Filed: Jun. 15, 1995
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals, Fifth Circuit. No. 94-10680. FLOORS UNLIMITED, INC., d/b/a First Floors, Plaintiff-Appellant, v. FIELDCREST CANNON, INC., Defendant-Appellee. June 15, 1995. Appeal from the United States District Court for the Northern District of Texas. Before DAVIS, SMITH and WIENER, Circuit Judges: WIENER, Circuit Judge: Plaintiff-Appellant Floors Unlimited (Floors), a carpet retailer and dealer, appeals the district court's summary judgment dismissal of Floors' breach of contr
Summary: United States Court of Appeals, Fifth Circuit. No. 94-10680. FLOORS UNLIMITED, INC., d/b/a First Floors, Plaintiff-Appellant, v. FIELDCREST CANNON, INC., Defendant-Appellee. June 15, 1995. Appeal from the United States District Court for the Northern District of Texas. Before DAVIS, SMITH and WIENER, Circuit Judges: WIENER, Circuit Judge: Plaintiff-Appellant Floors Unlimited (Floors), a carpet retailer and dealer, appeals the district court's summary judgment dismissal of Floors' breach of contra..
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United States Court of Appeals,
Fifth Circuit.
No. 94-10680.
FLOORS UNLIMITED, INC., d/b/a First Floors, Plaintiff-Appellant,
v.
FIELDCREST CANNON, INC., Defendant-Appellee.
June 15, 1995.
Appeal from the United States District Court for the Northern
District of Texas.
Before DAVIS, SMITH and WIENER, Circuit Judges:
WIENER, Circuit Judge:
Plaintiff-Appellant Floors Unlimited (Floors), a carpet
retailer and dealer, appeals the district court's summary judgment
dismissal of Floors' breach of contract and breach of fiduciary
duty claims against Fieldcrest Cannon, Inc. (Fieldcrest), a carpet
manufacturer. As we conclude that, as a matter of law, the oral
dealership agreement between Floors and Fieldcrest did not fall
within the parol evidence proscription of Section 26.01(b)(6) of
the Texas statute of frauds, we reverse the district court's
dismissal of Floors' breach of contract claim and remand for
further proceedings consistent with this holding. We affirm the
district court's dismissal of Floors' claim for breach of a
fiduciary duty by Fieldcrest, however, agreeing with the court that
no fiduciary relationship existed between the parties.
I
FACTS AND PROCEEDINGS
Floors is a carpet retailer and dealer which sells carpet to
1
residential and commercial customers in North Texas. Fieldcrest is
a carpet manufacturer which markets its product through dealers
like Floors. Fieldcrest's practice was to market its "Karastan"
line of carpeting only through a limited number of authorized
dealers.
According to Floors, it entered into an oral agreement with
Fieldcrest in 1982 whereby Floors became an authorized dealer for
Fieldcrest's "Karastan" line. Floors alleged that the agreement
required it to acquire carpeting, carpet samples, display racks,
and promotional material from Fieldcrest. The agreement allegedly
required Floors to sell and advertise Fieldcrest's product in
conformity with certain rules promulgated by Fieldcrest. Floors
claimed that Fieldcrest agreed not to terminate the contract (and,
therefore, Floors' designation as an authorized "Karastan" dealer)
except for "good cause," specifically, for Floors' failure to
comply with Fieldcrest's strict marketing requirements. In oral
argument before this court the parties acknowledged that Floors was
not required to buy any minimum quantity of carpet or to meet any
continuing sales quotas or goals to retain its dealership.
In February 1993, however, Fieldcrest terminated its
eleven-year relationship with Floors, unilaterally and without
explanation. That Floors never violated any of Fieldcrest's
marketing requirements is undisputed.
Floors sued Fieldcrest in Texas state court, alleging breach
of contract, promissory estoppel, and breach of fiduciary duty.
Fieldcrest removed the case to federal court based on diversity
2
jurisdiction and moved for summary judgment on all claims. The
district court granted Fieldcrest's summary judgment motion,
finding that (1) the parties' oral agreement, as a "satisfaction
contract," could not possibly be performed within one year, and
thus was unenforceable under the Texas statute of frauds; (2) the
promissory estoppel claim had no merit, as Floors had conceded that
there was no "second promise" to reduce the parties' oral agreement
to writing; and (3) no fiduciary relationship existed between
Floors and Fieldcrest.
