Floors Unlimited, Inc. v. Fieldcrest Cannon, Inc.

• Decision Date: 15 June 1995
• Docket Number: No. 94-10680,94-10680
• Citation: 55 F.3d 181
• Parties: FLOORS UNLIMITED, INC., d/b/a First Floors, Plaintiff-Appellant, v. FIELDCREST CANNON, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 181

55 F.3d 181

FLOORS UNLIMITED, INC., d/b/a First Floors, Plaintiff-Appellant, v. FIELDCREST CANNON, INC., Defendant-Appellee.

No. 94-10680.

United States Court of Appeals, Fifth Circuit.

June 15, 1995.

Durwood D. Crawford, Goins, Underkofler, Crawford & Langdon, Dallas, TX, for appellant.

Steven L. Dickerson, John R. Riddle, Strasburger & Price, Dallas, TX, for appellee.

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

Before DAVIS, SMITH and WIENER, Circuit Judges:

WIENER, Circuit Judge:

Plaintiff-Appellant Floors Unlimited (Floors), a carpet retailer and dealer, appeals the district court's summary judgment dismissal of Floors' breach of contract and breach of fiduciary duty claims against Fieldcrest Cannon, Inc. (Fieldcrest), a carpet manufacturer. As we conclude that, as a matter of law, the oral dealership agreement between Floors and Fieldcrest did not fall within the parol evidence proscription of Section

26.01(b)(6) of the Texas statute of frauds, we reverse the district court's dismissal of Floors' breach of contract claim and remand for further proceedings consistent with this holding. We affirm the district court's dismissal of Floors' claim for breach of a fiduciary duty by Fieldcrest, however, agreeing with the court that no fiduciary relationship existed between the parties.

I FACTS AND PROCEEDINGS

Floors is a carpet retailer and dealer which sells carpet to residential and commercial customers in North Texas. Fieldcrest is a carpet manufacturer which markets its product through dealers like Floors. Fieldcrest's practice was to market its "Karastan" line of carpeting only through a limited number of authorized dealers.

According to Floors, it entered into an oral agreement with Fieldcrest in 1982 whereby Floors became an authorized dealer for Fieldcrest's "Karastan" line. Floors alleged that the agreement required it to acquire carpeting, carpet samples, display racks, and promotional material from Fieldcrest. The agreement allegedly required Floors to sell and advertise Fieldcrest's product in conformity with certain rules promulgated by Fieldcrest. Floors claimed that Fieldcrest agreed not to terminate the contract (and, therefore, Floors' designation as an authorized "Karastan" dealer) except for "good cause," specifically, for Floors' failure to comply with Fieldcrest's strict marketing requirements. In oral argument before this court the parties acknowledged that Floors was not required to buy any minimum quantity of carpet or to meet any continuing sales quotas or goals to retain its dealership.

In February 1993, however, Fieldcrest terminated its eleven-year relationship with Floors, unilaterally and without explanation. That Floors never violated any of Fieldcrest's marketing requirements is undisputed.

Floors sued Fieldcrest in Texas state court, alleging breach of contract, promissory estoppel, and breach of fiduciary duty. Fieldcrest removed the case to federal court based on diversity jurisdiction and moved for summary judgment on all claims. The district court granted Fieldcrest's summary judgment motion, finding that (1) the parties' oral agreement, as a "satisfaction contract," could not possibly be performed within one year, and thus was unenforceable under the Texas statute of frauds; (2) the promissory estoppel claim had no merit, as Floors had conceded that there was no "second promise" to reduce the parties' oral agreement to writing; and (3) no fiduciary relationship existed between Floors and Fieldcrest.

Floors timely filed an appeal to this court, asserting that (1) the oral contract was for an indefinite duration and therefore was not subject to the statute of frauds; and (2) genuine issues of material fact remained regarding the existence of a fiduciary relationship between the parties, precluding summary judgment dismissal of Floors' claim of breach of a fiduciary duty by Fieldcrest. ¹

II

ANALYSIS

A. STANDARD OF REVIEW

We review a grant of summary judgment de novo, applying the same standard as the district court. ² Summary judgment is appropriate if the record, judged in the light most favorable to the non-moving party, discloses that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ³ The moving party must

                demonstrate by competent evidence that no issue of material fact exists. 4  The non-moving party then has the burden of showing the existence of a specific factual issue which is disputed. 5  If any element of the plaintiff's case lacks factual support, the district court should grant summary judgment. 6  To the extent a district court's grant of summary judgment is based on an interpretation of state law, our review of that determination is also de novo. 7
                

B. BREACH OF CONTRACT CLAIM

Two provisions of the Texas statute of frauds, which requires that specified types of agreements be in writing to be enforceable, are implicated in this case.

