bind a party to its corporate representative's answers
and prohibit a party from later introducing evidence on a topic
where
its
deposition.
representative
disclaimed
Super Future Eg:uities I
knowledge
during
the
Inc. v. Wells Fargo Bank
Minnesota, N.A., Civil Action No. 3:06-CV-0271-B, 2007 WL 4410370,
at *8 (N.D. Tex. Dec. 14, 2007).
The scope of a Rule 30(b)(6) deposition is not limited to the
topics listed in the notice.
See Rivas v. Greyhound Lines, Inc.,
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 9 of 30
EP-14-CV-166-DB, 2015 WL 13710124, at *4 (W.D. Tex. April 27, 2015).
While the designated corporate representative is not required to be
prepared to answer questions outside the scope of the Rule 30(b) (6)
notice, he "cannot use Rule 30(b) (6) as a shield if he or she in
fact knows the answers to those questions."
Id. at *6.
On September 30, 2019, Canrig served Unitech with a notice of
Rule 30(b) (6)
deposition.26
Unitech produced Joe to testify
regarding all matters designated in the Rule 30(b) (6) notice.27
1.
Number of Terms in the Agreement
In its Response to the Canrig's MSJ, Unitech alleges that the
agreement between the parties consisted of the following nine
terms:
[1]
Canrig and Unitech agreed to a "partnership" where
Unitech would supply and manufacture quills,
spindles, and outer sleeves for Canrig's top drive
business;
[2]
Canrig selected, qualified, and "imposed" the raw
material supplier on Unitech;
[3]
Unitech would purchase directly from these
suppliers and be reimbursed at a late[r] date from
Canrig;
[4]
If Unitech's first articles passed Canrig's
inspections, Canrig would begin ramping up to
eventually buying 40 pieces per month;
Amended Notice of Rule 30(b) (6) Deposition of Corporate
Representative ( "Rule 3 O (b) (6) Notice") , Exhibit 1 to Canrig's
Motion to Exclude, Docket Entry No. 57-1, p. 3.
26
Dennis Joe Deposition Transcript, Exhibit 2 to Canrig's
Motion to Exclude, Docket Entry No. 57-2, p. 2.
27
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[5]
Canrig would issue a "rolling forecast" - usually
in [the] form of a spreadsheet - and Unitech would
purchase raw materials based on this forecast 12 to
18-months [in] advance in order to meet the
anticipated deadline;
[6]
Price was set at the time the forecast was issued;
[7]
Within three months of the delivery date, Canrig
would issue a purchase order "against" the previous
"rolling forecast";
[8]
If the "rolling forecast" overestimated the need
against the purchase order, Canrig would reach "a
mutually agreeable resolution" with Unitech on what
it owed; and
[9]
The Canrig-Unitech "agreement" or "partnership"
would continue until one or both of the parties
decided to end it and a review of the "partnership"
would occur annually. 28
Canrig agrees that Joe's testimony supports Unitech's claims
on terms two, three, four, and eight, but argues that Unitech is
attempting to introduce evidence contradicting Joe's testimony
regarding the other five terms.
Canrig designated "[a]ny alleged
contracts or agreements between Canrig and Unitech, including the
purported contract that is the subject of this lawsuit" as a matter
for examination in its Rule 30(b)
(6)
Notice. 29
Thus, the terms of
the initial agreement between the parties were within the scope of
the Rule 30(b)
28
(6)
deposition.
Unitech's Response to MSJ, Docket Entry No. 53, p. 11.
Rule 30(b) (6) Notice, Exhibit 1 to
Exclude, Docket Entry No. 57-1, p. 2 #(4)
29
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Canrig's Motion to
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At his deposition, Joe was asked about the "exact agreement"
Joe testified
reached at the outset between Unitech and Canrig. 30
that initially Canrig supplied the forgings and Unitech would
machine the forgings, charge Canrig for the machining, and return
the finished Parts to Canrig. 31 Eventually, Canrig asked if Unitech
According to Joe,
could supply turnkey Parts. 32
initially
agreed
to
the
following
terms:
the parties
Unitech
( 1)
was
responsible for purchasing the forgings on behalf of Canrig;
(2) Canrig would pick the suppliers Unitech was to use, dictate the
terms and conditions of Unitech's purchases with those suppliers,
and
be
responsible
for
quality
regarding the forgings;
suppliers until
( 3)
control
and
inspection
work
Unitech did not have to pay the
Canrig paid Unitech for the finished
Parts;
(4) Canrig would initially accept twenty finished Parts per month
and would eventually accept forty finished Parts per month; and
(5)
the agreement lasted forever unless both parties agreed to
terminate it. 33
Unitech
would
Joe also testified that Canrig "understood" that
have to
invest
anticipated order quantities. 34
in
new
equipment
meet
the
Joe testified that there were no
Dennis Joe Deposition Transcript, Exhibit
Motion to Exclude, Docket Entry No. 57-2, p. 5.