Floors timely filed an appeal to this court, asserting that
(1) the oral contract was for an indefinite duration and therefore
was not subject to the statute of frauds; and (2) genuine issues
of material fact remained regarding the existence of a fiduciary
relationship between the parties, precluding summary judgment
dismissal of Floors' claim of breach of a fiduciary duty by
Fieldcrest.1
II
ANALYSIS
A. STANDARD OF REVIEW
We review a grant of summary judgment de novo, applying the
1
Floors did not challenge or address the district court's
grant of summary judgment with regard to the promissory estoppel
claim. Consequently, we need not, and therefore do not, consider
that issue on appeal. See Cinel v. Connick, 15 F.3d 1338, 1345
(5th Cir.1994) (appellant abandons all issues not raised and
argued in its initial brief on appeal), cert. denied, --- U.S. --
--,
115 S. Ct. 189,
130 L. Ed. 2d 122 (1994).
3
same standard as the district court.2 Summary judgment is
appropriate if the record, judged in the light most favorable to
the non-moving party, discloses that "there is no genuine issue as
to any material fact and that the moving party is entitled to a
judgment as a matter of law."3 The moving party must demonstrate
by competent evidence that no issue of material fact exists.4 The
non-moving party then has the burden of showing the existence of a
specific factual issue which is disputed.5 If any element of the
plaintiff's case lacks factual support, the district court should
grant summary judgment.6 To the extent a district court's grant of
summary judgment is based on an interpretation of state law, our
review of that determination is also de novo.7
B. BREACH OF CONTRACT CLAIM
Two provisions of the Texas statute of frauds, which requires
that specified types of agreements be in writing to be enforceable,
2
See Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th
Cir.1994).
3
See Fed.R.Civ.P. 56(c); Brothers v. Klevenhagen, 28 F.3d
452, 455 (5th Cir.1994), cert. denied, --- U.S. ----,
115 S. Ct.
639,
130 L. Ed. 2d 545 (1994).
4
See Isquith v. Middle South Utilities, Inc., 847 F.2d 186,
198-99 (5th Cir.1988), cert. denied,
488 U.S. 926,
109 S. Ct. 310,
102 L. Ed. 2d 329 (1988).
5
See Celotex Corp. v. Catrett, 477 U.S. 317, 321-22,
106
S. Ct. 2548, 2552-53,
91 L. Ed. 2d 265 (1986).
6
See id.
7
See Commons W. Office Condos, Ltd. v. Resolution Trust
Corp.,
5 F.3d 125, 127 (5th Cir.1993) (citing Salve Regina
College v. Russell,
499 U.S. 225, 231-32,
111 S. Ct. 1217, 1221,
113 L. Ed. 2d 190 (1991)).
4
are implicated in this case.
1. Contract to be Performed Within One Year
Section 26.01(b)(6) of the Texas statute of frauds requires
that, to be enforceable, any agreement which is "not to be
performed within one year from the date of making the agreement"
must be in writing.8 The district court concluded that the oral
contract alleged by Floors was not intended to be performed within
one year of its making and, therefore, was unenforceable under the
statute of frauds. We disagree.
In his deposition, the president of Floors stated that he
believed the oral contract between his company and Fieldcrest would
last "forever and ever and ever" and that Fieldcrest would not
terminate the dealership agreement except for "good cause." In
addition, Floors' president asserted his belief that his company's
designation as a "Karastan" dealer "would continue ... as long as
[Floors] complied with the rules and regulations that [Fieldcrest]
established for its authorized dealers." We conclude from this
evidence—essentially uncontradicted by Fieldcrest—that the oral
agreement between Fieldcrest and Floors was of an indefinite
duration, terminable only for "good cause." Thus, we are squarely
faced with the question of law: Is an indefinite term contract,
terminable only for good cause, required to be in writing under
Section 26.01(b)(6) of the Texas statute of frauds?
In Falconer v. Soltex Polymer Corp.9, we held that an oral
8
Tex.Bus. & Com.Code Ann. § 26.01(b)(6).
