Cq, Inc. v. Txu Min. Co., L.P., No. 07-11134.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtEmilio M. Garza
Citation565 F.3d 268
PartiesCQ, INC., Plaintiff-Appellant, v. TXU MINING COMPANY, L.P., Defendant-Appellee.
Docket NumberNo. 07-11134.
Decision Date09 April 2009
565 F.3d 268
CQ, INC., Plaintiff-Appellant,
v.
TXU MINING COMPANY, L.P., Defendant-Appellee.
No. 07-11134.
United States Court of Appeals, Fifth Circuit.
April 9, 2009.

[565 F.3d 270]

James David Jordan (argued) and David Mizgala, Munsch, Hardt, Kopf & Harr,

[565 F.3d 271]

P.C., LaDawn H. Conway, Alexander Dubose & Townsend LLP, Dallas, TX, for Plaintiff-Appellant.

Robert Kenneth Wise (argued), Miles B. Haberer, Thomas Foster Lillard, Hunton & Williams LLP, Dallas, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before WIENER, GARZA, and DeMOSS, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:


In this contract dispute, Appellant CQ, Inc. ("CQ") appeals the district court's resolution of the parties' cross-motions for summary judgment in favor of Appellee TXU Mining Company, L.P. ("TXU"). CQ also appeals the exclusion of its expert testimony on damages. For the following reasons, we affirm the judgment of the district court.

I

This dispute arises out of a failed partnership to clean lignite, a type of low-grade coal. TXU mines lignite and sells it for commercial use as fuel. In November of 2004, TXU began to explore cleaning lignite at several of its mines. TXU sent out a request for bids ("RFB") to several companies that specialized in such cleaning, including CQ. The RFB contemplated the formation of a "Key Alliance Agreement," by which a chosen company would construct and operate lignite-cleaning facilities at TXU's Twin Oak and Oak Hill mines for a period of five years. The RFB cautioned that, even once a "successful" bidder was selected, TXU reserved the right to further negotiate the proposed contract. Prior to bidding, TXU required CQ and the other companies to sign a "Confidentiality Agreement" that prevented either party from using confidential information disclosed during negotiations for any purpose "except the analysis, investigation, and evaluation of the proposed business relationship." CQ submitted a timely bid in response to the RFB.1 Subsequently, TXU proposed various addenda to the original RFB, and CQ and the other bidders submitted modified bids in response.

In late February of 2005, TXU called CQ and indicated that CQ had been selected as the preferred alliance partner. The significance of this "selection" is hotly disputed. CQ contends that TXU orally agreed to the five-year Alliance Agreement discussed in the bid documents. TXU contends that it merely selected CQ from among the available bidders and intended to further negotiate the final contract, as contemplated in the RFB. It is undisputed that the parties never entered a written contract finalizing the purported Alliance Agreement.

Over the next few months, CQ continued to work with and advise TXU on the proposed lignite-cleaning operation. CQ periodically asked when a long-term contract would be formalized in writing. TXU responded that it had not yet decided to build any cleaning facilities and would compensate CQ if TXU ultimately decided against the project. In mid-April of 2005, the parties exchanged drafts of an "Interim Services Contract" by which TXU would pay CQ a consulting fee for its services if the final Alliance Agreement failed to materialize. In mid-June of 2005,

565 F.3d 272

TXU requested documentation of the expenses undertaken by CQ until that point. CQ submitted an invoice for $110,419.17 in services. In early July of 2005, TXU terminated the relationship with CQ. TXU ultimately built and operated its own lignite-cleaning facility at the Oak Hill Mine, but chose not to clean lignite at the Twin Oak Mine.

After TXU terminated the relationship, CQ filed suit in state court for, inter alia, (1) breach of the purported five-year Alliance Agreement, (2) breach of the Confidentiality Agreement, (3) quantum meruit, and (4) misappropriation of trade secrets. TXU removed the case to federal court pursuant to diversity jurisdiction. The parties agreed that Texas law controlled the substantive claims.