30
31
Id.
33
Id.
to
at 5-6, 8-9, 15.
-11-
2
to Canrig' s
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other
terms
in
the
initial
agreement
between
the
parties. 35
Finally, Joe testified that the initial agreement was modified once
to increase the number of Parts Canrig would eventually accept from
forty to eighty. 36
In its Motion to Exclude, Canrig argues that Unitech should be
limited to Joe's testimony regarding the terms of the agreement and
not allowed to introduce evidence on all nine terms argued in
Unitech's Response to MSJ. 37
Unitech takes a more expansive view
of Joe's deposition testimony and argues that during the course of
the deposition Joe discussed all nine alleged contract terms. 38
Joe testified that pursuant to the business relationship
between the parties Canrig would buy quills, spindles, and sleeves
from Unitech. 39
Canrig argues that Joe did not testify that there
was a partnership as stated in the first term enumerated in
Unitech's Response to MSJ.
A partnership is generally defined as
"an association of two or more persons to carry on a business for
profit as owners."
NMRO Holdings, LLC v. Williams, No. 01-16-
00816-CV, 2017 WL 4782793, at *4 (Tex. App.-Houston [1st Dist.]
35
Id. at 6.
37
Canrig's Motion to Exclude, Docket Entry No. 57, pp. 6-7.
Unitech's Response to Motion to Exclude, Docket Entry No. 61,
pp. 4-8.
38
Dennis Joe Deposition Transcript, Exhibit 2 to Canrig's
Motion to Exclude, Docket Entry No. 57-2, p. 2.
39
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Oct. 24, 2017, no pet.) (internal quotation marks omitted) (quoting
Tex. Bus. Orgs. Code Ann. § 152.0Sl(b)).
(a)
Factors indicating that persons have created a
partnership include the persons':
(1)
receipt or right to receive a share of profits
of the business;
(2)
expression of an intent to be partners in the
business;
(3)
participation or right
control of the business;
(4)
agreement to share or sharing:
to
participate
in
(A)
(B)
(5)
losses of the business; or
liability for claims by third parties
against the business; and
agreement to contribute or contributing money
or property to the business.
Tex. Bus. Orgs. Code § 152.052(a).
Joe did not testify that the
parties were partners or to the existence of any of the partnership
factors.
Unitech is therefore precluded from introducing evidence
that the parties entered into a partnership.
Unitech supports the
fifth
alleged term
that
rolling
forecasts were issued on which Unitech based its forgings purchases
- by citing to three portions of Joe's testimony.40
In this
testimony, Joe vaguely mentions that rolling forecasts were used,
but never identified that they were a part of the parties' initial
40
p. 7.
Unitech's Response to Motion to Exclude, Docket Entry No. 61,
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agreement. 41 Unitech supports the sixth alleged term, that the price
was set at the time a forecast was issued, with citation to the same
testimony.42
This testimony does not state that the parties
initially agreed to set a price "at the time the forecast was
issued."
Unitech is precluded from introducing evidence that these
terms were a part of the initial agreement between the parties.
Unitech cites one portion of Joe's testimony to support the
seventh alleged term,
that Canrig would issue purchase orders
within three months of the forecasted Parts delivery date. 43
This
portion of Joe's testimony discussed that the lead time to have a
piece of equipment ordered and delivered was between three months
and one year. 44 This testimony does not establish that the seventh
alleged term was a part of the parties' initial agreement. Unitech
may not introduce evidence that the seventh alleged contract term
was a part of the initial agreement between the parties.
