United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
Rosenthal Chief United States District Judge
Inc. sued Quantem FBO Group - Houston, LLC, in Texas state
court, seeking a declaratory judgment that Quantem was not
entitled to the return of a $100, 000 earnest-money deposit.
(Docket Entry No. 1-1, Ex. A). After Quantem timely removed
to this court, Conservair moved for summary judgment, Quantem
responded, and Conservair replied. (Docket Entry No. 21, 24,
25). The court ordered supplemental briefing on an unbriefed
issue, and the parties filed supplemental briefs. (Docket
Entries No. 27, 28, 31, 32). Conservair filed a motion to
strike Quantem's surreply to the request for supplemental
briefing, to which Quantem responded. (Docket Entry No. 33,
34). The motion to strike is denied because Conservair was
able to, and did, respond. Having considered the motions,
responses, replies, and surreplies; the summary judgment
record; and the applicable law, the court denies
Conservair's motion for summary judgment, for the reasons
set out in detail below.
a Texas company, owned and operated a fixed-base operation
(FBO) at the Lone Star Executive Airport in Conroe, Texas.
Quantem, an Ohio company, sought to purchase the Conroe FBO.
The parties entered into an Asset Purchase Agreement on May
11, 2015. (Docket Entry No. 21-1, Ex. A). The Agreement
provided that the sale would close on or before May 31, 2015.
(M ¶ 3.1). The closing date could be extended by the
parties' mutual agreement or by Quantem giving Conservair
written notice stating that Quantem needed a reasonable
amount of additional time to satisfy the conditions of the
Agreement set out several conditions precedent to
Quantem's obligation to close. Quantem could waive the
conditions. (Id. at ¶ 8). The conditions
included Quantem's right to conduct satisfactory due
diligence before closing. (Id. at ¶ 8.1). The
APA could be terminated by a party giving written notice
that, as of the closing date, "the conditions precedent
to the performance of the obligations of the party giving
such notice shall not have been fulfilled and shall not have
been waived by such party." (Id. ¶ 11).
The Agreement stated that it could be modified or amended,
"but only in writing, signed by the parties .. . ."
(Id. ¶ 14.5).
29, 2015, Quantem gave written notice, under ¶ 3.1 of
the Agreement, that it needed additional time to conduct its
due diligence. That notice extended the Agreement's
closing date. (Docket Entry No. 24-2, Ex. B at ¶ 3). In
June 2015, Quantem and Conservair executed a written
amendment to the Agreement, setting a new closing date of
September 15, 2015, and requiring Quantem to pay a $100, 000
earnest money deposit to be applied to the purchase price if
the sale closed, and to be kept by Conservair if the sale did
not close because Quantem materially breached its obligations
under the Agreement. (Docket Entry No. 24-3, Ex. C).
(Id.). As amended, the Agreement also provided that
if the sale did not close because the conditions precedent to
Quantem's obligation to close had not been satisfied and
were not waived, the deposit would be returned to Quantem.
sale did not close on or before September 15, 2015. The
parties disagree on what happened around the closing date and
the legal significance of those occurrences. Conservair
argues that Quantem "did not seek a second extension of
the Agreement prior to the Closing Date, and failed to
terminate the agreement in the timeframe provided by the
Agreement." (Docket Entry No. 21 at 4). Instead,
Conservair says that Quantem waited until February 2016 and
then purported to give notice of its intent to terminate the
Agreement under ¶ 11. (Id.). Conservair asserts
that as a result, Quantem is not entitled to a refund of its
$100, 000 earnest money deposit.
has a different account. According to Quantem, the parties
orally agreed to extend the closing date in a September 10,
2015 conference call, and they continued to cooperatively
work toward an agreement over the next several months.
(Docket Entry No. 24 at 5). Quantem presented several pieces
of summary judgment evidence. In their affidavits. Ken
Allison, Quantem's CEO, (Docket Entry No. 24-5, Ex. E),
and Blake Fish, Quantem's president (Docket Entry No.
24-4, Ex. D), both stated that during this conference call,
the parties orally agreed to extend the closing date and
continue cooperating on due diligence. (Docket Entries Nos.
24-5, Ex. E and 24-4, Ex. D). Quantem also presented the
affidavit of Frank Pisano, Quantem's CFO. (Docket Entry
No. 24-2, Ex. B). Pisano testified that in October, November,
and December of 2015, he continued to communicate with
Conservair about due diligence issues, and Conservair
continued to provide requested due diligence information.
(Id.). Quantem also attached copies of some of this
correspondence. (Docket Entries No. 24-6 through 24-16, Exs.
and Allison both stated in their affidavits that in December
2015 and January 2016, based on the information uncovered
through Quantem's due diligence, Quantem sent Conservair
two new proposals for transaction terms that, in their view,
more fairly distributed the risks. (Docket Entries No. 24-4
and 24-5; Ex. D at ¶¶ 4-9, Ex. E at ¶¶
5-6). Both Fish and Allison stated that their discussions
included the fact that the parties were still operating under
the original Agreement with the modified closing date.
(Id.). The affidavits both stated after these
efforts to reach an agreement on the proposed sale, Quantem
remained dissatisfied with the outcome of its due diligence
and exercised its right to terminate the Agreement under
¶ 11 in February of 2016. (Id.). That led to
Quantem's demand for the return of its $100, 000 earnest
summary judgment dispute presents a narrow issue: whether
Quantem has demonstrated a genuine factual dispute material
to deciding whether the parties extended the closing date
beyond September 15, 2015. Quantem argues that the
parties' oral agreement to extend and subsequent course
of dealing, including continued cooperation on due diligence
work, give rise to a triable factual dispute on whether the
Agreement was extended. Conservair argues that the summary
judgment evidence would not permit a reasonable jury to find
that the parties agreed to extend the closing date because
the Agreement required legally effective modifications to be
made in writing.
The Applicable Legal Standards
judgment is required when 'the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.'" Trent
v. Wade, 776 F.3d 368, 376 (5th Cir. 2015) (quoting
Fed.R.Civ.P. 56(a)). "A genuine dispute of material fact
exists when the 'evidence is such that a reasonable jury
could return a verdict for the nonmoving party.'"
Nola Spice Designs, LLC v. Hay del Enters., Inc.,
783 F.3d 527, 536 (5th Cir. 2015) (quoting Anderson v.
Liberty Lobby, 477 U.S. 242, 248 (1986)). "The
moving party 'bears the initial responsibility of
informing the district court of the basis for its motion, and
identifying those portions of [the record] which it believes
demonstrate the absence of a genuine issue of material
fact.'" Id. (quoting EEOC v. LHC Grp.,
Inc., 773 F.3d 688, 694 (5th Cir. 2014)); see also
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
the non-movant bears the burden of proof at trial, the movant
may merely point to the absence of evidence and thereby shift
to the non-movant the burden of demonstrating by competent
summary judgment proof that there is an issue of material
fact warranting trial." Id. (quotation marks
omitted); see also Celotex, 477 U.S. at 325.
Although the party moving for summary judgment must
demonstrate the absence of a genuine issue of material fact,
it does not need to negate the elements of the
nonmovant's case. Boudreaux v. Swift Transp.
Co., 402 F.3d 536, 540 (5th Cir. 2005). "A fact is
'material' if its resolution in favor of one party
might affect the outcome of the lawsuit under governing
law." Sossamon v. Lone Star State of Texas, 560
F.3d 316, 326 (5th Cir. 2009) (quotation omitted). "If
the moving party fails to meet [its] initial burden, the
motion [for summary judgment] must be denied, ...