The parties filed cross-motions for summary judgment. CQ moved for partial summary judgment in favor of its contract claims, but the district court found that disputes of material fact precluded judgment as to either claim. TXU moved for summary judgment against all of CQ's claims. In response, the district court dismissed CQ's claim for breach of the purported Alliance Agreement, finding that the statute of frauds barred enforcement of the Agreement. The court also dismissed the majority of CQ's trade-secret claims, including the claim that TXU misappropriated CQ's recommendation to focus on cleaning ROM lignite rather than waste lignite. The court reasoned that CQ had failed to provide any evidence that TXU used the ROM recommendation. As to CQ's remaining claims, the district court denied TXU's request for summary judgment.

As the trial approached, TXU filed a motion to exclude the opinions and reports of Ronald Vollmar, CQ's expert on damages. The motion also sought to prohibit any evidence supporting a damages calculation other than $110,419.17, the amount stated in CQ's invoice. TXU argued that CQ failed to disclose any alternative computation of damages during discovery as required by FED.R.CIV.P. 26(a)(1)(A)(iii). After considering the parties' briefing, the district court both excluded Vollmar's reports and limited further evidence of damages as requested by TXU. Subsequently, the parties entered a settlement by which TXU paid CQ's $110,419.17 in fees and CQ dismissed its claims for promissory estoppel and injunctive relief.

Given the settlement of the fee liability and the court's order precluding further evidence on damages, TXU moved for a take-nothing judgment on CQ's remaining claims for breach of the Confidentiality Agreement, misappropriation of trade secrets, and quantum meruit. The district court granted the motion and entered a take-nothing judgment. CQ now appeals, arguing that the district court committed several errors in (1) resolving the parties' cross-motions for summary judgment and (2) excluding CQ's evidence of damages.

II

CQ raises several challenges to the district court's resolution of the parties' cross-motions for summary judgment. "We review a district court's grant or denial of summary judgment de novo, applying the same standard as the district court." Robinson v. Orient Marine Co. Ltd., 505 F.3d 364, 365 (5th Cir.2007). Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). The movant "has the initial burden of informing the court of the basis for its motion and identifying those parts of the record that demonstrate the absence of a

565 F.3d 273

genuine issue of material fact." U.S. v. $92,203.00 in U.S. Currency, 537 F.3d 504, 507 (5th Cir.2008). Once this initial burden has been met, the burden shifts to the nonmovant "to demonstrate the existence of a genuine issue of material fact." Id. All reasonable inferences are drawn in favor of the nonmovant. Robinson, 505 F.3d at 366.

A

CQ first contends that the district court erred in denying CQ's motion for summary judgment on its claim that TXU breached the Confidentiality Agreement by using CQ's confidential information. The district court denied the motion because it found that "issues of material fact remain[ed]" as to whether CQ indicated that its information was "confidential" as required by the Confidentiality Agreement. After reviewing the record, we agree that there is a genuine dispute as to whether CQ marked the information as confidential or otherwise disclosed the information "in a manner consistent with its confidential or proprietary nature." Namely, the documents at issue were not expressly marked "confidential" on all relevant pages, and the parties provide conflicting accounts on whether a confidential intent was expressed. Accordingly, the district court properly held that a genuine issue of material fact precluded summary judgment. See FED.R.CIV.P. 56(c).

B

CQ next contends that the district court erred in granting summary judgment against CQ's misappropriation claim as to its sixth alleged trade secret—CQ's recommendation that TXU focus on ROM lignite rather than waste lignite (the "ROM strategy"). To prevail on a misappropriation claim under Texas law, "a plaintiff must show that (1) a trade secret existed, (2) the trade secret was acquired through a breach of a confidential relationship or discovered by improper means, and (3) the defendant used the trade secret without authorization from the plaintiff." Gaia Techs. Inc. v. Recycled Prods. Corp., 175 F.3d 365, 376 (5th Cir.1999) (emphasis added).