Regarding the ninth alleged term, Unitech cites to additional
testimony that the agreement between the parties was in effect
until both sides agreed to terminate it. 45
Yet, in its summary
Dennis Joe Deposition Transcript, Exhibit 2 to Canrig's
Motion to Exclude, Docket Entry No. 57-2, pp. 22-23, 45.
41
Unitech's Response to Motion to Exclude, Docket Entry No. 61,
43
p. 7.
42
Id. at 7-8.
Dennis Joe Deposition Transcript, Exhibit 2 to Canrig' s
Motion to Exclude, Docket Entry No. 57-2, p. 44.
44
45
Id. at 14-15.
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judgment response,
Unitech argues that the parties' agreement
lasted until "one or both of the parties decided to end it and a
review of the 'partnership' would occur annually. " 46 This assertion
is directly belied by Joe's testimony.
Terms two, three, four, and eight were sufficiently supported
by Unitech's corporate representative as being a part of the
parties' initial agreement.
Unitech is prohibited from introducing
evidence that the parties entered into a partnership agreement as
alleged in the first term.
Unitech's corporate representative
testified that, while they may have been a part of the parties'
course of dealing, terms five through seven were not a part of the
parties' initial agreement.
Unitech is limited to that testimony.
Regarding the ninth term, Unitech is confined to its corporate
representative's testimony that the agreement lasted until both
Thus, the ninth term, as alleged,
parties agreed to terminate it.
is inconsistent with Joe's testimony and must be disregarded.
2.
Agreement Modification
In its Motion to Exclude Canrig argues that Unitech should be
held to Joe's testimony that the agreement was modified once to
increase quantity from twenty to forty. 47
As discussed above, Joe
testified that the parties' agreement was modified once to increase
quantity from forty to eighty Parts per month.
The court concludes
46
Unitech's Response to MSJ, Docket Entry No. 53, p. 11.
47
Canrig's Motion to Exclude, Docket Entry No. 57, p. 7.
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that the initial agreement was modified once consistent with Joe's
testimony.
3.
Canrig's Agents' Authority
Canrig argues that Unitech should be held to its testimony
that it did not verify the extent of Canrig's agents' purported
authority. 48
Unitech argues that this topic was outside the scope
of the Rule 30(b) (6) Notice. 49
Canrig responds that its agents'
authority was within the scope of the Rule 30(b) (6)
because it designated
deposition
"[a] ny alleged contracts or agreements
between Canrig and Unitech, including the purported contract that
is the subject of this lawsuit" as a matter for examination in its
Rule
30(b) (6)
Notice. 50
When
asked,
Joe
testified
that
he
understood Canrig's Agents' authority "by virtue of [their] title
and position within Canrig. " 51
Joe also testified that Unitech did
not inquire of Canrig what authority its agents had. 52
potentially outside the scope of the Rule 30(b)
(6)
While
Notice, Joe gave
definitive answers on these subjects, and Unitech is bound by those
answers.
4sid.
Unitech's Response to Motion to Exclude, Docket Entry No. 61,
pp. 10-11.
49
Rule 30(b) (6) Notice, Exhibit
Exclude, Docket Entry No. 57-1, p. 2.
50
1
to
Canrig's Motion to
Dennis Joe Deposition Transcript, Exhibit 2 to Canrig's
Motion to Exclude, Docket Entry No. 57-2, pp. 4-5.
51
52
Id. at 5.
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4.
Profit on Parts Purchased by Canrig
Canrig acknowledges that the amount of profit made on finished
Parts
purchased
by
Canrig
Rule 30(b) (6) Notice. 53
was
outside
the
scope
of
its
Thus, Joe's testimony that he did not know
the number of Parts purchased by Canrig or the amount of profit
made from those purchases does not prevent Unitech from introducing
evidence relevant to those inquiries.
5.
Forgings Damages
During the Rule 30(b) (6) deposition, Joe allegedly did not
know the amount of forgings purchased, the price Unitech paid for
the forgings, or the residual value of the forgings.
were not enumerated in the Rule 30(b) (6) Notice.
These topics
Thus, Unitech is
not precluded from introducing evidence regarding these topics.
6
New Equipment Damages
Because the court has granted summary judgment as to Unitech's
claims for damages relating to its purchase of new equipment, this
argument is moot.
7.
