Cory v. O'Connor

          MEMORANDUM OPINION AND ORDER

          JANE J. BOYLE UNITED STATES DISTRICT JUDGE

         One issue remains in this case-whether Defendants Tammy O'Connor and Michael Stewart can be bound and held liable for breaching a contract they never signed. The Court previously granted summary judgment against O'Connor and Stewart on all of their claims relating to the sale of their company to Atherio, Inc. Doc. 211, Mem. Op. & Order. But the Court did not reach the issue of now-Plaintiff Jason Cory's counterclaim against Defendants. Cory's counterclaim asserts that O'Connor and Stewart breached a different agreement-the Omnibus Compromise and Release Agreement (the “Omnibus Agreement”)-that entitles Cory to damages and attorneys' fees incurred in defending against O'Connor and Stewart's original claims. See Doc. 161, Cory's Answer & Countercl., ¶¶ 350-73. The Omnibus Agreement was entered into by Cory, Atherio (through its representatives), and a related party to, among other things, terminate Cory's employment with Atherio. The Omnibus Agreement also contained terms under which Cory, Atherio, and other Atherio parties would release any claims they had or might have had against each other. O'Connor and Stewart-Atherio shareholders at the time-did not sign the Omnibus Agreement. But Cory nonetheless argues they should be bound by this release provision because (1) their agent had authority to bind them to the Omnibus Agreement or (2) they accepted the benefits of the Omnibus Agreement. The parties have filed crossmotions for summary judgment on these issues. After reviewing the briefing, the Court DENIES Cory's motion for summary judgment (Doc. 218) and GRANTS Defendants O'Connor and Stewart's motion for summary judgment (Doc. 216). Because no other issues remain in this matter, a final judgment will follow this Order.

         I. BACKGROUND

         The factual background of this case has been recounted in the Court's prior opinions (Docs. 100, 109, 152, & 211). The Court discusses only the facts pertinent to the remaining issues in the case.

         Tammy O'Connor and Michael Stewart sold their ownership interests in their technology company to Atherio, Inc. in June 2013. Doc. 224, Defs.' Resp., 3. At the time of this transaction, Jason Cory was Atherio's chief executive officer. Doc. 219, Cory's Br. Summ. J., 2. In January of 2014, a dispute arose between Cory and Atherio's other executives based on allegations of potential company mismanagement. Id.; Doc. 224, Defs.' Resp., 3. Atherio's board placed Cory on unpaid leave, and Cory and the Atherio executives began negotiating a resolution. Doc. 224, Defs.' Resp., 3-4. In May of 2014, Atherio, Cory, and Prudent Capital (Atherio's mezzanine lender) reached an agreement on the terms of Cory's exit from Atherio-the Omnibus Agreement. Doc. 217, Defs.' Br. Summ. J., 1; Doc. 217-4, Defs.' App., 256-269.

         Relevant to this Order, § 15 of the Omnibus Agreement provides:

Atherio Parties' Cory Parties Release: Expressly subject to Section 15.1 hereof (which obligations are expressly not released hereby), upon the Effective Date, Atherio, any Affiliate of Atherio, and any Atherio Party hereby release, remise, and forever discharge Cory and the Cory Parties from any and all rights, claims, demands, Actions, causes of action, losses, expenses and judgments, whether known or unknown, suspected or unsuspected, accrued or not accrued, to which Atherio, any Affiliate of Atherio, or the Atherio Parties have, may have, or may claim to have against, Cory or any of the Cory Parties provided, however, that Atherio, any Affiliate of Atherio, and any Atherio Party does not waive, relinquish or may release any of its rights or any of the obligations of Cory, arising out of this Agreement.

Doc. 217-4, Defs.' App., 262 (emphasis added). A previous section of the Omnibus Agreement defines “Atherio Parties” as “shareholders (including Furst, Farb, Dinkel, Tammy O'Connor, Michael S. Stewart, and Pickett).” Id. at 261.

         The Omnibus Agreement was signed and executed in May of 2014 by Cory, Greg Furst-on behalf of Atherio as its CEO at the time-and Steven Schwartz, on behalf of Prudent Capital. Id. at 267-69. It is undisputed that O'Connor and Stewart did not sign the Omnibus Agreement. Doc. 217, Defs.' Br. Summ. J., 1; Doc. 219, Cory's Br. Summ. J., 1. In fact, they argue that they never saw the Omnibus Agreement until a subsequent legal proceeding in 2015. Id. at 7. O'Connor and Stewart argue that until they saw the agreement in that proceeding, they never knew it included a term (§ 15) that purported to release their personal claims against Cory. Id.

