CORRECT RX PHARMACY SERVICES, INCORPORATED, Plaintiff - Appellee
CORNERSTONE AUTOMATION SYSTEMS, L.L.C., Defendant-Appellant
Appeals from the United States District Court for the
Northern District of Texas
HIGGINBOTHAM, DENNIS, and HO, Circuit Judges.
L. DENNIS, Circuit Judge.
Cornerstone Automation Systems, L.L.C. ("CASI")
contracted with Plaintiff Correct Rx Pharmacy Services, Inc.
("Correct Rx") to supply a custom automated
pharmacy system by a specified deadline. CASI failed to
deliver, and Correct Rx brought the present diversity action.
Rather than bringing a breach of contract claim, Correct RX
asserted a Texas common law tort claim for negligent
misrepresentation based on various alleged misstatements CASI
had made over the course of their dealings regarding its
experience, resources, and capabilities. The jury found in
favor of Correct Rx, and CASI appeals the district
court's denial of its subsequent motion for judgment as a
matter of law. CASI argues that Texas's "economic
loss rule" precludes tort liability for economic losses
resulting from a defendant's negligence in negotiating or
fulfilling a contract between the parties.
review, we hold that the district court correctly determined
that Texas's economic loss rule does not preclude Correct
Rx's tort claim, and, accordingly, we AFFIRM.
Rx is a Maryland-based licensed institutional pharmacy that
primarily services correctional facilities and other
government entities. In 2013, Correct Rx's Manager of
Operations, Dr. Jaye Wexler, viewed an internet video of
CASI's customizable warehouse automation system,
SolidSuite. Hoping to increase the efficiency of Correct
Rx's operations, Wexler contacted CASI's Texas
headquarters to inquire whether the company knew of any
businesses offering similar automated solutions for packaging
and shipping medication. CASI's Director of Pharmacy
Sales, Mark Gillet, introduced Wexler to CASI founder Michael
Doke, and the two informed Wexler that CASI was itself
working in the pharmacy industry. Gillet and Doke asserted
that CASI had already created SolidSuiteRx, an adaptation of
its standard software that was optimized for pharmacy use.
stated that CASI had previously supplied an automated system
much like the one Correct Rx was interested in to the
California Department of Correction and Rehabilitation
("CDCR"), and Gillet related his belief that
"a very similar system" would be "the ultimate
solution" for Correct Rx's needs. Correct Rx alleges
that CASI repeatedly and falsely assured Correct Rx at this
meeting and over the following ten months that creating its
pharmacy automation system would require only minor
adaptations from products that the company had already fully
developed for its other institutional pharmacy
companies negotiated and drew closer to a purchase agreement,
Correct Rx informed CASI in April 2014 that its lease on its
current workspace was expiring and that it was preparing to
lease a larger facility to accommodate the new automation
system. It was thus a priority that the system be installed
by November 2014 in order for it to be fully functional when
Correct Rx began operations at the new facility on January 1,
2015. This would allow for a 30-week timeline for CASI to
completely develop and install the system.
who was in charge of CASI's engineering and software
development, met with two CASI project managers, Carlos
Jiminez and Kory Ballew, to discuss whether CASI would be
able to meet the deadline. Both Jiminez and Ballew, the
latter of whom would become the manager of the Correct Rx
project, informed Doke that they did not believe it was
possible to complete and install the system within 30 weeks.
At that time, CASI had never completed and installed a
pharmacy-automation system in less than 104 weeks. Jiminez
would later testify that no pharmacy-automation project he
had worked on had been delivered on-time. The CDCR account
had taken three years and ten deadline extensions to
complete, and a system CASI had contracted to supply to the
United States Veterans Administration was incomplete as of
the date of trial despite eight deadline extensions. CASI did
not disclose these facts to Correct Rx.
the reservations expressed by the project managers, CASI
informed Correct Rx that it would agree to the 30-week
timeline for installation. To facilitate this accelerated
timeline, CASI requested an "enhanced" down payment
of 52.5% of the contract price so that it could immediately
order components with "long lead times"-those parts
that would take a protracted period to manufacture, deliver,
or assemble. Correct Rx agreed to the enhanced down payment,
and the parties signed a contract on May 1, 2014, with an
agreed upon purchase price of $4, 194, 654.
unspecified reasons, CASI experienced delays in starting the
initial assembly of the system. In late July 2014, CASI
informed Correct Rx that it would not meet the 30-week
deadline. Correct Rx proceeded to secure an extension of its
previous lease so as to still allow CASI to install the
automated system in an empty workspace at its new location.
On September 10, 2014, the parties entered into an amended
agreement extending the delivery deadline to March 6, 2015,
in exchange for a $200, 000 reduction in the purchase price.
Rx contends that CASI made additional false representations
during this period in order to conceal its lack of progress
on the system. Correct Rx also claims that CASI
misrepresented its use of the enhanced down payment it
required of Correct Rx, pointing to a progress chart Dr.
Wexler viewed during site visits in August 2014 and ...