In
Additional Objections
its
Reply
in
Support
of
MSJ,
Canrig
objects
to:
(1) evidence contradicting Joe's testimony; (2) facts stated by
Canrig's Reply in Support of Motion to Exclude, Docket Entry
No. 62, p. 6.
53
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Unitech's expert in her unsworn report;
and
(3)
lay witness
opinions about the merits of Unitech's claims. 54
Canrig's objections to evidence contradicting Joe's testimony
covered the same issues that Canrig raised in its Motion to
Exclude, which the court has addressed above.
Moreover, the court
did not consider any factual information that was only established
by Unitech's expert's report or any lay witness opinions about the
merits of Unitech's lawsuit.
Canrig's objections are DENIED AS
MOOT.
B.
Breach of Contract
Canrig argues that there was no contract and, if there was, the
contract is unenforceable. 55
Canrig also argues that the damages
Unitech seeks are not available for its breach of contract claim. 56
1.
Existence of a Contract
"A contract for sale of goods may be made in any manner
sufficient to show agreement, including conduct by both parties
which recognizes the existence of such a contract."
Com. Code
§ 2. 204
(a) .
Tex. Bus.
&
"Even though one or more terms are left open
a contract for sale does not fail for indefiniteness if the parties
have intended to make a contract and there is a reasonably certain
Canrig's Reply in Support of MSJ,
pp. 7-16.
54
Docket Entry No.
55
Canrig's MSJ, Docket Entry No. 50, pp. 13-18.
56
Id. at 18.
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58,
Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 19 of 30
basis for giving an appropriate remedy."
Tex. Bus.
&
Corn. Code
§2.204(c).
An express contract "arises when its terms are stated by the
parties."
Harrison v. Williams Dental Group, P.C., 140 S.W.3d 912,
916 (Tex. App.-Dallas 2004, no pet.). "An implied-in-fact contract
'arises from the acts and conduct of the parties, it being implied
from the facts and circumstances that there was a mutual intention
to contract."'
Stewart Title Guaranty Co. v. Mims, 405 S.W.3d 319,
338 (Tex. App.-Dallas 2013, no pet.) (quoting Haws
&
Garrett Gen.
Contractors, Inc. v. Garbett Bros. Welding Co., 480 S.W.2d 607, 609
(Tex. 1972)). When considering an implied-in-fact contract, "[t] he
court must look to the conduct of the parties to determine the
terms of the contract on which the minds of the parties met."
Stewart Title, 405 S.W.3d at 339 (citing Parker Drilling Co. v.
Romfor Supply Co.,
316 S.W.3d 68,
75 (Tex. App.-Houston [14th
Dist.] 2010, pet. denied)).
Here, the initial agreement between the parties, limited to
the terms discussed above, is not sufficient to provide a basis for
Unitech' s breach of contract claim because the agreement lacks
certain essential elements of a contract.
See Document Imaging,
Inc. v. IPRO, Inc., 952 F. Supp. 462, 468 (S.D. Tex. 1996) (stating
that, in Texas, price is an essential element of a contract between
the parties). However, the parties' conduct following the initial
agreement suggests that an implied-in-fact contract arose during
the course of their business relationship.
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 20 of 30
In the regular course of their business relationship, Canrig
issued forecasts to Unitech, which then purchased forgings in order
to deliver the forecasted number of finished Parts.
The price
Canrig paid for the Parts was set at the time it issued forecasts
to Unitech.
Additionally,
Unitech ordered the forgings from
suppliers picked by Canrig and on terms and conditions dictated by
Canrig.
Canrig was also responsible for quality and inspection
work regarding the forgings.
Finally, the parties operated with
the understanding that if Canrig's forecasted demand exceeded its
actual demand, Canrig would purchase any finished Parts; and the
parties would reach an appropriate resolution as to the forgings or
partially finished Parts.
Upon Canrig's provision of a forecast,
the parties consistently operated as though a contract was in place
with respect to the Parts Canrig forecasted.
A reasonable jury could infer from these facts that upon
Canrig's provision of a forecast, a contract was in place between
the parties whereby Unitech would deliver the amount of forecasted
Parts to Canrig on the appropriate date, and Canrig would issue
purchase orders for those Parts or:
(1) purchase any Parts that
were completed based on forecasts issued by Canrig; (2) reimburse
Unitech for any partially completed Parts that Unitech had begun
machining based on Canrig's forecasts; and (3) reimburse Unitech
for any forgings it had purchased based on Canrig's forecasts.