1. Contract to be Performed Within One Year

Section 26.01(b)(6) of the Texas statute of frauds requires that, to be enforceable, any agreement which is "not to be performed within one year from the date of making the agreement" must be in writing. ⁸ The district court concluded that the oral contract alleged by Floors was not intended to be performed within one year of its making and, therefore, was unenforceable under the statute of frauds. We disagree.

In his deposition, the president of Floors stated that he believed the oral contract between his company and Fieldcrest would last "forever and ever and ever" and that Fieldcrest would not terminate the dealership agreement except for "good cause." In addition, Floors' president asserted his belief that his company's designation as a "Karastan" dealer "would continue ... as long as [Floors] complied with the rules and regulations that [Fieldcrest] established for its authorized dealers." We conclude from this evidence--essentially uncontradicted by Fieldcrest--that the oral agreement between Fieldcrest and Floors was of an indefinite duration, terminable only for "good cause." Thus, we are squarely faced with the question of law: Is an indefinite term contract, terminable only for good cause, required to be in writing under Section 26.01(b)(6) of the Texas statute of frauds?

In Falconer v. Soltex Polymer Corp. ⁹ , we held that an oral contract of employment that was alleged by the employee to last "forever," "so long as he obeyed the company rules and did his job," was an employment contract for an indefinite term, and was therefore barred by the Texas statute of frauds. ¹⁰ Our subsequent decision in Pruitt v. Levi Strauss & Co. ¹¹ , however, observed that our decision in Falconer was questionable because, under Texas law, "[i]f an oral employment agreement can cease upon some contingency, other than by some fortuitous event or the death of one of the parties, the agreement may be performed within one year, and the statute of frauds does not apply." ¹²

In Pruitt, we reviewed applicable Texas law and recognized that Texas courts generally held that when no period of performance is stated in an oral employment contract, the statute of frauds does not apply because the contract is performable within a year. ¹³ The Texas courts, we observed, drew a distinction between contracts of an unstated or indefinite duration, which fell outside the statute of frauds, and contracts of a specified duration Despite our acknowledgement of Texas jurisprudence on the issue, we nonetheless held that the oral employment contract in Pruitt, which had not specified any length of time for performance, fell within the statute of frauds and was therefore unenforceable. The reason for our manifestly conflicting decision was that under the stare decisis rule of this Circuit--which provides that one panel cannot overturn the decision of a prior panel in the absence of en banc reconsideration or a superseding Supreme Court decision--we were bound by the precedent of Falconer. ¹⁵

longer than a year, which fell within the statute of frauds. ¹⁴

In Pruitt we also acknowledged the corollary of our stare decisis rule, articulated in our decision in Farnham v. Bristow Helicopters, Inc. ¹⁶ , that in diversity cases we must follow subsequent state court decisions that are clearly contrary to one of our prior decisions. ¹⁷ We examined one Texas state court decision subsequent to Falconer--namely, Winograd v. Willis ¹⁸, which we read as not "clearly contrary" to Falconer--and concluded that we were still bound by Falconer. ¹⁹

Since we decided Pruitt, there have been two published decisions by Texas Courts of Appeals that have addressed the applicability of the statute of frauds to an indefinite term employment contract. ²⁰ In determining that the oral contract in the instant case was subject to the statute of frauds, the district court concluded that those subsequent Texas court decisions were not "clearly contrary" to our holding in Pruitt and that the court therefore could not disregard the holdings of Falconer and Pruitt. Our close examination of those subsequent Texas cases leads us to the contrary conclusion, i.e., that they are "clearly contrary" to our decisions in Falconer and Pruitt. That in turn compels us to conclude that Falconer is not a correct statement of Texas law and thus is no longer binding precedent in this Circuit.

The first case decided subsequent to Pruitt was Goodyear Tire & Rubber Co. v. Portilla. ²¹ In Goodyear, the oral employment agreement allegedly provided that the plaintiff's employment would last "as long as I ... done my job right." ²² The Goodyear court held that the employer's representation to the plaintiff that she would not be discharged except for unsatisfactory performance formed a satisfaction contract. ²³ As the contract did not specify how long the employment term would last, the court held that it was not barred by the statute of...