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finding no difference in the substance of the laws of two states and no conflict of law where the application of Texas law incorporated all of the elements required under Louisiana law, as well as required proof of an additional element
Summary of this case from Centex Homes v. Lexington Ins. Co.Opinion
No. 3:02-CV-1124-H
March 18, 2003
MEMORANDUM OPINION AND ORDER
Before the Court are Plaintiff's Motion for Partial Summary Judgment, filed January 27, 2003, Defendant's Opposition, filed March 10, 2003, and Plaintiff's Reply, filed March 14, 2003.
I. Background
Plaintiff Robbins Hardwood Flooring, Inc. ("Robbins") brings this suit against Defendant Bolick Distributors, Corporation ("Bolick") for breach of contract, suit on a sworn account, and attorneys' fees. Robbins alleges that Bolick failed to pay Robbins for certain hardwood flooring products that Bolick ordered and received. In this motion Robbins seeks summary judgment on the breach and sworn account issues. Robbins seeks $175,135.03 in collection damages and $11,393.37 in interest accrued to date. Def.'s Mot. at 1-2. Bolick argues that Robbins has failed to meet the burden to prevail on summary judgment. Defendant's Opposition at 1.
II. Summary Judgment Standard
Summary judgment is appropriate where the facts and law as represented in the pleadings, affidavits and other summary judgment evidence show that no reasonable trier of fact could find for the nonmoving party as to any material fact. FED.R.CIV.P. 56; Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Innovative Database Sys. v. Morales, 990 F.2d 217 (5th Cir. 1993). "The moving party bears the initial burden of identifying those portions of the pleadings and discovery in the record that it believes demonstrate the absence of a genuine issue of material fact, but is not required to negate elements of the nonmoving party's case." Lynch Props., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25). If the movant fails to meet its initial burden, the motion must be denied, regardless of the nonmovant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
If the movant does meet its burden, the nonmovant must go beyond the pleadings and designate specific facts showing that a genuine issue of material fact exists for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998). A party opposing summary judgment may not rest on mere conclusory allegations or denials in its pleadings unsupported by specific facts presented in affidavits opposing the motion for summary judgment. FED. R. Civ. P. 56(e); Lujan, 497 U.S. at 888; Hightower v. Texas Hosp. Ass'n., 65 F.3d 443, 447 (5th Cir. 1995).
In determining whether genuine issues of fact exist, "[f]actual controversies are construed in the light most favorable to the nonmovant, but only if both parties have introduced evidence showing that a controversy exists." Lynch, 140 F.3d at 625; see also Eastman Kodak v. Image Technical Servs., 504 U.S. 451 (1992). However, in the absence of any proof, the Court will not assume that the nonmoving party could or would prove the necessary facts. Lynch, 140 F.3d at 625. A party must do more than simply show some "metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "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." Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir. 1991).
III. Analysis
This case is for breach of contract and a suit on a sworn account. The Court will address each issue in turn.
A. Sworn Account 1. Choice of Law
The Court first addresses Bolick's contention that Robbins failed to meet the burden of summary judgment "by ignoring the fact-intensive analysis required to determine whether Louisiana or Texas law should be applied [in this case] and the potential impact of Louisiana law upon its claims." Def.'s Brief at 6. However, Robbins is under no obligation to rule out the law of alternative jurisdictions, even in a diversity case. Bolick also asserts affirmatively in its response that Louisiana law applies in this case. Def.'s Brief at 7. Under federal pleading requirements, a party need not plead the applicability of Louisiana law to preserve a choice-of-law question, but a party wishing to preserve a choice of law question does have the "obligation to call the applicability of another state's law to the court's attention in time to be properly considered." Kucel v. Walter E. Heller Co., 813 F.2d 67, 74 (5th Cir. 1987). Bolick raises this choice of law issue for the first time in its response to Robbins' motion for summary judgment. Furthermore, in the Joint Report dated October 15, 2002, Bolick stated that there were "no contested issues of law" in this case. Joint Report of October 15, 2002 at 2. In spite of the belated nature of Defendant's newfound conflict of laws issue, in the interests of justice the Court will address the conflict of laws issue in this case.
