Englobal U.S. Inc. v. Native Am. Servs. Corp.

• Court: U.S. District Court — Southern District of Texas
• Writing for the Court: Lee H. Rosenthal Chief United States District Judge
• Decision Date: 19 April 2018
• Docket Number: CIVIL ACTION NO. H-16-2746
• Citation: Englobal U.S. Inc. v. Native Am. Servs. Corp., CIVIL ACTION NO. H-16-2746 (S.D. Tex. Apr 19, 2018)
• Parties: ENGLOBAL U.S. INC., Plaintiff, v. NATIVE AMERICAN SERVICES CORPORATION, Defendant.

ENGLOBAL U.S. INC., Plaintiff, v. NATIVE AMERICAN SERVICES CORPORATION, Defendant.

CIVIL ACTION NO. H-16-2746

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

April 19, 2018

MEMORANDUM AND ORDER

ENGlobal U.S. Inc. and Native American Services Corporation entered into a subcontract under which ENGlobal agreed to provide consulting and engineering services for a biomass-powerplant project in the United Kingdom. ENGlobal alleges that Native American breached the contract by failing to pay ENGlobal's outstanding invoices; fraudulently induced ENGlobal to enter the contract by making false representations about the scope of the work; made negligent misrepresentations during the contract negotiations; and is liable for the value of ENGlobal's work under quantum meruit. Native American counterclaimed for breach of contract, fraudulent inducement, negligent misrepresentation, and money had and received, alleging that ENGlobal fraudulently induced Native American to enter the contract, then breached by failing to meet deadlines or meet the contract requirements for progress on the work.

After discovery, ENGlobal moved for summary judgment granting its breach-of-contract claim and for partial summary judgment dismissing Native American's counterclaims. The court issued a Memorandum and Opinion denying ENGlobal's motion for summary judgment and granting in part and denying in part the motion for partial summary judgment. The court held that the contract's mutual-waiver provision barred Native American's claims for consequential damages, exemplary damages, and loss of good will, but did not bar Native American's claims for direct damages and loss of profits. (Docket Entry No. 42).

After completing discovery, the parties filed: (1) ENGlobal's second motion for summary judgment; (2) ENGlobal's motion to exclude Native American's expert testimony; (3) ENGlobal's motion to designate a responsible third party; (4) Native American's motion to exclude the testimony of ENGlobal's damages expert; (5) Native American's motion for partial summary judgment dismissing ENGlobal's affirmative claim for breach of contract; and (6) Native American's motion to exclude the testimony of ENGlobal's technical experts. (Docket Entries No. 56, 58, 60, 62, 63, 65).

Based on the pleadings, motions, responses, replies, the record, and the applicable law, ENGlobal's second motion for summary judgment, (Docket Entry No. 56); ENGlobal's motion to exclude Native American's expert testimony, (Docket Entry No. 58); ENGlobal's motion to designate a responsible third party, (Docket Entry No. 60); Native American's motions to exclude the testimony of ENGlobal's damages and technical experts, (Docket Entries No. 62, 65); and Native American's motion for partial summary judgment on the breach-of-contract claim, (Docket Entry No. 64), are denied. The reasons for these rulings are explained below.

I. The Summary Judgment Motions

A. The Summary Judgment Legal Standard

"Summary judgment is appropriate only if 'there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Vann v. City of Southaven, Miss., 884 F.3d 307, 309 (5th Cir. 2018) (citations omitted); see also FED. R. CIV. P. 56(a). "A genuine dispute of material fact exists when the 'evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Burrell v. Prudential Ins. Co. of Am., 820 F.3d 132, 136 (5th Cir. 2016) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)). "The moving party 'bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.'" Brandon v. Sage Corp., 808 F.3d 266, 269-70 (5th Cir. 2015) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)).

"Where the non-movant bears the burden of proof at trial, 'the movant may merely point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating . . . that there is an issue of material fact warranting trial.'" Kim v. Hospira, Inc., 709 F. App'x 287, 288 (5th Cir. 2018) (quoting Nola Spice Designs, L.L.C. v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015)). While the party moving for summary judgment must demonstrate the absence of a genuine issue of material fact, it does not need to negate the elements of the nonmovant's case. Austin v. Kroger Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017) (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1076 n.16 (5th Cir. 1994)). A fact is material if "its resolution could affect the outcome of the actions." Aly v. City of Lake Jackson, 605 F. App'x 260, 262 (5th Cir. 2015) (citing Burrell v. Dr. Pepper/Seven UP Bottling Grp., Inc., 482 F.3d 408, 411 (5th Cir. 2007)). "If the moving party fails to meet [its] initial burden, the motion [for summary judgment] must be denied, regardless of the nonmovant's response." Pioneer Exploration, LLC v. Steadfast Ins. Co., 767 F.3d 503 (5th Cir. 2014).

