Coc Services, Ltd. v. Compusa, Inc.

• Decision Date: 26 August 2004
• Docket Number: No. 05-01-00865-CV.,05-01-00865-CV.
• Citation: 150 S.W.3d 654
• Parties: COC SERVICES, LTD., Appellant, v. COMPUSA, INC., James Halpin, Grupo Carso, S.A. de C.V., Grupo Sanborns, S.A. de C.V., and Carlos Slim Helu, Appellees.
• Court: Texas Court of Appeals

150 S.W.3d 654

COC SERVICES, LTD., Appellant, v. COMPUSA, INC., James Halpin, Grupo Carso, S.A. de C.V., Grupo Sanborns, S.A. de C.V., and Carlos Slim Helu, Appellees.

No. 05-01-00865-CV.

Court of Appeals of Texas, Dallas.

August 26, 2004.

Rehearing Overruled December 15, 2004.

P. Michael Jung, Strasburger & Price, L.L.P., Robert H. Mow, Jr., Bobby M. Rubarts, James Holbrook, Hughes & Luce, L.L.P., Dallas, B. Daryl Bristow, Stephen G. Tipps, Macey Reasoner Stokes, Houston, Samara L. Kline, Baker & Botts, L.L.P., Scott A. Scher, Dallas, for Appellant.

Robert Gilbreath, Theodore W. Daniel, V. Elizabeth Kellow, John A. Gilliam, Jenkins & Gilchrist, P.C., G. Luke Ashley, Timothy R. McCormick, Scott Patrick Stolley, Thompson & Knight, P.C., Dallas, Mike A. Hatchell, Mary H. Hatchell, Locke Liddell & Sapp, LLP, Austin, William V. Dorsaneo, III, Gibson, Dunn & Crutcher, L.L.P., Mark T. Josephs, John R. Clayton, Alan N. Greenspan, Jackson, Walker, L.L.P., Dallas, Jennifer Bruch Hogan, Richard Hogan, Hogan & Hogan, David M. Gunn, Beck, Redden & Secrest, Houston, David E. Keltner, Jose, Henry, Brantley & Keltner, L.L.P., Fort Worth,

William G. Whitehill, Joe B. Harrison, Stacy R. Obenhaus, Gardere & Wynne, L.L.P., Charles W. Gameros, Dallas, for Appellee.

Before Justices BRIDGES, O'NEILL, and FITZGERALD.

OPINION

Opinion by Justice O'NEILL.

This case involves a franchise deal, which never came to fruition, to establish CompUSA stores in Mexico. CompUSA and COC Services, Ltd. entered into negotiations for a master franchise agreement (MFA) with COC as master franchisee. The MFA contemplated a Mexican entity as subfranchisee. Negotiations eventually included the Carso parties (defendants below), who decided not to become the subfranchisee. They bought CompUSA instead.

COC sued and obtained a jury verdict against CompUSA, its CEO James Halpin, and the Carso defendants. We resolve the issues and cross-issues as follows: (1) as a matter of law, the unexecuted MFA was not a binding, enforceable contract; (2) there is no evidence that the Carso defendants tortiously interfered with the unexecuted MFA; (3) there is no evidence that CompUSA complained of Halpin's actions concerning the MFA, thus Halpin cannot be personally liable for acts taken on the corporation's behalf; (4) CompUSA adequately pleaded its claim that the damage-limiting provision in the MFA barred COC's claim for lost profits, which did as a matter of law bar those claims; and (5) there is no evidence that CompUSA and Halpin tortiously interfered with COC's prospective business relations with the Carso defendants.

Factual Background

COC's argument that CompUSA intended to be bound to the unexecuted MFA depends largely on the acts and words of CompUSA's CEO, Halpin. COC's theory that the Carso parties tortiously interfered with the MFA depends on an elaborate linkage of some of the Carso parties' business decisions — and their timing — with certain statements by Halpin.

The three limited partners in COC are Lawrence McBride, Roger Cunningham, and Ronald Beneke. The Carso defendants are Carlos Slim Helu (sued individually), Grupo Carso, and Grupo Sanborns (collectively, "Carso" or "the Carso parties"). Grupo Carso and Grupo Sanborns are part of an enterprise, headed by Slim, that conducts numerous businesses in Mexico and encompasses retail, technology, and telecommunications (including Sears, Prodigy, and Telmex).

Starting in 1997, COC partner McBride obtained a succession of three letters of intent from CEO Halpin, on behalf of CompUSA, granting the right to submit candidates to participate in a potential master franchise agreement for all of Mexico. Each letter of intent expired when no viable third-party candidate emerged. On January 8, 1999, COC and CompUSA executed a fourth letter of intent (LOI). Attached to the LOI were a form of a master franchise agreement, a forty-three page document, and a form of license agreement for a single initial licensee (subfranchisee), who would be subject to CompUSA's approval. The LOI required that both the MFA and the initial licensee's agreement be executed before the LOI expired, or neither party would have any further obligation or liability with respect to the potential master franchise. At COC's request, CompUSA extended the LOI deadline twice but refused to extend it beyond December 31, 1999. The MFA and licensee agreement were never executed.