9
886 F.2d 1312 (5th Cir.1989) (unpublished opinion).
5
contract of employment that was alleged by the employee to last
"forever," "so long as he obeyed the company rules and did his
job," was an employment contract for an indefinite term, and was
therefore barred by the Texas statute of frauds.10 Our subsequent
decision in Pruitt v. Levi Strauss & Co.11, however, observed that
our decision in Falconer was questionable because, under Texas law,
"[i]f an oral employment agreement can cease upon some contingency,
other than by some fortuitous event or the death of one of the
parties, the agreement may be performed within one year, and the
statute of frauds does not apply."12
In Pruitt, we reviewed applicable Texas law and recognized
that Texas courts generally held that when no period of performance
is stated in an oral employment contract, the statute of frauds
does not apply because the contract is performable within a year.13
The Texas courts, we observed, drew a distinction between contracts
of an unstated or indefinite duration, which fell outside the
statute of frauds, and contracts of a specified duration longer
than a year, which fell within the statute of frauds.14
Despite our acknowledgement of Texas jurisprudence on the
10
See id.
11
932 F.2d 458 (5th Cir.1991).
12
See id. at 463-64 (citing McRae v. Lindale Indep. School
Dist.,
450 S.W.2d 118, 124 (Tex.Civ.App.-Tyler 1970, writ ref'd
n.r.e.); Fruth v. Gaston,
187 S.W.2d 581, 584 (Tex.Civ.App.-
Austin 1945, writ ref'd w.o.m.)).
13
See id. at 463-65.
14
See id.
6
issue, we nonetheless held that the oral employment contract in
Pruitt, which had not specified any length of time for performance,
fell within the statute of frauds and was therefore unenforceable.
The reason for our manifestly conflicting decision was that under
the stare decisis rule of this Circuit—which provides that one
panel cannot overturn the decision of a prior panel in the absence
of en banc reconsideration or a superseding Supreme Court
decision—we were bound by the precedent of Falconer.15
In Pruitt we also acknowledged the corollary of our stare
decisis rule, articulated in our decision in Farnham v. Bristow
Helicopters, Inc.16, that in diversity cases we must follow
subsequent state court decisions that are clearly contrary to one
of our prior decisions.17 We examined one Texas state court
decision subsequent to Falconer—namely, Winograd v. Willis18, which
we read as not "clearly contrary" to Falconer—and concluded that we
were still bound by Falconer.19
15
See id. at 465 (citing Farnham v. Bristow Helicopters,
Inc.,
776 F.2d 535 (5th Cir.1985).
16
776 F.2d 535, 537 (1985).
17
See Pruitt v. Levi Strauss & Co., 932 F.2d 458, 465-66
(5th Cir.1991) (citing
Farnham, 776 F.2d at 537). See also Exxon
Co. v. Banque De Paris Et Des Pays-Bas,
889 F.2d 674, 676 (5th
Cir.1989) (federal court sitting in diversity is bound to follow
decisions of state's intermediate appellate courts unless it is
"convinced by other persuasive data that the highest court of the
state would decide otherwise."), cert. denied,
496 U.S. 943,
110
S. Ct. 3230,
110 L. Ed. 2d 676 (1990).
18
789 S.W.2d 307 (Tex.Ct.App.-Houston [14th Dist.] 1990,
writ denied).
19
See Pruitt, 932 F.2d at 465-66.
7
Since we decided Pruitt, there have been two published
decisions by Texas Courts of Appeals that have addressed the
applicability of the statute of frauds to an indefinite term
employment contract.20 In determining that the oral contract in the
instant case was subject to the statute of frauds, the district
court concluded that those subsequent Texas court decisions were
not "clearly contrary" to our holding in Pruitt and that the court
therefore could not disregard the holdings of Falconer and Pruitt.
Our close examination of those subsequent Texas cases leads us to
the contrary conclusion, i.e., that they are "clearly contrary" to
our decisions in Falconer and Pruitt. That in turn compels us to
conclude that Falconer is not a correct statement of Texas law and
thus is no longer binding precedent in this Circuit.
