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Stewart Title Guaranty Co. v. Stewart Title Latin America, Inc.

United States District Court, S.D. Texas, Houston Division

March 21, 2017

STEWART TITLE GUARANTY COMPANY, Plaintiff,
v.
STEWART TITLE LATIN AMERICA, INC., et al, Defendants.

          OPINION AND ORDER

          MELINDA HARMON, UNITED STATES DISTRICT JUDGE

         Pending before the Court in the above-referenced matter are Third-Party Defendants Michael B. Skalka (“Skalka”) and Charles M. Craig's (“Craig”) Motion for Summary Judgment Doc. 70; Plaintiff Stewart Title Guaranty Company's (“STGC”) Motion for Partial Summary Judgment on its Affirmative Claims, Doc. 71; and STGC and Third-Party Defendant Stewart Title Company's (“STC”) Motion for Summary Judgment on Stewart Title Latin America's (“STLA”)[1] Counterclaims, Doc. 74. The Court has considered the parties' filings, the record, and the law. For the reasons that follow, the Court grants all of the pending motions.

         I. Background

         Because the facts of this case are recited extensively in this Court's prior orders, Docs. 34, 56, the Court need not repeat them here. For the purposes of the motions now before this Court, however, it is worth restating that the crux of the parties' dispute is the proper scope of STLA's use of STGC's “Stewart Title” trademarks. STLA argues that it was granted an unrestricted, perpetual right to use the trademarks and STC and STGC have wrongfully tried to revoke that right. STC and STGC respond that the express terms of a series of contracts between the parties make it clear that STLA's use of the trademarks was restricted and STGC was free to revoke STLA's license to the trademarks when STLA violated a number of contractual terms.

         Invoking these terms, in September 2012 STGC sent termination notices to STLA. Docs. 74-29, 74-30, 74-31, 74-32. These notices ordered STLA to cease issuing title policies and discontinue use of the STGC trademarks. Docs. 74-29, 74-30, 74-31, 74-32. The notices also cited each provision of the agreements that STGC alleged STLA had violated. Doc. 74-29. Nevertheless, STLA continued to use the trademarks. Doc. 74 at 15.

         In an effort to regain control of its trademarks, STGC filed its Original Petition in the 215th Judicial District Court of Harris County on October 10, 2012, asserting four causes of action: (1) Declaratory Judgment: License Agreement;[2] (2) Declaratory Judgment: Underwriting Agreements; (3) Breach of Contract: Underwriting Agreements; and (4) Application for Injunctive Relief. Doc. 1-2 at 1, 18-22. STLA removed the action to this Court on November 5, 2012. Doc. 1. On November 13, 2012, STLA filed its Answer, Counterclaim, and Third-Party Complaint. Doc. 3. STLA asserted six counterclaims against STGC and STC: (1) Breach of Contract: Joint Venture Agreement; (2) Breach of Contract: Underwriting Agreements; (3) Promissory Estoppel; (4) Business Disparagement; (5) Breach of Fiduciary Duty as to Skalka and Craig; and (6) Conspiracy to Breach Fiduciary Duty. Doc. 3 at 18-21.

         On September 30, 2013, this Court granted STGC's Motion to Dismiss STLA's breach-of-contract claim with regard to the perpetual license of the Joint Venture Agreement.[3] Doc. 34 at 15. The Court also ordered STLA to more definitively state a counterclaim for business disparagement. Id. When it failed to do so, STGC and STC moved the Court to strike or dismiss the claim. Doc. 59. On July 31, 2015, STLA filed its Second Amended Counterclaim and Third Party Complaint in which it dropped its business-disparagement claim. Doc. 61.

         On April 29, 2016, Skalka, Craig, STGC, and STC filed their pending motions for summary judgment. Docs. 70, 71, 74. Although the motions reference and incorporate one another, each takes aim at different claims. Skalka and Craig's motion only attacks STLA's breach-of-fiduciary-duty counterclaim against them, STGC's motion targets most of its affirmative claims, and STGC and STC's joint motion assails all of STLA's counterclaims. STLA filed its Omnibus Response to Plaintiff's and Third-Party Defendants' Collective Motions for Summary Judgment (“Omnibus Response”) on May 20, 2016. Doc. 76. Skalka, Craig, STGC, and STC filed replies on June 13, 2016. Docs. 82-85. The pending motions are now ripe for consideration.

