VTX Commc'ns, LLC v. AT&T Inc.
| Decision Date | 04 August 2020 |
| Docket Number | CIVIL ACTION NO. 7:19-cv-00269 |
| Parties | VTX COMMUNICATIONS, LLC, et al., Plaintiffs, v. AT&T INC., et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
The Court now considers "AT&T Defendants' Motion to Dismiss Plaintiffs' New Amended Petition [ECF 54] and in the Alternative, Motion for Judgment on the Pleadings,"1 Plaintiffs' response,2 Defendants' reply,3 Plaintiffs' sur-reply,4 and Defendants' response of non-opposition to Plaintiffs' sur-reply.5 After considering the motion, record, and relevant authorities, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss.
This is a telecommunications partnership compensation dispute with such complexity that the parties have seen fit to include glossaries (albeit inconsistent ones) in their briefs.6 "This lawsuit originated in state court after certain Limited Partners of three limited partnerships that provide AT&T-branded wireless service in South Texas sued the Partnerships' common General Partner and affiliated entities."7 This suit is brought by limited partners against the generalpartner and the general partner's controllers. As in the Court's previous order, the Court will delineate the parties8:
Plaintiffs Defendants • VTX Investments, LLC• VTX Communications,LLCindividually andderivatively on behalf of: McAllen-Edinburg-MissionSMSALimitedPartnership • McAllen-Edinburg-Mission SMSA LimitedPartnership• Texas RSA 18 Limited Partnership• Texas RSA 19 Limited Partnership • VTX Investments, LLC• VTX Communications,LLC• SWT UnregulatedProperties, Inc.individually andderivatively on behalf of: Texas RSA 18LimitedPartnership • New CingularWireless PCS,LLC d/b/aAT&T Mobilityindividually and inits capacity asGeneral Partner of: • McAllen-Edinburg-Mission SMSALimited Partnership• Texas RSA 18Limited Partnership• Texas RSA 19Limited Partnership • VTX Investments, LLC• VTX Communications,LLC• Riviera Cellular andTelecommunications,Inc.individually andderivatively on behalf of: Texas RSA 19LimitedPartnership • AT&T MobilityCorporation• CricketCommunications,LLC• Cricket WirelessLLCindividually and intheir capacity asManager of: • New CingularWireless PCS, LLCd/b/a AT&TMobility • AT&T Inc.as parent of: • New CingularWireless PCS, LLCd/b/a AT&TMobility• AT&T MobilityCorporation• CricketCommunications,LLC• Cricket WirelessLLC
The general partner, New Cingular Wireless PCS, LLC d/b/a AT&T Mobility, operates the three limited partnerships, the McAllen-Edinburg-Mission SMSA Limited Partnership, the Texas RSA18 Limited Partnership, and the Texas RSA 19 Limited Partnership.9 The three limited partnerships have exclusive authority to provide "wireless [cell phone] service in their Partnerships' respective service areas" throughout south Texas.10 However, Plaintiffs allege that Defendants have been using the networks and wireless spectrums operated by the limited partnerships "in derogation of" Defendants' duties to the Plaintiffs, specifically by Defendants' operation of a Cricket Wireless network "without proper compensation or at no compensation" to the three limited partnerships and thus to the detriment of the Plaintiffs.11 Plaintiffs provide the example that when AT&T Inc. purchased Cricket Wireless, AT&T Inc. allegedly operated "Cricket assets in the Partnership service areas as a separate business in competition with the Partnerships using the Partnership's network to serve that business."12 Plaintiffs detail their history with Defendants and allegations of deliberate failures and negligent mismanagement of the partnerships at length,13 for example by alleging Defendants' sale of cell phone location information to third parties without accounting to the three limited partnerships for those revenues.14 Plaintiffs bring this dispute over (1) revenue compensation and distributions allegedly withheld from certain limited partners of three different partnerships by the common general partner of the three partnerships; and (2) the authorized scope of the partnerships' network utilization and operation by the general partner and its managing and parent entities.15
Plaintiffs bring causes of action for breach of fiduciary duty, breach of the partnership agreements, tortious interference, conversion/civil theft, aiding and abetting, and fraud.16
