Mailing & Shipping Sys., Inc. v. Neopost USA, Inc.

• Citation: 937 F.Supp.2d 879
• Decision Date: 28 March 2013
• Docket Number: No. EP–12–CV–37–KC.,EP–12–CV–37–KC.
• Parties: MAILING AND SHIPPING SYSTEMS, INC., Plaintiff, v. NEOPOST USA, INC. d/b/a Hasler, Defendant.
• Court: U.S. District Court — Western District of Texas

937 F.Supp.2d 879

MAILING AND SHIPPING SYSTEMS, INC., Plaintiff,

v.NEOPOST USA, INC. d/b/a Hasler, Defendant.

No. EP–12–CV–37–KC.

United States District Court,

W.D. Texas,

El Paso Division.

March 28, 2013.

David W. Klaudt, Locke Lord LLP, Dallas, TX, Aldo R. Lopez, James & Haugland, P.C., Robert A. Skipworth, Attorney at Law, El Paso, TX, for Plaintiff.

Michael Eidel, Fox Rothschild LLP, Warrington, PA, David W. Klaudt, Kimberly F. Williams, Paul G. Nason, Locke Lord Bissell & Liddell, LLP, Dallas, TX, for Defendant.

ORDER

KATHLEEN CARDONE, District Judge.

On this day, the Court considered Defendant's Motion for Summary Judgment, ECF No. 29. Defendant filed the instant Motion on December 7, 2012, before Plaintiff was granted leave to file its Second Amended Complaint. See Order on Pl.'s Mot. to File a Second Am. Compl., ECF No. 43. Defendant's Motion, therefore, addresses only those claims that were originally discernible from Plaintiff's First Amended Complaint. Importantly, in the time since Defendant filed the present Motion, Plaintiff has explicitly waived its original claims for fraud and DTPA violations. See Pl.'s Mot. 1, ECF No. 36; Pl.'s Resp. 10, ECF No. 38. The present Order, therefore, need only address those remaining claims in Plaintiff's First Amended Complaint for breaches of contract and violations of the duty of good faith and fair dealing under Texas law. For the reasons set forth below, Defendant's Motion is GRANTED in part and DENIED in part.

I. BACKGROUND¹

The current litigation relates to a dealership agreement that governed business relations between Plaintiff and Defendant for approximately twenty-four years. From 1988 until 2012, Plaintiff was authorized under this dealership agreement to sell, install, and maintain Defendant's postage meters and mailing machines within a designated territory in Texas and New Mexico.

As explained below in further detail, Defendant and Plaintiff do not dispute any questions of fact relevant to the task currently before the Court. The parties' only material disagreements relate to certain questions of law. That is, the parties dispute the meaning and effect of certain language within the dealership agreement. In particular, this language relates to the length of the pre-termination period of notice required under the dealership agreement and the alleged “exclusivity” of Plaintiff's former territory. The parties also disagree as to the applicability and effect of the duty of good faith and fair dealing under Texas law. In the circumstances of this case, each of these questions can be resolved as a matter of law.

A. The Dealership Agreement

On February 24, 1988, Plaintiff entered into a dealership agreement with Defendant's predecessor, International Mailing Systems, Inc./Hasler, to become an authorized dealer of postage meters and mailing machines. See Def.'s Mot ¶ 1; Pl.'s Resp. ¶ 1; ² Def.'s A pp., Ex. A (“Igoe Deposition”), at 4–5, ECF No. 30–1; Def.'s App., Ex. B (“Appointment Letter”), at 2, ECF No. 30–2. The parties do not dispute that Defendant succeeded to the dealership agreement with Plaintiff in or about 2001, when Defendant acquired International Mailing Systems, Inc./Hasler. Def.'s Mot ¶ 5; Pl.'s Resp. ¶ 5; Igoe Dep. 13–14.

Under the dealership agreement, Plaintiff would sell Defendant's equipment to customers within Plaintiff's designated territory and then install and maintain that equipment. See Pl.'s Resp. 51–53 (“Flood Deposition”). Plaintiff's designated territory included several counties in Texas and New Mexico. Def.'s Mot. ¶ 4; Pl.'s Resp. ¶ 4. The parties agree that the terms of the dealership agreement were never memorialized in a single unified document, but rather arose through a course of dealing and a variety of documents, correspondence, and “dealer policy manuals” that changed hands between the parties regularly during their long business relationship. See Igoe Dep. 5–10; Flood Dep. 54–56. The parties agree that certain of these items created contractual obligations that are relevant to Defendant's Motion, although the nature of these contractual obligations is disputed.

Five of these items are of particular importance to the Court's present task. First, at the beginning of its participation i n the dealership agreement on February 24, 1988, Plaintiff received from Robert Hahn, a regional manager for Defendant's predecessor, a letter appointing Plaintiff as “a factory authorized dealer for IMS/H asler postage meters and mailing machines.” See Appointment Letter. The letter provided that “[t]his arrangement is subject to termination by us upon 30 days written notice to you.” Id.