         II. Legal Standard

         The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment under Federal Rule of Civil Procedure 56(c) is appropriate when, viewed in the light most favorable to the nonmovant, the court determines that “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1996). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248.

         The movant initially bears the burden of identifying those portions of the pleadings and discovery in the record that it finds demonstrate the absence of a genuine issue of material fact on which the nonmovant bears the burden of proof at trial. Lujan v. Nat'l Wildlife Fed., 497 U.S. 871, 885 (1990) (citations omitted). “[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex, 477 U.S. at 323. When the moving party makes an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine dispute of material fact concerning every element of its cause of action in order to defeat the motion for summary judgment. Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998); Nat'l Ass'n of Gov't Emps. v. City Pub. Serv. Bd., 40 F.3d 698, 712 (5th Cir. 1994); Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998). There is no genuine issue for trial if a rational trier could not find for the nonmoving party based on the evidence presented. City Pub. Serv. Bd., 40 F.3d at 712-13 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 584-88 (1986)).

         Allegations in a plaintiff's complaint are not evidence. Wallace v. Tex. Tech Univ., 80 F.3d 1042, 1047 (5th Cir. 1996) (citation and internal quotation marks omitted) (“[P]leadings are not summary judgment evidence.”); Johnston v. City of Houston, 14 F.3d 1056, 1060 (5th Cir. 1995) (quoting Solo Serve Corp. v. Westtown Assoc., 929 F.2d 160, 164 (5th Cir. 1991) (for the party opposing the motion for summary judgment, “‘only evidence-not argument, not facts in the complaint-will satisfy' the burden.”). Likewise, unsubstantiated assertions, conclusory allegations, improbable inferences, and unsupported speculation are not competent summary judgment evidence. Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994). Instead, the nonmovant must “go beyond the pleadings and by [his] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue of material fact for trial.” Giles v. Gen. Elec. Co., 245 F.3d 474, 493 (5th Cir. 2001) (quoting Celotex, 477 U.S. at 324) (internal quotation marks omitted).

         In ruling on a summary judgment motion, the court must consider all evidence and draw all inferences from the factual record in the light most favorable to the nonmovant, but the court may not make credibility determinations or weigh the evidence. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (citing Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)).

         III. Analysis

         The Court begins by noting that STLA conflates STGC and STC throughout its filings. See Docs. 61, 76. Nowhere, however, does STLA provide legal authority for doing so. See Id. STGC and STC are separate, independent corporate entities-related only as parent and subsidiary. Doc. 74-44 at 3. Consequently, unless one of the equitable doctrines for disregarding the separate existence of parent and subsidiary corporations is applicable (i.e., “single business enterprise” or “alter ego”[4]), STGC and STC must be treated as distinct and separate “persons” as a matter of law. See N. Cypress Med. Ctr. Operating Co. v. Fedex Corp., 892 F.Supp.2d 861, 865 (S.D. Tex. 2012) (citation omitted); Airflow Hous., Inc. v. Theriot, 849 S.W.2d 928, 931 (Tex. App.-Houston [1st Dist.] 1993, no writ) (citation omitted).

         STLA's stated reason for treating the entities as one is that “knowledge cannot be segregated between STG and STC.” Doc. 76 at 9. This is an insufficient rationale; it addresses none of the factors required for application of the single business enterprise or alter ego doctrines. See supra note 4. Accordingly, the Court will analyze each of STLA's claims against STGC and STC separately.