As to the new equipment purchased by Unitech, there is no
summary judgment evidence suggesting that the parties came to a
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 21 of 30
meeting of the minds whereby Canrig would reimburse Unitech for the
new equipment it purchased if Canrig did not order enough Parts to
justify that purchase.
The court will grant summary judgment on
Unitech's breach of contract claim to the extent it relates to the
purchase of new equipment.
2.
Enforceability of the Contract
Canrig argues that the alleged contract is unenforceable
because it is defeated by merger clauses in the parties' purchase
orders, does not comply with the statute of frauds,
and is an
agreement to agree. 57
i.
Merger Clauses
The purchase orders issued by Canrig contained the following
clause:
This Purchase Order constitutes the entire agreement of
the parties with respect to this transaction except as to
additional product quality and performance representa
tions of [Unitech]. [Canrig] objects to and shall not be
bound by any past or future terms and conditions not set
forth herein, including any additional or inconsistent
terms shown on [Unitech] 's sales confirmation, shipping
documents,
or
invoices,
and
any
additions
or
inconsistencies therein with the provisions hereof shall
be null and void. 58
The parties' dispute is over forgings and Parts for which purchase
orders were never issued.
Thus, the merger clauses in the issued
purchase orders do not apply to the dispute.
57
Canrig's MSJ, Docket Entry No. 50, pp. 14-15.
Purchase Orders,
No. 51, p. 5 1 1.
58
Exhibit 1 to Canrig's MSJ, Docket Entry
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 22 of 30
ii.
Statute of Frauds
Canrig argues that the statute of frauds renders the alleged
contract between the parties unenforceable. 59
Unitech argues that
the statute of frauds does not apply or that the contract falls
under an exception to the statute of frauds.
The statute of frauds
provides that:
a contract for the sale of goods for the price of $500 or
more is not enforceable by way of action or defense
unless there is some writing sufficient to indicate that
a contract for sale has been made between the parties and
signed by the party against whom enforcement is sought or
by his authorized agent or broker.
Tex. Bus.
&
Com. Code§ 2.201(a).
An exception to this rule occurs
if the goods are to be specially manufactured for the
buyer and are not suitable for sale to others in the
ordinary course of the seller's business and the seller,
before notice of repudiation is received and under
circumstances which reasonably indicate that the goods
are for the buyer, has made either a substantial
beginning of their manufacture or commitments for their
procurement
Tex. Bus.
&
Com. Code § 2. 201(c)(1)
Additionally, "an agreement
which is not to be performed within one year from the date of
making the agreement" is unenforceable if it is not in writing.
Tex. Bus.
&
Com. Code § 26. 01(b)(6).
It is undisputed that the Parts had sale prices greater than
$500.
However,
the Parts arguably fall under the "specially
manufactured" exception because:
(1) the Parts were proprietary
and only fit in Canrig's equipment;
59
(2) Unitech was bound by
Canrig's MSJ, Docket Entry No. 50, pp. 10-11.
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 23 of 30
nondisclosure agreements regarding the Parts; and (3) Unitech was
prohibited from selling the Parts to a third party. 60
statute
of
frauds
does
not
render
the
alleged
Thus, the
contract
unenforceable for the forgings already procured and the Parts fully
or partially completed.
However, to the extent Unitech is arguing
that the contract is enforceable beyond those Parts and forgings,
the statute of frauds renders the contract unenforceable. 61
"The statute of frauds in section 26.0l(b) (6) does not apply
when
'the parties do not fix the time of performance and the
agreement itself does not indicate that it cannot be performed
within one year. ' "
Fuller v. Wholesale Electric Supply Co. of
Houston. Inc., No. 14-18-00328-CV, 2020 WL 1528041, at *4 (Tex.
App.-Houston
[14th Dist.]
March 31, 2020, no pet. h.) (quoting
Niday v. Niday, 643 S.W.2d 919, 920 (Tex. 1982)).
The evidence
does not conclusively establish that delivery of completed Parts
could not have been performed within one year of the forecasts
issued by Canrig.