The first case decided subsequent to Pruitt was Goodyear Tire
& Rubber Co. v. Portilla.21 In Goodyear, the oral employment
agreement allegedly provided that the plaintiff's employment would
last "as long as I ... done my job right."22 The Goodyear court
held that the employer's representation to the plaintiff that she
would not be discharged except for unsatisfactory performance
20
The two cases are Gerstacker v. Blum Consulting Eng'rs.,
Inc., 884 S.W.2d 845 (Tex.Ct.App.-Dallas 1994, writ denied) and
Goodyear Tire & Rubber Co. v. Portilla,
836 S.W.2d 664
(Tex.Ct.App.-Corpus Christi 1992), aff'd on other grounds,
879
S.W.2d 47 (Tex.1994).
21
836 S.W.2d 664 (Tex.Ct.App.-Corpus Christi 1992), aff'd on
other grounds,
879 S.W.2d 47 (Tex.1994).
22
See id. at 667.
8
formed a satisfaction contract.23 As the contract did not specify
how long the employment term would last, the court held that it was
not barred by the statute of frauds because the contract was
performable within one year.24 The Goodyear court distinguished its
case from others in which Texas courts had ruled that agreements
promising to retain the employee until retirement had to be in
writing to be enforceable under the statute of frauds, unless
retirement was scheduled to occur within one year.25
The district court held that Goodyear was not "clearly
contrary" to Falconer because the Goodyear court noted that "[a]t
no time did [the plaintiff] contend that she presumed to have a job
until she retired."26 From this statement, the district court
concluded that Goodyear "cannot be said to stand for the
proposition that satisfaction contracts never fall within the
statute of frauds." We think that the district court
misinterpreted Goodyear.
The statement in Goodyear on which the district court relies
merely indicates that the contract involved in Goodyear was an
indefinite term contract. If the contract had specified that it
would last "until retirement," the contract would have been for a
definite term and would fall within the statute of frauds unless
normal retirement age was to occur within one year. We read
23
See id. at 668.
24
See id. at 669.
25
See id. at 669-671.
26
Id. at 670.
9
nothing in the passage quoted by the district court as being
contrary to the general rule; indeed, the Goodyear court's
statement merely echoes our conclusion that definite term contracts
fall within the Texas statute of frauds whereas indefinite term
contracts do not.
The second relevant Texas case decided after Pruitt was
Gerstacker v. Blum Consulting Eng'rs., Inc.27 The court in
Gerstacker held that the statute of frauds did not apply to an
employer's oral promise to employ the plaintiff "during [his] good
performance and satisfactory performance of his duties."28 The
court proceeded to determine the applicability of the statute of
frauds by ascertaining the parties' intent regarding the duration
of employment at the time of the confection of the contract.29
Concluding that the parties had agreed that the intended term for
performance of employment was until the occurrence of an express
contingency (unsatisfactory performance), the court held that the
contract could conceivably be performed within one year and that
the statute of frauds therefore did not apply.30
Another Texas case decided subsequent to Pruitt, Collins v.
27
884 S.W.2d 845 (Tex.Ct.App.-Dallas 1994).
28
See id. at 847.
29
See id. at 850-51.
30
See id. at 851 (citing Hardison v. A.H. Belo Corp.,
247
S.W.2d 167, 168-69 (Tex.Civ.App.-Dallas 1952, no writ) (holding
that statute of frauds does not apply to oral agreement providing
employment as long as employee does satisfactory work because
contingency may happen within one year)).
10
Allied Pharmacy Management31, although not clearly contrary to
Pruitt, is significant in reinforcing our conclusion that the
instant agreement is enforceable because it falls outside the
statute of frauds. The Collins court illustrated the converse
doctrine of Goodyear when it held that, because the alleged oral
employment agreements were for specified terms of three years, they
had to be in writing to be enforceable even though there existed
the possibility of termination for cause within a year.32 The
Collins court rejected the plaintiffs' argument that the
possibility of termination for cause took their three-year oral
contracts outside the statute of frauds, concluding instead that
the agreements' specified durations trumped the mere possibility of
termination for cause: Such a possibility simply did not
constitute "performance" of these specified-term contracts under
their own terms.33
We believe that Goodyear and Gerstacker are "clearly contrary"
to our antecedent decisions in Falconer and Pruitt, and that
Collins, although not "clearly contrary" to our decisions because
it involved a definite term contract, lends support to our
conclusion that Falconer is no longer a correct statement of Texas
law. Under Farnham, therefore, we are precluded from following
Falconer because subsequent Texas law is "clearly contrary" to its
31
871 S.W.2d 929 (Tex.App.-Houston [14th Dist.] 1994, no
writ).