Ordinarily, a federal court exercising diversity jurisdiction applies the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). Texas applies the analysis of the Second Restatement in making these determinations. The first step in that analysis is to determine whether there is any conflict between the states' substantive laws. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 419 (Tex. 1984). Under Louisiana law, a suit on an open account — the equivalent of a sworn account under Texas law — requires that a person have failed to pay an open account within 30 days of receipt of a written demand. LA. REV. STAT. ANN. 9:2781 (2003). An "open account" includes "any account for which a part or all of the balance is past due, whether or not the account reflects one or more transactions and whether or not at the time of contracting the parties expected future transactions." Id. An open account is much like a line of credit. Hayes v. Taylor, 812 So.2d 874, 878 (La.App. 3 Cir. 2002). Citation and service of a petition is considered written demand for the purposes of the statute. Id. In short, all that is required under Louisiana law is 1) sale and delivery of a good or service on credit; and 2) the amount remains unpaid. These elements are significantly similar to the elements under Texas law. Under Texas law, the elements of an action on a sworn account are: (1) a sale and delivery of goods or services; (2) the charges on the account are just, i.e., the prices are charged in accordance with an agreement or, in the absence of an agreement, are the usual, customary and reasonable prices for that good or service; and, (3) the amount remains unpaid. Burch v. Hancock, 56 S.W.3d 257, 264 (Tex.App.-Tyler 2001, no pet.). There is a presumption in a case such as this one where there are multiple invoices that have not been paid, that the sales must have been on credit terms. In fact, the invoices themselves list "credit memo" under the heading "terms." The application of Texas law in this case would incorporate all of the elements required under Louisiana law, and in fact would require proof as to an additional element. As there is no difference in the substance of the laws of the two states, it is unnecessary to engage in a most significant relationship analysis. Texas law will be applied to this claim.
Contrary to Bolick's assertion that the Court must consider factors such as the previous relationship of the parties and expectations of other dealings, the language of 9:2781 makes it clear that the definition of an open account is quite broad.
2. Fact Issues
The Court next turns to whether Robbins has met its initial burden by showing that there is no genuine issue of material fact on the sworn account claim. Robbins has submitted evidence in the form of invoices of each transaction between the parties to show that Robbins delivered goods to Bolick. Pl.'s App. at 5-99. Robbins has also submitted an affidavit by the Vice President and Assistant Treasurer of Robbins, Donald Fetzer, stating that Bolick has not been paid for those goods. Aff. of Fetzer at 3-4. Fetzer's affidavit also states that for each transaction evidenced by the invoices in Plaintiff's Appendix, Robbins offered a specific price and Bolick accepted the price by ordering a specific quantity of the product. Aff. at 2. Robbins has met its initial burden of showing that there is no genuine issue of material fact. While Bolick argues that "Plaintiff neither shows, nor even claims, the absence of evidence supporting the existence of a larger contractual relationship between the parties," Robbins is under no obligation to do so. Robbins need not "negate elements of the nonmoving party's case." Lynch Props., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998). If Bolick wants to argue that the contractual relationship between the parties was different from what Robbins has proposed here, it is Bolick's obligation to put forth evidence indicating that was the case. Bolick submits a copy of a letter from Robbins to Jim San Souci, ("San Souci") general manager of Bolick that "outlines the terms of the disengagement of our companies" to support its argument that there was a larger contractual relationship between the parties than that represented by the invoices. However, there is no evidence to show the terms of that agreement. Certainly part of the agreement would have involved shipment of goods from Robbins to Bolick and payment of Robbins by Bolick, as represented by the invoices. In the absence of specific evidence of contradictory or supplementary terms of the "larger contractual relationship," the Court does not find a genuine issue of material fact sufficient to prevent summary judgment.
