Illinois Tool Works, Inc. v. Harris, 14-04-00792-CV.

• Decision Date: 02 March 2006
• Docket Number: No. 14-04-00792-CV.,14-04-00792-CV.
• Citation: 194 S.W.3d 529
• Parties: ILLINOIS TOOL WORKS, INC., Appellant, v. Ken HARRIS, Appellee.
• Court: Texas Court of Appeals

194 S.W.3d 529

ILLINOIS TOOL WORKS, INC., Appellant, v. Ken HARRIS, Appellee.

No. 14-04-00792-CV.

Court of Appeals of Texas, Houston (14th Dist.).

March 2, 2006.

Rehearing Overruled May 18, 2006.

John G. Bissell, Michael L. Samford, Houston, for appellant.

James J. Ormiston, Houston, for appellee.

Panel consists of Justices FOWLER, EDELMAN, and GUZMAN.

OPINION

WANDA McKEE FOWLER, Justice.

The opinion of February 23, 2006, is withdrawn because of a typographical error on page two of the opinion and this substituted opinion issued in it's place.

Appellee, Ken Harris, sued appellant, Illinois Tool Works, for breach of contract. Appellee moved for partial summary judgment on the ground that the contract was unambiguous. Appellant opposed the motion, but did not move for partial summary judgment. The trial court granted appellee's motion for partial summary judgment and entered final judgment in appellee's favor. Appellant timely filed a notice of appeal. We reverse and remand.

Factual and Procedural Background

Ken Harris was a pioneering developer of holographic technology. On May 25, 2001, Illinois Tool Works ("ITW") entered into a contract with Harris to purchase Harris's Direct Write holographic technology ("the technology") and engage Harris's specialized knowledge to further develop the technology. The contract involves multiple agreements executed together. The major portions of the contract are the Asset Purchase Agreement, the Employment Agreement, and the Consulting Agreement. The Consulting Agreement was to begin when the Employment Agreement expired at the end of two years. The contract provides that Illinois law will govern the contract.

The opening paragraphs of the Employment Agreement explain ITW's interest and purpose for hiring Harris:

WHEREAS, in consideration for and in order to induce ITW to enter into the Asset Purchase Agreements, Mr. Harris agreed to deliver this Employment Agreement and a certain Consulting Agreement;

WHEREAS, Mr. Harris, as a pioneering inventor of holographic technologies, has had substantial prior experience with respect to developing, manufacturing and marketing holographic technologies, equipment, products, and services;

WHEREAS, ITW seeks to hire Mr. Harris in order to enjoy continued access to his special skills and knowledge relating to the development, manufacture and marketing of holographic technologies, equipment, products, and services;

. . . . Because of ITW's desire for Harris's particular skill, knowledge and experience, there were few opportunities to terminate Harris's obligations under the contract, as provided for in the following excerpted provision in the Employment Agreement:

Term. The term of employment ("Term") shall commence on the Closing Date, and continue for two (2) years thereafter with Employee devoting himself to his duties as specified herein on a full time basis (forty (40) hours week [sic]) for forty (40) weeks during each of the two years. The obligations hereunder shall terminate immediately without notice upon (i) the death of Employee; (ii) the total disability of Employee for a period in excess of six (6) weeks; (iii) the voluntary resignation or retirement of Employee; or (iv) for "just cause" as defined herein.... "Just Cause" shall mean (a) Employee has been convicted of criminal fraud, embezzlement, or a felony, or has been judicially determined to have committed intentional misfeasance or malfeasance in the performance of his duties hereunder to the detriment of ITW, which ITW believes, in good faith, could have a material adverse effect on its business; (b) Employee has committed a breach of the covenant not-to-compete... or of the confidentiality agreement ...; or (c) if ITW believes in good faith that Employee has failed to devote his full business time or best efforts to the Business. ITW agrees that Employee may also be employed by the DuPont Company during the Term of this Agreement; provided, however, that such employment: (i) does not interfere with Employee's obligations and duties under this Agreement; and (ii) is limited to the development of a material or film for use with the Direct Write Technology, as defined in the Direct Write Asset Purchase Agreement.

(Emphasis added). Harris specifically negotiated for the italicized language to be included. The contract also contained clauses prohibiting Harris from assigning his employment obligations. Following the Employment Agreement, Harris was to continue working for ITW as a consultant.

Paragraph Six of the Employment Agreement addressed when the Consulting Agreement would become effective:

6. Consulting Agreement. After the expiration of this Employment Agreement Employee has agreed to become an independent consultant of ITW, in accordance with the terms and conditions of the Consulting Agreement, executed at the Closing of the Asset Purchase Agreement.

