Taj Al Khairat Ltd. v. Swiftships Shipbuilders, L.L.C.

Decision Date04 December 2015
Docket NumberNo. 15-30195,15-30195
PartiesTAJ AL KHAIRAT LIMITED, Plaintiff - Appellee v. SWIFTSHIPS SHIPBUILDERS, L.L.C., Defendant - Appellant
CourtU.S. Court of Appeals — Fifth Circuit

Appeal from the United States District Court for the Western District of Louisiana

USDC No. 6:13-CV-2609

Before DAVIS, BARKSDALE, and DENNIS, Circuit Judges.

PER CURIAM:*

For Swiftships Shipbuilders, L.L.C.'s challenge to the summary judgment awarded Taj Al Khairat, Ltd., on its breach-of-contract claim regarding their settlement agreement, primarily at issue is whether a genuine dispute of material fact exists for whether Swiftships and Taj reached an oral agreement constituting a novation of the settlement agreement. AFFIRMED.

I.

Two contracts form the basis for this dispute. The first is the settlement agreement, executed in August 2011 by Taj and Swiftships. To resolve disputes arising from a contract the parties executed the year before, the settlement agreement required Swiftships to pay Taj either a lump sum of $5.2 million, or monthly installments totaling $6.8 million; if Swiftships failed to make timely payment, Taj was entitled to default judgment, which Swiftships expressly waived its right to challenge. A choice-of-law provision designated Texas law as governing. Rahman, the United States representative for Taj through its United States subsidiary, Crown Contracting, Inc., signed the agreement for Taj.

The second contract is a master services agreement (MSA) between Swiftships and IWG, Inc., executed in February 2013. The MSA obligated Swiftships to pay IWG for consulting services on a shipbuilding contract with South Oil Company in Iraq (SOC contract). The MSA included a merger provision, identifying the MSA as "the entire agreement between the parties . . . , supersed[ing] any oral promises, proposals, representations, understandings and negotiations between the parties respecting the subject matter" of the MSA. In addition to being the United States representative for Taj, Rahman served as an officer for IWG, and executed the MSA for it.

Taj filed this action in September 2013, claiming Swiftships breached the settlement agreement by failing to make timely payment. Swiftships did not dispute that it only made one payment under that agreement. Instead, it claimed, inter alia, a novation occurred when the MSA was executed, relieving it of obligations under the settlement agreement. Along that line, Swiftships contended: an oral agreement in the summer of 2012 between its then-new owners, brothers Shehraze and Khurram Shah, and Rahman (again, United States representative for Taj and officer for IWG), substituted the MSA for thesettlement agreement; and, under the MSA, Swiftships' payments to IWG satisfied Swiftships' debt to Taj. The Shah brothers' attorney, Nubani, was also present at the summer-2012 meeting at which Swiftships contends it and Taj reached an oral agreement.

In awarding summary judgment to Taj, the district court ruled that "nothing in the testimony of the parties permits the conclusion that a meeting of the minds ever occurred concerning how the Taj debt would be handled, and therefore, a new oral agreement was never formed which could be considered a novation of the Settlement Agreement". Taj Al Khairat, Ltd. v. Swiftships Shipbuilders, L.L.C., No. 13-02609, 2015 WL 464749, at *5 (W.D. La. 3 Feb. 2015). Additionally, the court held, inter alia, "the merger clause in the MSA bars any novation defense". Id.

II.

Summary judgment is reviewed de novo, applying the same legal standards as the district court. E.g., Nobel Energy, Inc. v. Bituminous Cas. Co., 529 F.3d 642, 645 (5th Cir. 2008). Viewing all evidence and drawing all reasonable inferences in the nonmovant's favor, summary judgment is appropriate when "no genuine dispute [of] material fact" exists and "the movant is entitled to judgment as a matter of law". Fed. R. Civ. P. 56(a); see, e.g., Nunez v. Allstate Ins. Co., 604 F.3d 840, 844 (5th Cir. 2010). No such dispute exists "[i]f the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party". Dediol v. Best Chevrolet, Inc., 655 F.3d 435, 439 (5th Cir. 2011). Once the movant satisfies its burden of demonstrating no such dispute exists, the nonmovant must point to specific evidence in the summary-judgment record to demonstrate there is a material-fact dispute regarding the essential elements of the case. Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994). On the other hand, "if the nonmoving party rests merely upon conclusory allegations, improbable inferences, and unsupportedspeculation", summary judgment may be proper. Id. (quoting Krim v. BancTexas Grp., Inc., 989 F.2d 1435, 1449 (5th Cir. 1993)).

A.

Before reaching whether there is a genuine dispute of material fact, two points must be addressed.

1.

