Case Corp. v. Hi-Class Business Systems
| Decision Date | 21 December 2005 |
| Docket Number | No. 05-02-00103-CV.,05-02-00103-CV. |
| Citation | 184 S.W.3d 760 |
| Parties | CASE CORPORATION, Appellant and Cross-Appellee, v. HI-CLASS BUSINESS SYSTEMS OF AMERICA, INC. and HBS Systems, Inc., Appellees and Cross-Appellants. |
| Court | Texas Court of Appeals |
E. Paul Cauley, Jr., S. Vance Wittie and W. Neil Rambin, Sedgwick, Detert, Morgan & Arnold, LLP, Dallas, for Appellant.
Richard Abernathy, Larry R. Boyd, Charles J. Crawford, Abernathy, Roeder, Boyd & Joplin, P.C., McKinney, Brent L. Brown, Bracewell & Patterson, Cynthia Hollingsworth, Gardere, Wynne, Sewell, L.L.P., Dallas, for Appellees.
Before Justices MORRIS, MOSELEY, and O'NEILL.
Hi-Class Business Systems of America, Inc. (HBS) contracted with Case Corporation to become an approved or certified vendor of business systems to independently-owned Case dealers.1 When Case later started a more exclusive "preferred vendor" program that did not include HBS, HBS sued alleging breach of contract as well as fraud in inducing HBS to enter the contract.
The trial court granted summary judgment in favor of Case on HBS's fraudulent inducement claim based on the alleged representations that Case would reduce the number of certified vendors and HBS would be included in the new, exclusive group of preferred vendors. HBS's breach of contract claim and its remaining fraud claims were tried to a jury, which found in favor of HBS on the breach of contract claim and in favor of Case on the fraud claims. The trial court entered judgment based on the jury's verdict (and incorporating its earlier partial summary judgment). Case appeals the judgment entered against it on the breach of contract claim, while HBS appeals the judgment that it take nothing by way of its fraud claims.
For the reasons set forth herein, we conclude there is no evidence to support the jury's finding that Case breached its contract with HBS. We also conclude the trial court properly entered judgment in favor of Case on HBS's fraud claims. Therefore, we affirm the trial court's judgment in favor of Case on the fraud claims, reverse the trial court's judgment in favor of HBS on the breach of contract claim, and render judgment that HBS take nothing by way of those claims.
Case manufactures construction and agricultural equipment. In North America, Case sold its products through a network of authorized, independently-owned dealerships. HBS sold a computer software program called EPIC, which is an acronym for "Electronic Product Information Catalog." The EPIC program allowed dealers to electronically store and display manufacturers' parts catalogs and service information. HBS also sold dealer business management systems for agricultural equipment dealers. HBS developed EPIC as a "module" part of its dealer business system.
In 1993, Case approached HBS about acquiring a license to use EPIC. In March 1994, the parties signed a "Software License and System Development Agreement," by which HBS granted Case a software license for EPIC. As partial consideration for the EPIC license, Case agreed HBS would be a "certified, full service vendor" of dealer business systems to North American Case dealers.
The parties focus on two paragraphs of the license agreement. Paragraph 3.3 provided that HBS would become a "certified vendor" of business systems to Case dealers after it successfully tested its communications interfaces with Case.2 Paragraph 5.6 provided that Case would notify its dealers of HBS's "certified vendor" status.3 It is undisputed that HBS successfully completed the communications interfaces testing, and that Case approved HBS and notified its dealer network that HBS was a "certified vendor." Eventually, HBS was one of nine approved business system vendors.
The license agreement was for five years and was later extended for an additional year; thus, it terminated on March 2, 2000. However, during the term of the agreement Case decided it wanted to reduce the number of dealer business system vendors. Case sent a request for proposal to its certified vendors and received replies from all of them, including HBS. Thereafter, Case selected two vendors, DIS and NDS, as "preferred vendors," and contracted with them to develop the preferred software product and for the right of Case's dealers to use that software at no charge. In a September 17, 1996 letter to its dealers, Case announced the preferred vendor program and set forth a policy or "statement of direction" that included the provisions quoted below:
Migration to two dealer business system vendors.