Like the Employment Agreement, the Consulting Agreement outlined ITW's interest in "continued access" to Harris's "special skills and knowledge." The term of the Consulting Agreement was to begin pursuant to the following provisions:

WHEREAS, on May 25, 2003 and upon termination of the two (2) year Employment Agreement, ITW seeks to enjoy continued access to the special skills and knowledge of Mr. Harris relating to the development, manufacture and marketing of holographic technologies, equipment, products, and services

[]

Term. The term of this Consulting Agreement ("Term") shall commence on the termination of the Employment Agreement, which date is two (2) years from the Closing date, and continue for three (3) years thereafter, with the Consultant devoting himself to his duties as specified for twenty (20) weeks during each of the three (3) years. The obligations hereunder shall terminate immediately without notice upon the death of Consultant. ITW may terminate this Consulting Agreement prior to the end of the three (3) year Term, if Consultant has committed a breach of the confidentiality agreement ... or a breach of the covenant not-to-compete ... to the detriment of ITW, or if ITW believes in good faith that Consultant has failed to devote his twenty (20) weeks per year or best efforts to the Business.

Utilizing the provision for which he specifically bargained, Harris terminated his employment with ITW in October 2001. He offered to work as a consultant beginning immediately, but ITW did not respond to his request. In May 2003, when the Consulting Agreement otherwise would have begun, Harris attempted to begin his consultancy. However, ITW claimed Harris had repudiated the entire contract and so did not allow him to perform under the Consulting Agreement. Harris brought suit and moved for partial summary judgment, which the trial court granted. Harris then sought attorney's fees pursuant to the contract and the trial court granted those in the Final Judgment. ITW appeals the grant of partial summary judgment.

The question we must answer is whether or not the term of employment could terminate under the Employment Agreement before the end of two years without Harris also terminating the Consulting Agreement.

Analysis

I. Choice of Law and Standard of Review

The parties contractually agreed to apply the law of Illinois to this contract. Texas courts will respect that choice and apply the law the parties choose. However, while the substantive law of Illinois may apply, we as the forum will apply our own law to matters of remedy and procedure. In re Wells Fargo Bank Minn. N.A., 115 S.W.3d 600, 605 n. 7 (Tex.App.-Houston [14th Dist.] 2003, original proceeding [mand. denied]). Procedure includes standards of review. Henderson v. Autozone, No. 14-97-01226-CV, 2000 WL 1425223, *2 n. 1 (Tex.App.-Houston [14th Dist.], September 28, 2000, pet. denied) (not designated for publication) (citing Billman v. Mo. Pac. R. Co., 825 S.W.2d 525, 526 (Tex.App.-Fort Worth 1992, writ denied); Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768, 787 (Tex.App.-Houston [1st Dist.] 1987, writ ref'd n.r.e.)). The construction of an unambiguous written instrument is a matter of law. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex.1999). Therefore, we use Texas law to determine what deference to give the trial court's ruling, and Illinois law to construe the contract.

ITW appeals the trial court's grant of partial summary judgment. The trial court determined that the contract was unambiguous as a matter of law. We review legal determinations de novo. MCI, 995 S.W.2d at 651. When reviewing a partial summary judgment, we use the same standards as when we review a summary judgment. Carlton v. Trinity Universal Ins. Co., 32 S.W.3d 454, 458 (Tex. App.-Houston [14th Dist.] 2000, pet. denied). The movant has the burden of showing there is no genuine issue of material fact. Id. When determining if there is a disputed material fact issue precluding partial summary judgment, all evidence favorable to the non-movant is taken as true, every reasonable inference must be indulged in favor of the non-movant, and all doubts are resolved in favor of the non-movant. Id. In this case we are asked to make a purely legal conclusion: is the contract unambiguous and, if so, what is its meaning. There are no factual disputes. Thus, without any deference to the trial court, we utilize Illinois law to determine the meaning of the contract.

II. Construing the Contract

A. Principles of Contract Construction under Illinois Law

When construing a contract, courts¹ are to give effect to the parties' intent. Henderson v. Roadway Express, 308 Ill.App.3d 546, 242 Ill.Dec. 153, 720 N.E.2d 1108, 1110 (1999). We determine the parties' intent using the plain and ordinary meaning of the contract's language, unless that language is ambiguous. Id. A contract is ambiguous only if it is susceptible to more than one reasonable construction. Id. If a contract is susceptible to more than one construction and one of those makes the...