Canrig has not shown that the statute of frauds
bars Unitech's breach of contract claim for forgings already
procured or Parts fully or partially completed based on Canrig's
forecasts.
Doug Campbell Deposition Transcript, Exhibit 1 to Unitech's
Motion for Sanctions, Docket Entry No. 30-1, p. 69.
60
The court assumes this is Unitech's argument for why it is
entitled to damages for the new equipment it purchased.
61
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 24 of 30
iii.
Agreement to Agree
Canrig argues that the indefinite termination provision of the
alleged contract is unenforceable because it is an agreement to
agree. 62
the
As discussed above, the contract is unenforceable beyond
forgings
completed.
3
already
procured
and
Parts
partially
or
fully
Thus, the court need not reach this argument.
Damages Sought
Canrig argues that Unitech seeks improper remedies for its
breach of contract claim.
i.
Damages for Parts Not Ordered
Canrig argues that Unitech cannot seek damages for Parts for
which Canrig did not issue purchase orders. 63
The court is not
persuaded by this argument because, as discussed above, there is
sufficient evidence in the record for a jury to find that Canrig's
obligation to perform arose when it issued forecasts.
ii.
Evidence of Out-Of-Pocket Damages
Canrig argues that Unitech's breach of contract claim should
be dismissed because Unitech does not have evidence of the residual
value of the unused forgings. 64
Canrig fails to cite any legal
support stating that a lack of evidence of an offset to a loss
62
Canrig's MSJ, Docket Entry No. 50, p. 16.
63
Id. at 19-22.
64
Id. at 22.
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 25 of 30
defeats
liability.
This
is
an
argument
more
appropriately
addressed on cross-examination and does not defeat plaintiff's
claim.
iii.
Consequential Damages
Canrig argues that Unitech's damages for unused forgings are
unrecoverable consequential damages.65
"Consequential damages are
those damages that 'result naturally, but not necessarily, from the
defendant's wrongful acts.'"
Stuart v. Bayless, 964 S.W.2d 920,
921 (Tex. 1998) (quoting Arthur Andersen
Corp., 945 S.W.2d 812, 816 (Tex. 1997))
&
Co. v. Perry Equip.
Consequential damages
"are not recoverable unless the parties contemplated at the time
they made the contract that such damages would be a probable result
of the breach."
Stuart, 964 S.W.2d at 921. Canrig argues that any
damages for unused forgings were not foreseeable because Unitech's
contracts with the suppliers specified that Unitech would not have
to pay for the forgings until Canrig paid Unitech.66
The summary judgment record contains evidence that the parties
anticipated that if forecasted demand exceeded actual demand there
would be a future reconciliation.
There is also evidence in the
record that Unitech's contracts with its suppliers did not require
it to pay the suppliers until Canrig paid Unitech.
The summary
judgment evidence creates a factual issue regarding whether the
65
Id. at 23.
66_Id.
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 26 of 30
parties contemplated damages for unused forgings at the time of
their agreement.
iv.
Settlement Damages
There is evidence in the record that Unitech settled a lawsuit
filed in China by one of its suppliers.
Unitech purportedly seeks
damages for this settlement.
Canrig argues that these damages are
not causally linked to it.
Canrig did not cite any authority
precluding damages for the settlement or appropriately establish
the factual underpinnings of the settlement.
As Canrig has failed
to meet its summary judgment burden on this issue the court rejects
Canrig's argument.
c.
Promissory Estoppel
Canrig argues that Unitech's promissory estoppel claim is
barred by the statute of frauds and the parties' purchase orders. 67
"The elements of a promissory estoppel claim are (1) a promise,
(2) foreseeability of reliance thereon by the promiser,
(3) substantial detrimental reliance by the promisee."
and
Trevino
&
Associates Mechanical. L.P. v. Frost National Bank, 400 S.W.3d 139,
146 (Tex. App.-Dallas 2013, no pet.).
1.
Statute of Frauds
"When the statute of frauds applies, promissory estoppel is
available only if the alleged oral promise is a promise to sign an
67
Id. at 26-27.
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 27 of 30
existing document that satisfies the statute of frauds."
v.
Bank of America,
N.A.,
Civil Action No.