CQ alleged that the ROM strategy was a trade secret that was misappropriated by TXU. TXU moved for summary judgment on this point, arguing that (1) the ROM strategy was not a trade secret under Texas law and (2) there was no evidence that TXU actually used the ROM strategy. The district court granted summary judgment on the latter ground, reasoning that CQ's response brief failed to provide "more than a scintilla of evidence that TXU [was] using this information."

CQ contends that it provided sufficient evidence to create a genuine issue as to whether TXU used the ROM strategy. In order to avoid summary judgment, the nonmovant must identify specific facts within the record that demonstrate the existence of a genuine issue of material fact. Smith ex rel. Estate of Smith v. United States, 391 F.3d 621, 625 (5th Cir. 2004). The party must also "articulate the precise manner in which the submitted or identified evidence supports his or her claim." Id. "[W]hen evidence exists in the summary judgment record but the nonmovant fails even to refer to it in the response to the motion for summary judgment, that evidence is not properly before...

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171 practice notes
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    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas
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    ...or at a trial, unless the failure was substantially justified or is harmless." Fed.R.Civ.P. 37(c)(1); CQ Inc. v. TXU Mining Co. LP, 565 F.3d 268, 279 (5th In deciding whether the Plaintiffs failure to provide information—i.e. Page 661 the damages computation—is substantially justified ......
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    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 22, 2013
    ...trade secret, (3) use of the trade secret without the plaintiff's authorization, and (4) resulting damages. CQ, Inc. v. TXU Mining Co., 565 F.3d 268, 273 (5th Cir.2009), citing Gaia Techs. Inc. v. Recycled Prods. Corp., 175 F.3d 365, 376 (5th Cir.1999); In re TXCO Resources, Inc., 475 B.R. ......
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    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • December 16, 2019
    ...380 (5th Cir. 2019) ; Apache Corp. v. W & T Offshore, Inc. , 626 F.3d 789, 793 (5th Cir. 2010) ; CQ, Inc. v. TXU Mining Co., L.P. , 565 F.3d 268, 272 (5th Cir. 2009). Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be granted "if the movant s......
  • Lormand v. Us Unwired, Inc., No. 07-30106.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • April 9, 2009
    ...rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.") (emphasis added).35 565 F.3d 268 3. For these reasons, the district court's judgment is affirmed in part and reversed in part. Accordingly, the district court's judgment dis......
  • Request a trial to view additional results
171 cases
  • In re Advanced Modular Power Systems, Inc., Bankruptcy No. 07-34646-H4-7.
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas
    • September 16, 2009
    ...or at a trial, unless the failure was substantially justified or is harmless." Fed.R.Civ.P. 37(c)(1); CQ Inc. v. TXU Mining Co. LP, 565 F.3d 268, 279 (5th In deciding whether the Plaintiffs failure to provide information—i.e. Page 661 the damages computation—is substantially justified ......
  • Ultraflo Corp. v. Pelican Tank Parts, Inc., Civil Action No. H–09–0782.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 22, 2013
    ...trade secret, (3) use of the trade secret without the plaintiff's authorization, and (4) resulting damages. CQ, Inc. v. TXU Mining Co., 565 F.3d 268, 273 (5th Cir.2009), citing Gaia Techs. Inc. v. Recycled Prods. Corp., 175 F.3d 365, 376 (5th Cir.1999); In re TXCO Resources, Inc., 475 B.R. ......
  • Bitco Gen. Ins. Corp. v. Acadia Ins. Co., CIVIL ACTION NO. 1:18-CV-526
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • December 16, 2019
    ...380 (5th Cir. 2019) ; Apache Corp. v. W & T Offshore, Inc. , 626 F.3d 789, 793 (5th Cir. 2010) ; CQ, Inc. v. TXU Mining Co., L.P. , 565 F.3d 268, 272 (5th Cir. 2009). Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be granted "if the movant s......
  • Lormand v. Us Unwired, Inc., No. 07-30106.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • April 9, 2009
    ...rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.") (emphasis added).35 565 F.3d 268 3. For these reasons, the district court's judgment is affirmed in part and reversed in part. Accordingly, the district court's judgment dis......
  • Request a trial to view additional results

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