32
See id. at 934.
33
See id. at 934.
11
holding.
As we suggested in Pruitt, we are now satisfied that, if faced
with this issue, Texas courts would conclude that a contract for an
indefinite duration, terminable only for cause, falls outside the
statute of frauds. And in light of such satisfaction, we deny
Floors' motion for certification of that question of law to the
Supreme Court of Texas.
The oral dealership agreement between Floors and Fieldcrest in
the instant case is a satisfaction contract for an indefinite
term—"as long as [Floors] followed certain rules and
regulations"—and not for a specified duration. The contract
therefore falls outside the purview of Section 26.01(b)(6) of the
Texas statute of frauds.
2. Contract for Sale of Goods for $500 or More
Fieldcrest also argued in its motion for summary judgment that
the oral agreement alleged by Floors is unenforceable under Section
2.201(a) of the Texas Business and Commerce Code, which provides
that a contract for the sale of goods at a price at or over $500 is
not enforceable unless it is in writing.34 The district court did
34
The relevant portion of Section 2.201 reads as follows:
(a) Except as otherwise provided in this section 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. A writing is not insufficient because it omits
or incorrectly states a term agreed upon but the
contract is not enforceable under this paragraph beyond
the quantity of goods shown in such writing.
12
not address this argument, instead basing its summary judgment
dismissal of Floors' claims on Section 26.01(b)(6) of the Texas
statute of frauds.
As we find that Section 26.01(b)(6) does not apply to the
parties' oral agreement, we turn to Fieldcrest's alternative
argument for summary judgment dismissal grounded in Section
2.201(a) of the Texas statute of frauds. The parties have failed
to cite any relevant Texas cases expressly addressing the issue
whether Section 2.201(a) is applicable to dealership or dealership
contracts, and we have been unable to locate any such cases
independently. Given the apparent absence of Texas law on the
subject, we decline the invitation to address the issue whether a
dealership agreement such as the one in the instant case falls
within the statute of frauds provision regarding contracts for the
sale of goods priced at $500 or more. It would not be prudent for
us to render decision on such an uncertain issue when the district
court has not yet addressed it.35
Although we do not express any opinion on the applicability of
Section 2.201(a) to the agreement in this case, we note that if the
district court on remand decides that a dealership agreement such
Tex.Bus. & Com.Code Ann. § 2.201(a).
35
For the same reason, we would be premature in certifying
this issue to the Supreme Court of Texas at this time. If,
however, the district court on remand rules on the applicability
of § 2.201 to the dealership agreement here at issue and the case
is thereafter appealed to this court, the question might well be
one ripe for certification, given the split of authority
throughout the country and the dearth of Texas authority on the
issue.
13
as the one between Floors and Fieldcrest is subject to Section
2.201(a) of the Texas statute of frauds, it must then reexamine the
issue whether, separately or in combination, Fieldcrest's letters
to Floors constitute a writing sufficient to meet the requirements
of the statute of frauds. The Uniform Commercial Code Comment
accompanying Section 2.201 states that the "phraseology of this
section is intended to make clear that ... [t]he required writing
need not contain all the material terms of the contract and such
material terms as are stated need not be precisely stated."36 The
comment also provides that "[a]ll that is required is that the
writing afford a basis for believing that the offered oral evidence
rests on a real transaction."37 In light of this commentary
interpreting the statutory language at issue, the district court on
remand should closely examine Fieldcrest's various letters to
Floors to determine whether, under Texas law, the correspondence
meets the writing requirement of Section 2.201 of the Texas statute
of frauds.
