617 Fed.Appx. 272 (5th Cir. 2015), 13-51098, Transverse, L.L.C. v. Iowa Wireless Services, L.L.C.

Docket Nº:13-51098
Citation:617 Fed.Appx. 272
Opinion Judge:PER CURIAM
Party Name:TRANSVERSE, L.L.C., Plaintiff--Appellee--Cross-Appellant, v. IOWA WIRELESS SERVICES, L.L.C., doing business as i wireless, Defendant--Appellant--Cross-Appellee
Attorney:For TRANSVERSE, L.L.C., Plaintiff - Appellee Cross-Appellant: Raymond Edward White, Esq., Blaire Allen Knox, Nelia Robbi, McGinnis, Lochridge & Kilgore, L.L.P., Austin, TX. For IOWA WIRELESS SERVICES, L.L.C., doing business as i wireless, Defendant - Appellant Cross-Appellee: Sidney Katherine Pow...
Judge Panel:Before DAVIS and ELROD, Circuit Judges.[*]
Case Date:June 11, 2015
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 272

617 Fed.Appx. 272 (5th Cir. 2015)

TRANSVERSE, L.L.C., Plaintiff--Appellee--Cross-Appellant,

v.

IOWA WIRELESS SERVICES, L.L.C., doing business as i wireless, Defendant--Appellant--Cross-Appellee

No. 13-51098

United States Court of Appeals, Fifth Circuit

June 11, 2015

UNPUBLISHED

As Revised, August 5, 2015.

Editorial Note:

Please Refer Federal Rule of Appellate Procedure Rule 32.1

Appeals from the United States District Court for the Western Division of Texas USDC. No. 1:10-CV-517.

For TRANSVERSE, L.L.C., Plaintiff - Appellee Cross-Appellant: Raymond Edward White, Esq., Blaire Allen Knox, Nelia Robbi, McGinnis, Lochridge & Kilgore, L.L.P., Austin, TX.

For IOWA WIRELESS SERVICES, L.L.C., doing business as i wireless, Defendant - Appellant Cross-Appellee: Sidney Katherine Powell, Dallas, TX; Torrence Evans Lewis, Esq., Sidney Powell, P.C., Pittsburgh, PA; John Robert Nelson, Locke Lord, L.L.P., Austin, TX.

Before DAVIS and ELROD, Circuit Judges.[*]

OPINION

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PER CURIAM [**]

Iowa Wireless Services (IWS) hired Transverse to develop customized billing software. When the parties' business relationship unraveled, they sued each other for breach of a " Supply Contract," breach of a non-disclosure agreement, and on several claims sounding in tort. After the dust settled in the district court, Transverse was awarded $11.7 million in damages for IWS's breach of the Supply Contract, but the district court rejected Transverse's tort claims and its claim that IWS breached the non-disclosure agreement. Each party appealed various aspects of the judgment. As we explain below, we affirm in part, reverse and render in part, vacate in part, and remand for further proceedings consistent with this opinion.1

I.

The parties in this case are IWS, a wireless telephone service provider, and Transverse, a telecommunications billing software development company. For several years, IWS had used a billing system developed and maintained by a company called Convergys. However, in late 2008, Convergys notified IWS that it ( i.e., Convergys) would discontinue its billing system in March 2010. IWS set out to find a replacement billing system, eventually hiring Transverse to develop a billing system based on Transverse's software, which was known as " blee(p)." 2 Although the billing

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system would be based on blee(p), it was not to be an off-the-shelf product; rather, it was to be customized to meet IWS's particular needs and specifications. IWS and Transverse signed two separate agreements to govern their relationship. The first was a " Mutual Non-Disclosure Agreement" (NDA), in which IWS agreed not to use or disclose Transverse's " Confidential Information." The second was a Supply Contract purportedly obligating Transverse to develop customized billing software for IWS.

The Supply Contract called for the mutual development of a " Controlling Specification" and " acceptance criteria" -- i.e., customized features and functionality that Transverse needed to build into the billing software to satisfy its end of the bargain. According to the Supply Contract, Transverse was required to " satisfy the [a]cceptance criteria no later than 11:59 PM Central Standard Time February 28, 2010," which was the date when Convergys planned to discontinue IWS's old billing system. However, the acceptance criteria were not enumerated in the Supply Contract; rather, the parties agreed to negotiate and develop a " User Acceptance Test" (UAT) document that would contain the acceptance criteria. To that end, after signing the Supply Contract, IWS and Transverse met several times to discuss IWS's needs and blee(p)'s capabilities. A draft UAT document was created, and IWS employees recorded the content of the parties' discussions in a set of meeting notes.

