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CompuCom Systems Inc v. WJ Global LLC

United States District Court, N.D. Texas, Dallas Division

March 31, 2017

COMPUCOM SYSTEMS, INC., Plaintiff,
v.
WJ GLOBAL, LLC, Defendant.

          ORDER

          Sam A. Lindsay, United States District Judge.

         Before the court is Plaintiff CompuCom Systems, Inc.'s Motion for Entry of Default Judgment (“Motion”) (Doc. 47), filed October 9, 2015; and Plaintiff CompuCom Systems, Inc.'s Expedited Motion to Release or Reduce Preliminary Injunction Bond (Doc. 52), filed January 20, 2017. On June 21, 2016, Magistrate Judge Paul D. Stickney entered the Findings, Conclusions and Recommendation of the United States Magistrate Judge (“Report”) (Doc. 50), recommending that the court grant in part and deny in part the Motion. Specifically, the magistrate judge recommended that the court grant the Motion as to liability with respect to Plaintiff's breach of contract claim but deny the Motion with respect to its request for declaratory relief and deny as moot the Motion with respect to its request for an accounting.[*]The magistrate further recommended that the court defer ruling on the amount of damages that Plaintiff is entitled to for its contract claim until after Plaintiff submits supplemental briefing establishing the reasonableness of the attorney's fees requested.

         On July 8, 2016, Plaintiff CompuCom Systems, Inc. (“Plaintiff” or “CompuCom”) filed objections regarding the Report's recommendation as to its request for declaratory relief and attorney's fees. After considering the motions, Plaintiff's pleadings and evidence, the Report, and conducting a de novo review of that portion of the Report to which objection was made, the court, for the reasons herein explained, accepts as modified the Report, overrules Plaintiff's objections, and denies without prejudice Plaintiff's Motion (Doc. 47), except for Plaintiff's contract claim based on WJ Global's failure to pay its subcontractors, which is denied. Further, the court denies without prejudice Plaintiff CompuCom Systems, Inc.'s Expedited Motion to Release or Reduce Preliminary Injunction Bond (Doc. 52).

         I. Standard of Review

         A magistrate judge's determination regarding a dispositive matter is reviewed de novo if a party timely objects. 28 U.S.C. § 636(b)(1)(C); Fed.R.Civ.P. 72(b). A magistrate judge's determination regarding a nondispositive matter is reviewed under the “clearly erroneous or contrary to law” standard. 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a). As explained by the court in Arters v. Univision Radio Broadcasting TX, L.P., No. 3:07-CV-0957-D, 2009 WL 1313285 (N.D. Tex. May 12, 2009):

The clearly erroneous standard applies to the factual components of the magistrate judge's decision. The district court may not disturb a factual finding of the magistrate judge unless, although there is evidence to support it, the reviewing court is left with the definite and firm conviction that a mistake has been committed. If a magistrate judge's account of the evidence is plausible in light of the record viewed in its entirety, a district judge may not reverse it. The legal conclusions of the magistrate judge are reviewable de novo, and the district judge reverses if the magistrate judge erred in some respect in [his] legal conclusions. [T]he abuse of discretion standard governs review of that vast area of choice that remains to the [magistrate judge] who has properly applied the law to fact findings that are not clearly erroneous.

Id. at *2 (citations and internal quotation marks omitted). As Plaintiff's request for entry of a default judgment against Defendant is dispositive, the court will conduct a de novo review of the Report.

         II. Motion for Default Judgment

         A. Standard for Default Judgment

         The magistrate judge set forth the correct legal standard for entry of default judgment pursuant to Federal Rule of Civil Procedure 55(b). Accordingly, the court need not repeat that legal standard for purposes of ruling on CompuCom's Motion and objections to the Report.

         B. Breach of Contract

         The magistrate judge found that Plaintiff's pleadings satisfied the requirements for its breach of contract claim and recommended that the court grant Plaintiff's Motion as to liability with respect to Plaintiff's breach of contract claim. Although CompuCom did not object to this finding or recommendation, the court believes this issue warrants further discussion and rejects the magistrate judge's finding that Plaintiff's pleadings satisfy the requirements for its breach of contract claim based on Defendant WJ Global, LLC's (“Defendant” or “WJ Global”) breach of the parties' contract. In its Motion, CompuCom seeks a default judgment on its contract claim to recover damages sustained for the following alleged material breaches by WJ Global of the parties' contractual agreements: (1) Defendant's failure to pay its subcontractors under the Subcontractor Master Agreement (“Master Agreement”) and related statements of work (“SOW” or “SOWs”); (2) Defendant's failure to indemnify CompuCom “when presented with a claim or demand arising from an act or omission in WJ Global's relationship with its subcontractors”; (3) Defendant's failure to provide CompuCom with a release of liens by WJ Global and its subcontractors; and (4) Defendant's refusal or failure to provide requested information timely regarding it subcontractors and their claims at the request of CompuCom. Pl.'s Br. 4.

         As correctly noted by the magistrate judge, the elements for breach of contract under Texas law are as follows: “(1) a valid contract; (2) the plaintiff performed or tendered performance; (3) the defendant breached the contract; and (4) the plaintiff was damaged as a result of that breach.” Aquila Sw. Pipeline, Inc. v. Harmony Exploration, Inc., 48 S.W.3d 225, 235 (Tex. App.-San Antonio 2001, pet. denied). There are five elements of a contractual indemnity claim under Texas law: (1) a contractual indemnity agreement exists; (2) the indemnity agreement obligates one party to indemnify the other for particular claims; (3) those claims were made; (4) all conditions precedent for recovery have occurred or been waived or excused; and (5) the party seeking relief has been damaged. See Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 719 (5th Cir. 1995) (citing Ford v. Aetna Ins. Co., 394 S.W.2d 693 (Tex. App.-Corpus Christi 1965, writ ref'd n.r.e.)). The court determines as a matter of law what the contract requires of the parties. See Meek v. Bishop Peterson & Sharp, P.C., 919 S.W.2d 805, 808 (Tex. App.-Houston [14th Dist.] 1996, writ denied). When the terms of a contract are clear and unambiguous, and the facts concerning breach or performance are undisputed or conclusively established, the issue of whether the facts show performance or breach is also decided as a matter of law. Id. A breach of contract also occurs when one party to a contract prevents another party to the contract from performing its side of the bargain. See Texas Nat'l Bank v. Sandia Mortg. Corp., 872 F.2d 692, 699 (5th Cir.1989). The “party seeking to recover under a contract bears the burden of proving that all conditions precedent have been satisfied.” Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 283 (Tex. 1998). “A condition precedent is an act or event that must take place before performance of a contractual obligation is due.” Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d 485, 488 (5th Cir. 2007); Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992). “[T]o determine whether a condition precedent exists, the intention of the parties must be ascertained; and that can be done only by looking at the entire contract.” Solar Applications Eng'r, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 109 (Tex. 2010); Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex. 1990). Indemnity agreements are construed under the normal rules of contract construction. Associated Indem. Corp., 964 S.W.2d at 284.

         Because of its default, Defendant is deemed to have admitted the allegations set forth in the Plaintiff's Complaint (“Complaint”). Nonetheless, the court must review the pleadings to determine whether Plaintiff can establish a viable claim for the relief sought. Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). Plaintiff's pleadings are sufficient to establish the existence of valid contracts entered into between CompuCom and WJ Global that include the Master Agreement and several SOWs. In addition, the Master Agreement contains an indemnity provision. The court's concern rests with the remaining requirements for Plaintiff's contract claim.

         1. Failure to Pay Subcontractors under Master ...


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