Proactive enhancement of the two preferred systems to maximize the benefit to Case dealers and customers.
Provid[ing] a five year transition period to the preferred system vendors.
Continued cooperation with the existing approved vendors during the five year transition period.
The letter announced a series of regional meetings to tell the dealers about "this strategic direction and especially about our preferred vendors." Case communicated its "preferred vendor" direction to its dealers through these meetings and through communications to individual dealers.
Case also decided to work on enhancements to the dealer software systems. One such enhancement was a parts-order fulfillment software application called AMAX,4 which Case developed in conjunction with DIS.
When HBS was not selected as a preferred vendor, it sued Case, alleging both breach of contract and fraud claims. The breach of contract claim will be discussed in more detail herein. With respect to its fraud claims, HBS asserted in its first amended petition that Case induced HBS to enter the license agreement, and thus gained access to EPIC, by making the following representations:
(a) That as a certified vender, HBS would have access, for at least an assured period of five years, to the lucrative Case dealer market for business systems software;
(b) That Case was in the process of reducing the number of certified vendors to only two or three, and HBS would be included in the newly limited group of certified vendors (the "Hatch representations")5; and
(c) That Case would support HBS in its efforts to sell business systems software to Case dealers during the parties' entire relationship.
HBS alleged these representations were material and that they were knowingly false when made or were made recklessly with indifference to their truth or falsity. HBS also alleged that, in reliance on these assurances and the anticipated economic value of being one of a few certified vendors, HBS agreed to the terms of the license agreement (including certain price concessions for producing the Case catalogs) and developed at its own expense a version of EPIC (called SupportPro) specifically tailored for Case dealers. HBS alleged these representations caused it actual damages "including, but not limited to, lost profits and lost business goodwill." HBS also requested exemplary damages, claiming that Case acted with fraud and/or malice.
Case moved for partial summary judgment on the fraud claims on two grounds. It asserted the Hatch representations— that Case would reduce the number of vendors with HBS to be included in the remaining group—were "far too indefinite to support a fraud claim." It also asserted the fraud claims were barred by the Statute of Frauds because: (a) the alleged "plan" could not be performed within one year; and (b) HBS was "attempting to recover the lost profits it claim[ed] it would have made had Case followed through on Hatch's alleged `promise.'" Without specifying the basis for its ruling, the trial court granted summary judgment in Case's favor specifically on HBS's fraud claim based on the Hatch representations.
Subsequently, HBS filed its third amended petition, its live trial pleading.
HBS alleged that Case breached the license agreement, and specifically paragraph 3.3, by its conduct in establishing "preferred" and/or "partner" vendors, excluding HBS from
the "preferred" and/or "partner" group, and then announcing and systematically requiring each of its dealers to do business exclusively with preferred/partner vendors in prejudice to HBS' valuable contract right of access to the Case dealer market and its ability to perform on a level playing field.
HBS also alleged that, "in further breach of its contractual obligations," Case took actions to "prevent HBS from performing as a certified, full service vendor under its Agreement...." Specifically, HBS alleged Case spread negative information about HBS and persuaded its dealers to not purchase HBS systems or to cancel pending purchases. As a result, dealers cancelled pending orders with HBS or refused to continue planned purchases. HBS also alleged Case's conduct constituted a breach of the contractual duty of good faith and fair dealing under section 1.203 of the Uniform Commercial Code.
HBS also alleged Case breached the contract by breaching an implied duty of cooperation with respect to HBS's sales:
In light of its conduct of actively working against HBS sales activities during the term of its contract right to sell to Case dealers, Case breached the implied duties to cooperate and not hinder, prevent or interfere with HBS's ability to perform its functions under the Agreement as a certified, full service vendor.
HBS's third amended petition asserted a claim for tortious interference with prospective advantage/business relations. The tortious interference claim was not submitted to the jury; according to Case's brief, HBS abandoned this claim at or before trial. HBS does not contradict this statement and does not...
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