In early February 2010, the parties agreed that the project was behind schedule. IWS, without " waiving any rights or terms under the original contract," agreed to a timeline change that divided delivery of the system into four parts over an extended period of time. IWS also procured an extension with Convergys through June 2010 and reached out to IDI, a competitor of Transverse's, about the possibility of IDI's developing a billing system for IWS. To help bring IDI up to speed on IWS's needs, IWS sent IDI the draft UAT document and the meeting notes from the various meetings between IWS and Transverse.

February 28 came and went, and IWS and Transverse still had not finalized the UAT document (for reasons the parties vigorously dispute). Because the UAT document was not finalized, no acceptance criteria existed and, needless to say, Transverse had not satisfied the acceptance criteria.

IWS and Transverse finally agreed to a UAT document containing the acceptance criteria on March 13, 2010. Two months later, Transverse still had not satisfied the acceptance criteria (or even delivered the first part of the divided delivery plan). IWS then terminated the Supply Contract, claiming that Transverse had materially breached the contract by not delivering an " acceptable billing system on or before February 28, 2010." After IWS terminated the Supply Contract, it procured an additional extension from Convergys and formally contracted with IDI.

Transverse filed a lawsuit against IWS in Texas state court, alleging, inter alia, breach of the Supply Contract, breach of the NDA, misappropriation of trade secrets, violation of the Texas Theft Liability Act, and conversion. IWS removed the case to federal district court and counterclaimed for, inter alia, breach of the Supply Contract. The parties' claims alleging breach of the Supply Contract were tried to the jury, while Transverse's claims for breach of the NDA, trade secret misappropriation, conversion, and violation of the Texas Theft Liability Act were tried to the bench pursuant to a jury-waiver provision in the NDA.

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The jury found in favor of Transverse, determining that IWS breached the Supply Contract by wrongfully terminating it and by " giving a competitor access to the Service," in violation of an express prohibition in the Supply Contract. The jury awarded Transverse $10 million for lost profits, $1.7 million in reliance damages, and $9.3 million for lost value of blee(p) as a result of IWS's " access to the Service" breach. However, the district court set aside the $9.3 million award, finding that it was not supported by legally sufficient evidence. The district court ruled against Transverse on its tort claims and on its claim for breach of the NDA. The parties cross-appealed.

II.

We review the district court's factual findings for clear error and its legal conclusions de novo. Arete Partners, L.P. v. Gunnerman , 594 F.3d 390, 394 (5th Cir. 2010). The question of whether a contract is enforceable is a legal question, Westlake Petrochemicals, L.L.C. v. United Polychem, Inc., 688 F.3d 232, 238 (5th Cir. 2012), as is the interpretation of contract terms, In re Isbell Records, Inc., 586 F.3d 334, 336 (5th Cir. 2009).3

III.

We begin with the breach-of-contract claims arising out of the Supply Contract. As noted, the jury found that IWS breached the Supply Contract in two separate ways: (1) by terminating the contract on May 3, 2010, and (2) by providing IDI with " access to the service." On appeal, IWS argues that the Supply Contract was unenforceable and, even if it was enforceable, that Transverse breached first and that Transverse's " access to the Service" claim is untenable as a matter of law. IWS also insists that all damages awards must be vacated. Transverse defends its judgment by arguing that the Supply Contract was valid and enforceable, that the " access to the Service" claim properly was submitted to the jury, and that the damages awards were proper.

A.

IWS first argues that the Supply Contract was unenforceable because it lacked essential terms. As IWS points out, the Supply Contract uses the future tense and expressly leaves open for future negotiation the specific requirements for the customized billing software, including the " Controlling Specification" for the Service, the " acceptance criteria," and the " Acceptance Tests." See T.O. Stanley Boot Co. v. Bank of El Paso , 847 S.W.2d 218, 221 (Tex. 1992) ( " Where an essential term is open for future negotiation, there is no binding contract." ); see also Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000) (" [W]hen an agreement leaves material matters open for future adjustment and agreement that never occur, it is not binding upon the parties and merely constitutes an agreement to agree." ). Because these terms were left open for future negotiation, IWS argues that Transverse was not under any obligation to perform until a second agreement was reached, rendering the contract an unenforceable agreement to agree. IWS's argument has persuasive force. Nevertheless, because IWS did not preserve

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the argument in the district court, the argument fails.

IWS did not argue that the contract was unenforceable until after the jury returned its verdict, in a motion for judgment notwithstanding the verdict. However, " Rule 50(b) of the Federal Rules of Civil Procedure precludes a district court from entertaining a motion for judgment notwithstanding the verdict unless the movant has first sought a directed verdict after presentation of all the evidence [and before the jury verdict]." Bohrer v. Hanes Corp., 715 F.2d 213, 216 (5th Cir. 1983). Although IWS moved for a directed verdict at the close of evidence, it did not argue in its motion that the Supply Contract was unenforceable. To the contrary, IWS stated in its motion for directed verdict that " it is undisputed that the parties entered into...

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