3. Setoff
Bolick also argues that it is entitled to offsets that were not taken into consideration in determining its indebtedness. Def.'s Brief at 5. Setoff is an affirmative defense that must be pleaded. Fed.R.Civ.P. 8(c). This defense was raised for the first time in this Court in Bolick's response to Robbins' motion for summary judgment. A Court may excuse a violation of Rule 8(c) in the absence of prejudice to the opposing party. Giles v. General Elec. Co., 245 F.3d 474, 494 (5th Cir. 2001). The Court need not address the issue of prejudice in this case, however, because Bolick has failed to state a legal claim for setoff. Bolick argues that "expenses incurred and losses suffered by [Bolick] in selling and developing a market of [Robbins'] products may be setoff against amounts allegedly owed, because [Bolick] was not afforded a reasonable time to sell product purchased form (sic) [Robbins] before termination of [Bolick's] distribution rights." Def.'s Brief at 5. In support of that proposition, Bolick relies upon Prince v. Miller Brewing Co., 434 S.W.2d 232 (Tex.Civ.App.-Houston [1st Dist.] 1968, writ ref'd n.r.e.). However, Prince is inapposite in this case. The portion of the opinion relied upon by Bolick is a discussion of previous holdings in other cases, and the rule proposed in that discussion was held not to apply in Prince. This dicta is not applicable to the case before the Court. Bolick has not presented and the Court has not located any authority to support the use of reliance damages as an offset to a sworn account claim. Furthermore, Bolick did not present the Court with any Texas cases to support the proposition that Bolick would be entitled to reliance damages at all. Even were the authority relied upon by Bolick to apply in this case, which it does not, Bolick has not put forth competent summary judgment evidence to support its setoff claim. San Souci's affidavit states that Bolick incurred $192 340 in losses in 2001 and $330,208 in the first 3 months of 2002 from its efforts to market and promote Robbins' products. See Aff. of San Souci at 2. However, San Souci's affidavit also states that its relationship with Robbins began in 1990. Aff. of San Souci at 1. The authority relied upon by Bolick to support its argument for reliance damages specifically states that it applies when "expenditures of time and money by the distributor are necessary to build up his distributorship" and "the manufacturer terminates the distributorship before the distributor is afforded a reasonable time to recoup his losses." Prince at 236. The language relied upon is clearly meant to apply at the beginning of a distributorship relationship when the distributor may be required to operate at a loss for a period of time. There is nothing in this language to indicate an ongoing duty by a manufacturer to pay for yearly shortfalls in a distributor's balance sheet if the at-will relationship is terminated.
Specifically, Bolick relies upon the following language: "where a manufacturer and a distributor enter into an arrangement whereby the distributor is to develop a market for and sell the manufacturer's products, and it is contemplated by both parties that expenditures of time and money by the distributor are necessary to build up his distributorship, though the relationship be one terminable at will, the law will not allow the manufacturer to exercise its rights of cancellation with impunity, but will imply an obligation on its part tor respond in damages sufficient to compensate the distributor for his expenditures made and losses incurred in reliance upon the agreement if the manufacturer terminates the distributorship before the distributor is afforded a reasonable time to recoup his losses." Prince at 236.
Finally, Robbins argues, and the Court agrees, that these claims for "setoff" as set forth by Bolick are really more appropriately characterized as a counterclaim for breach of the distributorship agreement. Reply at 5. Bolick did not plead a counterclaim for breach of the distributorship agreement. The time for amending pleadings has passed, and the addition of such a claim at this late point in the proceedings would be prejudicial to Robbins.
4. Conclusion
Robbins has presented competent summary judgment evidence to support the absence of a genuine issue of material fact on its sworn account claim. Bolick has not put forth summary judgment evidence to show that there is a genuine issue of material fact in this case. Bolick's response rested upon choice of law problems (which involve questions of law) and the potential applicability of other offsets which are not legally available to Bolick. Robbins motion for summary judgment on its suit on a sworn account is GRANTED. B. Breach of Contract
Having held that Robbins' motion for partial summary judgment is granted on its sworn account claim, the Court need not address its breach of contract claim because the two claims are the same.
IV. Conclusion
Robbins' motion for partial summary judgment is GRANTED as to its suit on a sworn account. The Court need not and does not reach Robbins' contract claim. Plaintiff, as prevailing party, is awarded reasonable attorneys' fees in an amount to be determined pursuant to 28 U.S.C. § 54(d)(2).
SO ORDERED.