C. BREACH OF FIDUCIARY DUTY CLAIM
The district court determined that there was no fiduciary
relationship between Floors and Fieldcrest which would support
Floors' claim that Fieldcrest breached its fiduciary duty. Floors
concedes that there was no legal partnership between it and
Fieldcrest; it asserts, nonetheless, that the nature of its
relationship with Fieldcrest created a question of fact as to the
36
Tex.Bus. & Com.Code Ann. § 2.201 comment 1.
37
See id.
14
existence of a fiduciary obligation which should have precluded
summary judgment. Specifically, Floors contends that an issue of
fact exists because:
[Fieldcrest] took many actions, some of them in writing, to
make its dealers feel that a special relationship—akin to a
partnership—existed. The use of the term "partnership," while
it may not create the legal entity of partnership, was
intentionally used—and repeatedly—by [Fieldcrest] to impress
its dealers that their relationship was more than "arms
length."
We find this contention to be without merit. Under Texas law, a
fiduciary duty will not be lightly created, as it imposes
extraordinary duties.38 The party owing the duty in a fiduciary
relationship must put the interests of the beneficiary ahead of its
own if the need arises.39 Our review of the summary judgment
evidence convinces us that the relationship between Fieldcrest and
Floors did not give rise to any fiduciary duty.
In Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp.40,
the Supreme Court of Texas held that, as a matter of law, the
parties to the written franchise agreement in that case did not
have a fiduciary relationship because there was no evidence of a
"confidential relationship" between them.41 The court noted that,
although the existence of a confidential relationship is
38
See Gillum v. Republic Health Corp., 778 S.W.2d 558, 567
(Tex.Ct.App.-Dallas 1989, no writ).
39
See Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 558-59
(5th Cir.1991) (citing Texas Supreme Court cases finding
fiduciary relationships).
40
823 S.W.2d 591 (Tex.1992).
41
See id. at 594.
15
"ordinarily a question of fact, when the issue is one of no
evidence, it becomes a question of law."42
Floors has not presented any summary judgment evidence that
its relationship with Fieldcrest was anything more than an
longstanding, cordial business relationship. The mere
conversational use of the term "partnership" in Fieldcrest's
correspondence and dealings with Floors does not warrant imposing
a fiduciary relationship between the parties. There is no
indication that the relationship between Fieldcrest and Floors was
one in which influence was "acquired and abused"43 or one in which
there was a "heightened degree of trust and confidence that
surpasses what is customarily shared between business associates."44
On the contrary, the summary judgment evidence as a whole
reveals that Fieldcrest, which took great care to maintain its
"Karastan" product's high-quality image, and Floors, which wanted
to sell as much carpeting as possible, occupied naturally
antagonistic positions. Although the parties entered into an
agreement to work together out of self-interest, they had different
goals and were free to pursue their own interests. Moreover, we
are convinced that the parties' informal dealings for eleven years,
based only on an oral agreement, do not evidence a fiduciary
42
See id.
43
See id. (citing Texas Bank & Trust Co. v. Moore,
595
S.W.2d 502, 507 (Tex.1980)).
44
See United Teachers Assoc. Ins. Co. v. Mackeen & Bailey,
Inc., 847 F. Supp. 521, 530 (W.D.Tex.1994) (finding fiduciary
relationship between actuary and client).
16
relationship. We have previously observed that a fiduciary
relationship does not exist merely because businesspersons choose
to "conduct their affairs on a handshake, without formal written
contracts."45 Agreeing with the district court, we therefore hold
as a matter of law that the relationship between Fieldcrest and
Floors did not give rise to any fiduciary duty.
III
CONCLUSION
Finding that no fiduciary relationship existed between the
parties, we affirm the district court's summary judgment dismissal
of Floors' breach of fiduciary duty claim. We conclude, however,
that the oral dealership agreement between Floors and Fieldcrest is
not covered by the Texas statute of frauds, as that agreement has
an indefinite term not necessarily requiring more than a year to
perform. We therefore reverse the district court's grant of
summary judgment as to Floors' breach of contract claim and remand
this case to the district court for further proceedings consistent
with this opinion. In so doing, we decline Floors' invitation to
certify the Section 26.01(b)(6) statute of frauds issue to the
Supreme Court of Texas.
AFFIRMED in part, REVERSED in part, and REMANDED.
45
See Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 558 (5th
Cir.1991).
17