         A. Breach of Contract

         1. Formation Agreement

         In its Third-Party Complaint, STLA alleges that STGC/STC breached the Formation Agreement by wrongfully terminating the Underwriting and License Agreements; wrongfully competing with STLA in the covered territories; terminating and revoking the unrestricted and perpetual grant; and otherwise failing to carry out the terms of the agreements. Doc. 61 at ¶¶ 48- 53. STLA alleges reliance damages of “millions of dollars in building the Stewart Title brand across Latin America.” Id. ¶ 53.

         In response, STGC and STC note that STGC cannot be liable for breach of the Formation Agreement because it was not a party to it. Doc. 74 at 16-17. Similarly, STGC and STC argue that STC cannot be liable for breach of the Formation Agreement on the basis of breach of the Underwriting or Licensing Agreements because STC was not a party to those underlying agreements and, therefore, could not have breached them. Id. at 18. STGC and STC also point out STLA's lack of evidence to support its arguments that STGC and STC breached the Formation Agreement by wrongfully competing against STLA in the covered territories and failing to make premium payments. Id. at 18-19.

         With regard to the wrongful-competition accusations, STGC and STC urge, “all of Counterclaimants' complaints about competition relate to activities carried out by employees, representatives, or agents of STGM, [5] not STC.” Id. at 18. Next, STGC and STC draw the Court's attention to STLA shareholder and general manager Christopher Hill's testimony in which he admits that he has no knowledge of STC ever competing directly with STLA. Id. at 19 (citing Doc. 74-42 at 13-14).

         STGC and STC respond to STLA's claim that STC failed to make premium payments due under the Formation Agreement by pointing out that the Underwriting and Service Provider Agreements make it clear that STC never had an agreement to pay anything to STLA. Id. Rather, STLA agreed in these agreements to share premiums with STGM. Id. STGC and STC contend that STLA has no evidence otherwise. Id.

         Finally, STGC and STC respond to STLA's argument that revocation of the alleged perpetual right to a license breached the Formation Agreement by pointing out that because STC does not own the trademarks-a fact this Court has already established[6]-it cannot have either granted or revoked a perpetual license of said trademarks. Id. at 19-20. STGC and STC point out that this Court has already found that the Formation Agreement granted no such “perpetual license” to STLA and instead stated that “licensing will be governed by agreements between [STGC] and [STLA].” Id. at 20 (citing Doc. 56 at 4, 9).

         As STGC and STC point out, Texas law does not provide a cause of action for breach of contract against a defendant who is not a party to the underlying contract. Silvas v. Ohio Cas. Ins. Co., SA-05-CA-0627 XR, 2005 WL 2645015, at *2 (W.D. Tex. Aug. 24, 2005) (citing Natividad v. Alexsis, Inc., 875 S.W.2d 695, 698 (Tex. 1994); C & C Partners v. Sun Exploration & Prod., 783 S.W.2d 707, 721 (Tex. App.-Dallas 1989, writ denied)). Accordingly, as a non-party, STGC could not have, as a matter of law, breached the Formation Agreement. Likewise, STC cannot be liable for breach of the Formation Agreement as a result of alleged breaches of underlying agreements to which it was not a party.

         Nor is there evidence in the record to support STLA's claims that STC wrongfully competed in the covered territories or that STC wrongfully withheld premiums. Indeed, STGC, not STC, was the party that contracted with STLA in the Underwriting and Service Provider Agreements that outlined territorial boundaries and premium-payment terms. See Docs. 74-5 at 1-74-18 at 1. Finally, to the extent that STLA relies on STC's alleged breach of the perpetual license as the basis of its breach-of-contract claim in the Formation Agreement (a.k.a. Joint Venture Agreement), the Court agrees with STGC and STC that such a claim has been foreclosed by the Court's prior opinion:

Counter-Defendants' motion to dismiss the counter claim and third party claims for breach of contract under the perpetual right clause of the First Addendum (Joint Venture Agreement) is GRANTED. The Counterclaim and Third Party Claims for breach of contract under the alleged perpetual right to use of the Stewart name are DISMISSED.

Doc. 56 at 9. As a result, summary judgment is warranted on STLA's breach-of-contract claims against both STGC and STC regarding the Formation Agreement.

         2. ...


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