         Cory, on the other hand, argues that Furst had the authority to bind O'Connor and Stewart to the Omnibus Agreement based on discussions he had with them. Doc. 219, Cory's Br. Summ. J., 5-6 (citing Furst's Dep.). Alternatively, Cory claims that the Omnibus Agreement included provisions that benefitted the Defendants, such as an indemnification provision, and that they accepted these benefits. Id. at 6-7. Finally, Cory argues that O'Connor and Stewart are liable to him for damages and attorneys' fees because they violated the release provision cited above and breached the Omnibus Agreement when they originally brought this suit against him. Id. at 15-17.

         On January 18, 2019, both sides filed crossmotions for summary judgment on Cory's breach of contract claim. Cory filed his motion for summary judgment (Doc. 218), in which he asserts O'Connor and Stewart are bound by the Omnibus Agreement as a matter of law. O'Connor and Stewart filed their motion for summary judgment on the same issue, in which they argue that Cory has failed to create a genuine issue of material fact on his theories of liability. Both motions have been fully briefed, and the Court now considers whether O'Connor and Stewart can be bound by this agreement.

         II. LEGAL STANDARD

         Summary judgment is appropriate “if 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.” Fed.R.Civ.P. 56(a). A dispute “is ‘genuine' if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party.” Burrell v. Dr. Pepper/Seven Up Bottling Grp., 482 F.3d 408, 411 (5th Cir. 2007). And a fact “is ‘material' if its resolution could affect the outcome of the action.” Id.

         The summary-judgment movant bears the burden of proving that no genuine issue of material fact exists. Latimer v. Smithkline & French Labs., 919 F.2d 301, 303 (5th Cir. 1990). Usually, this requires the movant to identify “those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted). But if the non-movant ultimately bears the burden of proof at trial, the movant may satisfy its burden just by pointing to the absence of evidence supporting the non-movant's case. Id. at 322-23.

         If the movant meets that burden, then it falls to the non-movant to “show with significant probative evidence that there exists a genuine issue of material fact.” Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000) (internal quotation marks omitted) (citing Conkling v. Turner, 18 F.3d 1285, 1295 (5th Cir. 1994)). And significant probative evidence is just that: significant. See Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (per curiam). “[M]etaphysical doubt as to material facts, ” “conclusory allegations, ” “unsubstantiated assertions, ” or a mere “scintilla of evidence” will not do. Id.(internal citations and quotation marks omitted). Rather, “the non-movant must go beyond the pleadings and present specific facts indicating a genuine issue for trial.” Bluebonnet Hotel Ventures, L.L.C. v. Wells Fargo Bank, N.A., 754 F.3d 272, 276 (5th Cir. 2014) (citing Celotex, 477 U.S. at 324).

         To be sure, the court views evidence in the light most favorable to the non-movant when determining whether a genuine issue exists. Munoz v. Orr, 200 F.3d 291, 302 (5th Cir. 2000). The presence of crossmotions does not change this approach: The court will “review each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party.” Ford Motor Co. v. Tex. Dep't of Transp., 264 F.3d 493, 498 (5th Cir. 2001). But it need not “sift through the record in search of evidence to support a party's opposition to summary judgment.” Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n.7 (5th Cir. 1992)). Simply put, the non-movant must “identify specific evidence in the record” and “articulate the precise manner in which that evidence supports [its] claim.” Id. If it cannot, then the court must grant summary judgment. Little, 37 F.3d at 1076.

         III. ANALYSIS

         The Court must decide if O'Connor and Stewart-nonsignatories to the Omnibus Agreement-can nonetheless be bound by it and held liable for breaching it. The Court asked the parties to address which principles of law would support such liability. Doc. 213, Status Report Order. Cory argues that O'Connor and Stewart can be held liable under (1) agency law or (2) a ratification/adoption theory. Doc. 219, Cory's Br. Summ. J., 1. The Court addresses each theory in turn.

         A. Agency Theory

         The issue under this theory is whether Greg Furst, as an agent of O'Connor and Stewart, had their authority to bind them to the Omnibus Agreement. Under Texas law, ^[1] “[a]n agent cannot bind a principal absent either actual or apparent authority.” Sanders v. Total Heat & Air, Inc., 248 S.W.3d 907, 913 (Tex. App.-Dallas 2008, no pet.). “Texas law does not presume agency, and the party who alleges it has the burden of proving it.” IRA Res., Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007). “An agent's authority to act on behalf of a principal depends on some communication by the principal either to the agent (actual or express authority) or to the third party (apparent or implied authority).” Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007).

         The Court will first determine whether the summary-judgment evidence supports a finding of actual authority and then whether the ...