Second, Plaintiff received a Dealer Policy Manual in 2011 containing the following language: “Except as otherwise provided in a written agreement with Dealer, [Defendant] shall give Dealer ninety (90) days prior written notice of intent to terminate Dealer by registered mail, return receipt requested (unless a shorter time frame is mutually agreed upon by [Defendant] and the Dealer).” Def.'s App., Ex. E (“2011 Manual Notice Provision”), at 13, ECF No. 30–2.

Third, Plaintiff also received from the regional manager for Defendant's predecessor a document “[e]ffective 2/15/88” providing that a designated list of “TEXAS counties” and “NEW MEXICO counties have been assigned to [Plaintiff's] non-exclusive territory.” Def.'s App., Ex. C (“Territory Assignment Document”), at 5, ECF No. 30–2 (emphasis added). This document did not contain any definition for the term, “non-exclusive.” See id.

Fourth, the 2010 and 2011 versions of Defendant's Dealer Policy Manual both include the following language: “[Defendant] will not use customer information gathered from meter rental, online services, neoFunds, or Totalfunds to sell supplies, products, or maintenance contracts into an authorized ... dealer's exclusive territory without fair and reasonable compensation to the dealer that initially supplied the information.” Pl.'s Resp. 78 (“2010 Manual Information Provision”), 80 (“2011 Manual Information Provision”) (emphasis added). This document did not contain any definition for the term, “exclusive.”

Fifth, according to the deposition testimony of Defendant's vice president, the 2009 version of Defendant's Dealer Policy Manual included the following language: “Dealers will not sell, lease, or rent new or refurbished products or solicit rental contracts covering postal meters for delivery in any territory other than the territory described in the Dealer's Sales Agreement.” Flood Dep. 55. The Court has not been provided with any copy of this page from the 2009 version of Defendant's policy manual, but the parties do not dispute the accuracy of this quoted language.

B. Encroachments by Rival Dealers

Plaintiff's owner and only officer, John Igoe, testifies in an affidavit that certain rival dealers, Accurate Business Machines and General Mailing Systems, periodically would “encroach” upon Plaintiff's designated territory by conducting business in San Angelo, Midland, and southern New Mexico. Pl.'s Resp. 94 (“Igoe Affidavit”). Plaintiff has also alleged throughout this litigation that Defendant “fail[ed] to take action” to prevent these encroachments. See Pl.'s First Am. Compl. ¶ 6, ECF No. 17; Pl.'s Second Am. Compl. ¶¶ 8, 10. These allegations were set forth in more detail in Plaintiff's Second Amended Complaint, but were already clearly discernible in Plaintiff's First Amended Complaint. Compare Pl.'s First Am. Compl. ¶ 6, with Pl.'s Second Am. Compl. ¶¶ 8, 10. Defendant does not deny that such encroachments occurred, but argues that Defendant had no obligation under the dealership agreement to prevent such encroachments. See Def.'s Reply 10–11, ECF No. 41.

C. Termination of the Agreement

The parties agree that Defendant set quotas for its dealers to meet, and that Plaintiff had fallen more than 75% below its quotas on various occasions between 2009 and 2011. See Def.'s Mot. ¶¶ 6–15; Pl.'s Resp. ¶¶ 6–15 (contesting Defendant's figures as to 2010, but conceding as to 2009 and 2011). On August 30, 2011, Defendant sent Plaintiff a “performance warning” notifying Plaintiff that it was not on track to meet its quotas for 2011. Def.'s Mot. ¶ 12; Pl.'s Resp. ¶ 12; Igoe Dep. 15–16. As Defendant's Dealer Policy Manual provides, “[t]he Dealer's failure to meet its assigned sales quota is cause for [Defendant], upon written notice to Dealer, to terminate such dealership.” Def.'s Mot. ¶ 16; Pl.'s Resp. ¶ 16; Igoe Dep. 9–11.

By letter dated December 7, 2011, and received by Plaintiff on December 12, 2011, Defendant gave notice that it would terminate Plaintiff's dealership agreement on January 31, 2012. Pl.'s First Am. Compl., Ex. 2 (“Termination Letter”), at 8, ECF No. 17; Def.'s Mot. ¶¶ 21–22; Pl.'s Resp. ¶¶ 21–22. Only days before the termination was to take effect, Plaintiff filed a petition and a request for a temporary restraining order in County Court at Law No. 3 in El Paso County, Texas, on January 27, 2012. See Def.'s Notice of Removal 12, ECF No. 1. In its original petition, Plaintiff brought various claims against Defendant, each of which related to the dealership agreement. Id. On February 6, 2012, Defendant filed a Notice of Removal and invoked this Court's diversity jurisdiction under 28 U.S.C. § 1332. Id. at 3. On June 11, 2012, Plaintiff timely filed its First Amended Complaint.

On December 7, 2012, Defendant filed its Motion for Summary Judgment, in which Defendant addressed all of the claims discernible from Plaintiff's First Amended Complaint. See Def.'s Mot. These included Plaintiff's claims for fraud, violations of the Deceptive Trade Practices Act (“DTPA”), violations of the duty of good faith and fair dealing, and two different breaches of contract. See id. at 11–19. The claims for breach of contract included, first, a claim that Defendant had terminated the dealership agreement without providing adequate notice to Plaintiff and, second, a claim...