In April 1999, Slim-related companies began acquiring stock in CompUSA. In early September 1999, Carso contacted COC to express interest in COC's franchising proposal. On September 10, Carso announced publicly that it had acquired nearly 15 percent of CompUSA's stock, which made Carso the largest single stockholder of CompUSA. Thereafter, all three parties were involved in two meetings. Slim's son-in-law, Arturo Elias, and COC arranged a meeting for September 14 in Mexico City. The Carso parties, including Slim, met with COC and Halpin. One of the purposes of the meeting was to discuss synergies between the Slim companies and CompUSA. Thereafter, Elias traveled to Dallas to meet with COC and Halpin, on September 22 and 23. According to COC, during those meetings they made a "handshake deal" with Elias to form a joint venture, and Elias successfully negotiated with Halpin for a reduction of one of the fees under the MFA. Elias went back to Mexico City and spoke with Slim's son, Carlos Slim Domit, who was chairman of the board for both Grupo Carso and Grupo Sanborns. During the next week Domit rejected the Carso-COC deal, but the Carso parties did not communicate that decision to COC.

In October 1999, COC approached Halpin, concerned that Carso had not returned any of its phone calls since the September meeting in Dallas. The focus of the conversation was on enticing Carso back to negotiations. Halpin suggested that COC might send a letter to Carso advising that COC was looking to other potential licensees. On October 29, McBride sent the letter, stating that COC would be pursuing other parties. This became known as the "prom letter" (through the analogy that COC was contemplating asking a prettier girl to the prom). Negotiations between Carso and COC never resumed.

CompUSA's board met on November 3. At the meeting, Halpin announced that CompUSA and Carso were talking, among other things, about franchising opportunities and opening stores in Mexico. This information was published in both the Dallas press and Mexican press. Days later, Halpin met with Slim and other company representatives in Mexico City to discuss Slim's interest in buying CompUSA outright. On November 10, Halpin assured McBride that any press references were to the same franchising arrangement COC was pursuing with Slim, but he noted that if COC's talks with Slim had terminated, it might be difficult, if not impossible, for COC to meet the December 31 LOI deadline.

In late November and through the first week of December, Grupo Sanborns made increasingly larger offers to purchase CompUSA, which Halpin rejected. On December 16, a representative of Grupo Sanborns met with Halpin in Dallas for further negotiations, but the negotiations halted. That same day, McBride sent a facsimile to Halpin presenting a new licensee candidate, an entity associated with the Gonzalez-Nova family, who owned a substantial Mexican business enterprise. McBride attached a three-page letter of intent between COC and Gonzalez-Nova. Halpin responded that he did not have enough information to evaluate the candidate. Negotiations between Grupo Sanborns and CompUSA resumed on January 3. That same day, COC filed this lawsuit. The negotiations eventually resulted in an agreed price and Carso's acquisition of CompUSA late in January.

A jury found favorably for COC. It found that CompUSA and COC intended to be bound to the MFA, that CompUSA had breached the MFA, and that $90 million in damages for lost profits and $270 million in punitive damages were appropriate redress for the violations. On the damages question, the trial court granted judgment notwithstanding the verdict (JNOV) in favor of CompUSA. COC appeals the JNOV. The jury also found the Carso parties had tortiously interfered with the MFA, finding collective damages against them for $31.5 million in actual damages and $90 million in punitive damages. The Carso parties cross-appeal the judgment against them. The jury also found that CompUSA and Halpin tortiously interfered with the prospective business relationship between COC and the Carso parties. The trial court granted JNOV on that issue, and COC appeals that JNOV as well.

I. Contract Formation

We begin with the contract-formation issue, Carso's first issue on cross-appeal. The jury found in question A-1 that COC and CompUSA intended to be bound to the MFA.¹ Carso and CompUSA sought a JNOV on this issue, but the trial court left this finding undisturbed. In this section, we ultimately conclude that the MFA is not a binding, enforceable contract for at least two reasons. First, the MFA lacks price-related terms that are essential and thus, as a matter of law, the MFA does not constitute an enforceable contract. Second, and in the alternative, the evidence does not raise a triable issue of fact on the matter of mutual intent to be bound to the MFA.

We review questions of law de novo, applying the rule that a motion for JNOV should be granted when (1) the evidence is conclusive and one party is entitled to recover as a matter of law, or (2) a legal principle precludes recovery. See Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex.1990).

The Letter of Intent

The Letter of Intent (LOI) states that it "evidences the mutual intention" of CompUSA (Company) and COC (Prospective Master Franchisee) to enter into a master franchise agreement for establishing computer stores in Mexico (Licensed Business). It contemplates a "single approved initial Licensee" to whom COC will grant licensing rights to develop and...