Carrillo
H-12-3096,
2013
WL 1558320, at *8 (S.D. Tex. April 11, 2013) (citing Bank of Texas,
N.A. v. Gaubert, 286 S.W.3d 546, 553 (Tex. App.-Dallas 2009, pet.
Unitech does not seek to enforce a promise to sign an
dism'd)).
existing document. Accordingly, to the extent Unitech's breach of
contract claim is barred by the statute of frauds,
promissory estoppel claim is also barred.
Unitech's
Plaintiff's promissory
estoppel claim is viable as to claims for any fully or partially
completed Parts and any unused forgings.
2.
Purchase Orders
Canrig
argues
that
the
parties'
express
contracts,
the
purchase orders, render promissory estoppel inapplicable. 68 "Unless
there is evidence of fraud, bad faith, or illegality,
[promissory
estoppel is] not applicable when an express contract governs the
subject matter of the dispute."
See McAfee, Inc. v. Agilysys,
Inc., 316 S.W.3d 820, 828 (Tex. App.-Dallas 2010, no pet.) (citing
Doctors Hosp. 1997, L.P. v. Sambuca Houston, L.P., 154 S.W.3d 634,
636-37 (Tex. App.-Houston [14th Dist.] 2004, pet. abated)).
As discussed above, the purchase orders only govern Parts that
were delivered and paid for.
Because the dispute between the
parties only concerns Parts for which purchase orders were never
68
Id. at 27.
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 28 of 30
issued, the purchase orders do not prevent Unitech's promissory
estoppel claim.
D.
Quantum Meruit
Canrig argues that Unitech's quantum meruit claim fails
because it paid for all Parts that were manufactured and accepted.69
Under Texas common law a plaintiff seeking recovery under the
theory of quantum meruit must prove that (1) valuable services were
rendered or materials furnished (2) for the person sought to be
charged,
(3) which services and materials were accepted by the
person sought to be charged, used and enjoyed by him, and (4) under
such circumstances as reasonably notified the person sought to be
charged that
the
plaintiff
in
performing
such
services
expecting to be paid by the person sought to be charged.
Exploration Co.
1
Inc. v. Chevron U.S.A.
1
was
Vortt
Inc., 787 S.W.2d 942, 944
(Tex . 199 O ) •
Canrig paid for all finished Parts that it issued purchase
orders for and received.70
There is no evidence that Canrig
accepted and used any Parts or materials from Unitech without
paying for them. The court will therefore grant Canrig's MSJ as to
this claim.
69
Id. at 28.
Dennis Joe Deposition Transcript, Exhibit 2 to Canrig's MSJ,
Docket Entry No. 50-2, p. 14.
70
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Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 29 of 30
IV.
Conclusion
As stated and outlined in Part III(A), above, Canrig's Motion
to
Exclude
Evidence
or
Testimony
Contradicting
Plaintiff's
Corporate Representative Testimony (Docket Entry No. 57) is GRANTED
IN PART and DENIED IN PART.
For the reasons stated in Part III(B),
concludes that:
above,
the court
(1) material factual disputes support Unitech's
breach of contract cause of action for any fully or partially
completed Parts and any unused forgings; and (2) Unitech has failed
to raise a genuine issue of material fact as to Unitech's breach of
contract claim related to its purchase of new equipment.
For the
reasons stated in Part III(C), above, the court concludes that
Unitech's promissory estoppel cause of action is barred by the
statute of frauds except to the extent it seeks damages for any
fully or partially completed Parts and any unused forgings.
For
the reasons stated in Part III(D), the court concludes that Unitech
has failed to raise a genuine issue of material fact as to
Unitech's quantum meruit claim.
For these reasons, Defendant's
Motion for Final Summary Judgment (Docket Entry No. 50) is GRANTED
IN PART and DENIED IN PART.
The court will conduct a scheduling conference on July 31,
2020, at 2:00 p.m., in Courtroom 9-B, Ninth Floor, United States
Courthouse, 515 Rusk Street, Houston, Texas 77002.
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If counsel wish
Case 4:18-cv-00852 Document 67 Filed on 07/23/20 in TXSD Page 30 of 30
to appear instead by telephone, they should notify the court's case
manager by e-mail.
SIGNED at Houston, Texas, on this the 23rd day of July, 2020.
SENIOR UNITED STATES DISTRICT JUDGE
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