"When the moving party has met its Rule 56(c) burden, the nonmoving party cannot survive a summary judgment motion by resting on the mere allegations of its pleadings." Bailey v. E. Baton Rouge Par. Prison, 663 F. App'x 328, 331 (5th Cir. 2016) (quoting Duffie v. United States, 600 F.3d 362, 371 (5th Cir. 2010)). The nonmovant must identify specific evidence in the record and articulate how that evidence supports that party's claim. Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir. 2014). "This burden will not be satisfied by 'some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.'" Jurach v. Safety Vision, LLC, 642 F. App'x 313, 317 (5th Cir. 2016) (quoting Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005)). In deciding a summary judgment motion, the court draws all reasonable inferences in the light most favorable to the nonmoving party. Darden v. City of Fort Worth, 866 F.3d 698, 702 (5th Cir. 2017).

B. ENGlobal's Second Motion for Summary Judgment

ENGlobal seeks summary judgment dismissing Native American's counterclaims for fraudulent inducement, negligent misrepresentation, breach of contract, and money had and received. (Docket Entry No. 56). Native American argues in response that there are genuine factual disputes material to determining whether the counterclaims may proceed. (Docket Entry No. 66).

The summary judgment record consists of the follows materials:

• deposition testimony of James Bortz, an ENGlobal employee who worked on the biomass-powerplant project, (Docket Entry No. 56, Ex. A);

• deposition testimony of R. Bruce Williams, ENGlobal's corporate representative, (Id., Ex. B);

• deposition testimony of Dane Ash, Native American's project manager, (Id., Ex. C);

• deposition testimony of Rick Luna, Native American's corporate representative, (Id., Ex. D); • deposition testimony of W.N. Scott, an ENGlobal employee, (Docket Entry No. 66, Ex. 1);

• deposition testimony of Ray Bliesmer, ENGlobal's corporate representative (Id., Ex. 2);

• deposition testimony of William Tyburk, an ENGlobal employee, (Id., Ex. 5);

• ENGlobal's meeting minutes for the biomass project's "kick-off" meeting, (Id., Ex. 6); and

• an email chain, dated March 2, 2016, between ENGlobal and Native American about the "Project Execution Plan," (Id., Ex. 7).

1. The Fraudulent Inducement Counterclaim

The elements of a fraud cause of action under Texas law are: (1) a material misrepresentation; (2) that was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) suffered injury. In re FirstMerit Bank, 52 S.W.3d 749, 758 (Tex. 2001). Fraudulent inducement "is a particular species of fraud that arises only in the context of a contract, and the elements of fraud must be established as they relate to an agreement between the parties." West v. Northstar Fin. Corp., 2010 WL 851415, at *5 (Tex. App.—Ft. Worth Mar. 11, 2010) (citing Haase v. Glazner, 62 S.W.3d 795, 798-99 (Tex. 2001)). Although fraudulent inducement has the same elements as common-law fraud, it must also involve "a promise of future performance made with no intention of performing at the time it was made." Zorilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015).

ENGlobal argues that there is no summary judgment evidence showing that it made a false statement of fact or promised to perform with no intention of performing. ENGlobal cites deposition testimony of Native American's project manager, Dane Ash, that some members of the ENGlobal project team were "good people" and "they are competent." (Docket Entry No. 56, Ex. C). Ash also stated that the ENGlobal project team "did not want to follow the scope of work and do the specific work that was being asked for. They wanted to go out and design a plant." (Id.).

Native American argues that ENGlobal made assurances that it was willing and able to perform the contract scope of work, despite knowing that it was not able to perform. (Docket Entry No. 66). According to Native American, ENGlobal's internal disorganization and refusal to adequately staff the biomass-project team as promised led to the termination of the contract. In support, Native American cites precontract representations that ENGlobal had conducted its own diligence on the biomass project and was aware of and able to perform the contractual scope of work, when it did not understand the scope of work or the project deadlines. Native American argues that ENGlobal falsely represented its willingness to comply with Native American's requirement that all of ENGlobal's project team members...