The district court found no basis for Swiftships' challenges to the validity of the settlement agreement. Taj, 2015 WL 464749, at *5-6 & n.4. Those issues are not raised on appeal; therefore, they are waived. E.g., United States v. Whitfield, 590 F.3d 325, 346 (5th Cir. 2009).

2.

Similarly, Swiftships does not contest the district court's ruling that the MSA's merger clause bars Swiftships' novation defense. Taj, 2015 WL 464749, at *5. The court cited New York law, which the parties agreed governed the MSA, to articulate the enforceability of merger clauses: "The purpose of a merger clause is to require the full application of the parol evidence rule . . . to bar the introduction of extrinsic evidence to alter, vary or contradict the terms of the writing. . . . by evincing the parties' intent that the agreement is to be considered a completely integrated writing". Id. at *5 n.4 (quoting Jarecki v. Shung Moo Louie, 95 N.Y.2d 665, 669 (2001)) (internal quotation marks omitted). Merger clauses are also generally enforceable under Texas law. See, e.g., ISG State Operations, Inc. v. Nat'l Heritage Ins. Co., 234 S.W.3d 711, 719 (Tex. App.—Eastland 2007).

Swiftships waives any issue concerning the MSA merger provision by failing to challenge this part of the district court's ruling. Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 609-10 (5th Cir. 2011). As a result, it arguably forfeits its right to dispute the summary judgment. See id. "We will not raise and discuss legal issues that [the appellant] . . . failed toassert." Brinkmann v. Dallas Cty. Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir. 1987).

Assuming this point may be considered, and for our de novo review, a plain reading of the MSA merger provision calls into question its applicability regarding the claimed novation. The clause prevents the parties to the MSA from presenting evidence of prior oral agreements between the same parties concerning the subject matter of the MSA. The alleged summer-2012 oral agreement was, according to the Shah brothers, between Taj and Swiftships, not IWG. And, the parties to the MSA were Swiftships and IWG, not Taj. Although Swiftships contends the debt to Taj was satisfied by payments to IWG under the MSA, Taj is not a party to the MSA. On the other hand, Rahman could execute contracts for both Taj and IWG.

Even assuming arguendo the merger clause does not bar our considering evidence of an oral agreement, Swiftships' challenge still fails, for the following reasons.

B.

In maintaining the district court erred in holding Swiftships and Taj did not reach an oral agreement, Swiftships contends: had the court construed all the evidence in the light most favorable to the nonmovant, it would have concluded the Shah brothers' deposition testimony created a genuine dispute of material fact on whether the parties reached an oral agreement and novation; and, therefore, summary judgment was improper.

Under Texas law, novation is an affirmative defense to a breach-of-contract claim. Honeycutt v. Billingsley, 992 S.W.2d 570, 577 (Tex. App.—Houston [1st Dist.] 1999). A "[n]ovation is the substitution of a new agreement between the same parties or . . . of a new party on an existing agreement". N.Y. Party Shuttle, LLC v. Bilello, 414 S.W.3d 206, 214 (Tex. App.—Houston [1st Dist.] 2013). "Where a novation occurs, only the new agreement may beenforced." Id. The party asserting novation as a defense must show: "(1) a previous, valid obligation; (2) a mutual agreement of the parties to the acceptance of a new contract; (3) the extinguishment of the old contract; and (4) the validity of the new contract". Vickery v. Vickery, 999 S.W.2d 342, 356 (Tex. 1999). In other words, a "novation is never presumed". In re Bath Junkie Franchise, Inc., 246 S.W.3d 356, 365 (Tex. App.—Beaumont 2008). Obviously, the party claiming a novation must present evidence showing the parties' intent to effect one. Id.

Furthermore, the requisite "elements of both written and oral contracts are the same and must be present for a contract to be binding". Searcy v. DDA, Inc., 201 S.W.3d 319, 322 (Tex. App.—Dallas 2006). An agreement must detail its essential terms such that a court could enforce it. E.g., id.; T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). And, the parties must have, inter alia, a meeting of the minds, and intend the agreement to be mutual and binding. See, e.g., Labor Ready Cent. III, L.P. v. Gonzalez, 64 S.W.3d 519, 522 (Tex. App.—Corpus Christi 2001). Moreover, the requisite meeting of the minds is evaluated "on the objective standard of what the parties said and did—and not on their subjective state of mind". Wal-Mart Stores, Inc. v. Lopez, 93 S.W.3d 548, 556 (Tex. App.—Houston [14th Dist.] 2002). "It is well settled law that when an agreement leaves material matters open for future adjustment and agreement that never occur, [the agreement] is not binding upon the parties and merely constitutes an agreement to agree." Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000).

Swiftships points to the Shah brothers'...

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