Plaintiffs filed an original petition in Texas state court on October 21, 2016.17 Defendants answered on December 19, 2016.18 In state court, Plaintiffs filed a First Amended Petition on October 26, 2018,19 then a Second Amended Petition on July 3, 2019.20 Defendants removed to this Court on August 2, 2019.21 On February 26, 2020, this Court issued an order addressing numerous motions and concluding, for purposes of this opinion, that the Court has jurisdiction over this case.22 On April 23, 2020, the Court considered Plaintiffs' motion for leave to amend and granted Plaintiffs leave to amend to meet the verification requirements of Federal Rule of Civil Procedure 23.1.23 On May 5, 2020, in compliance with this Court's order, Plaintiffs filed "Plaintiffs' Second Amended Petition Conformed to Federal Rule of Civil Procedure 23.1," which is Plaintiffs' current complaint and live pleading in this case.24 Defendants filed the instant motion to dismiss and alternative motion for judgment on the pleadings on May 19, 2020, and the motion is briefed25 and ripe for decision.26 To this point, Plaintiffs have filed five complaints and Defendants have filed three motions to dismiss.27 The Court turns to the analysis.28
Plaintiffs filed a "Motion for Leave to File Sur-Reply Concerning AT&T Defendants' Reply Brief in Support of their Motion to Dismiss" seven days after Defendants' reply.29 Plaintiffs seek to address supposedly new arguments relating to judicial notice and Plaintiffs' prior admissions.30 Plaintiffs did not successfully confer with Defendants prior to filing their motion.31 Had Plaintiffs conferred as required by Local Rule 7.1.D., Plaintiffs would have learned that Defendants are unopposed to Defendants' requested relief.32
"Whether to allow filing a surreply is within the sound discretion of the district court."33 Given that the parties are unopposed and the sur-reply Plaintiffs attached as an exhibit appears limited to specific issues and does not appear to be an attempt to recapitulate arguments, the Court GRANTS Plaintiffs' motion to file a sur-reply.34 The Court will consider "Plaintiffs' Sur-Reply Concerning AT&T Defendants' Reply Brief in Support of their Motion to Dismiss"35 as applicable to the remainder of this Opinion and Order.
A threshold issue in this case is which forum's law to apply, yet the parties have given perfunctory consideration to the issue. Plaintiffs favor the application of Delaware law "to Plaintiffs' breach of fiduciary duty, breach of contract, and aiding and abetting breach offiduciary duty claims" and Texas law to the remainder of Plaintiffs' claims.36 Defendants agree that Delaware law applies to the breach of contract and breach of fiduciary duty and aiding and abetting claims,37 but argue that the Court need not undertake any choice of law analysis because "the elements of the claims are largely the same under both states' laws."38 Since Defendants' first motion to dismiss, Defendants have argued for dismissal under either Delaware or Texas law.39 However, the parties admit that there is an agreed choice-of-law provision in the parties' partnership agreements.40
41 The Court should resolve choice-of-law issues at the outset.42 This Court "must apply the choice of law rules of the forum state, in this case Texas."43 "Texas choice of law principles give effect to choice of law clauses if the law chosen by the parties has a reasonable relationship with the parties and the chosen state, and the law of the chosen state is not contrary to a fundamental policy of the [forum] state."44 This is a two-step inquiry.45 In cases with a choice-of-law provision in an agreement, protection of the justified expectations of the parties is the most significant and important factor in the choice-of-law analysis.46 Nevertheless, tort causes of action are independent of contract claims, and therefore might not be governed by choice-of-law provisions in the parties' contract particularly when the choice-of-law provision is narrow.47 Even if the plaintiff's tort claims arise out of a contractual relationship, the contractual choice-of-law provision does not necessarily control because tort claims do not require construction or interpretation of the parties' contractual engagement.48 Whether the parties' agreed choice-of-law clause governs tort disputes in addition to contract claims thus depends on the breadth of the clause.49 For example, choice-of-law clauses that govern all disputes "in connection with" the contract also encompass tort claims, whereas choice-of-law clauses that only apply to "construe" the contract do not cover tort claims.50
Here, the choice-of-law clause governing this case bears the following identical language across all three limited partnership agreements: "This Agreement and the rights and obligations of the Partners shall be interpreted in accordance with the laws of the State of Delaware."51 The"Partners" are the general partner and limited partners together.52 The first question is whether the general partner's affiliates or controllers may be bound by the choice-of-law clause.53 Courts in the Second,54 Third,55 Sixth,56 Seventh,57 Eighth,58 Ninth,59 and Eleventh Circuits60 bind "closely...
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