Susan Chatelain v. Gideon Math & Reading LLC ( 2017 )

Affirmed in part, and Reverse and Remand in part and Opinion Filed August 8, 2017
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-16-00458-CV
SUSAN CHATELAIN, Appellant
V.
GIDEON MATH & READING LLC, Appellee
On Appeal from the 417th Judicial District Court
Collin County, Texas
Trial Court Cause No. 417-01628-2015
MEMORANDUM OPINION
Before Justices Bridges, Myers, and Brown
Opinion by Justice Bridges
Susan Chatelain appeals the trial court’s summary judgment in favor of Gideon Math &
Reading LLC on Chatelain’s claims under a licensing agreement. In a single issue, Chatelain
argues the trial court erred in holding there was not an enforceable agreement between her and
Gideon. We affirm the trial court’s judgment in part, reverse in part, and remand for further
proceedings.
Chatelain operates a business providing educational instruction in math and reading in
McKinney, Texas. Gideon produces proprietary materials for use by its franchisees and
licensees in providing educational instruction. Prior to the formation of Gideon, the business
was a sole proprietorship. Gideon was formed on October 14, 2010 and, on June 13, 2011,
Gideon Learning, LLC was formed, and the research and development, publication, and sales of
Gideon’s material was transferred to Gideon Learning. In the beginning, there were no
agreements between Gideon and customers purchasing its materials for use in after-school
learning centers. Prior to the formation of the Gideon entity, Gideon used a form agreement
contract which provided parties would not copy material from Gideon’s “Do Not Copy” list;
would “pay $20,000 for new Gideon Center fee + materials for opening kit”; and would be
available for three days of training in Dallas. In exchange, Gideon agreed to provide a current
manual with the Do Not Copy list; send a Gideon representative to the center for training;
provide three days’ free training in Dallas and unlimited access by phone and email; give notice
of changes to the curriculum and “give ability to re-order; and “Will not allow any new centers
to open within ten minutes of your center.”
As alleged in Chatelain’s original petition, In January 2012, Gideon and Chatelain
entered into a license agreement “for the purpose of granting to [Chatelain] the right to use
Gideon Materials and display the Gideon Marks” at Chatelain’s business. The agreement
granted Chatelain “a non-exclusive, non-transferable, personal license” to use the Gideon
materials and display the Gideon Marks at her place of business only. Gideon retained sole
ownership of the materials and marks and Chatelain agreed she was “not entitled to copy, store
electronically, print, or sell” the materials or marks except for certain specified materials listed in
an exhibit. Chatelain further agreed to run her business “with adequate lighting, working and
clean bathrooms, clean student workrooms, a clean waiting room, adequate and appropriate
furniture, and in a safe manner.” In return, Gideon agreed not to place another licensee “within a
ten (10) minute driving time from your Location.” Upon termination of the agreement, Chatelain
agreed to stop using the marks and materials, immediately return the materials to Gideon or sell
them to another licensee with Gideon’s approval, and provide proof of any sale to Gideon.
–2–
Chatelain retained no right to the materials or marks upon termination of the agreement. Gideon
did not charge Chatelain any fees in connection with the signing of the agreement.
In 2013, Gideon opened a learning center which Chatelain claimed was within ten
minutes of her location. Gideon responded that the ten minute restriction “is determined by
reference to Google maps at the time the new center is introduced.” Chatelain took no further
action. Chatelain’s petition alleged that, in April 2015, Gideon was opening another new
location within ten minutes from her location. Chatelain sought declaratory judgment as to the
“rights, status, or other legal relations under the License Agreement between the parties.”
Chatelain also alleged claims for breach of contract, injunctive relief, and attorney’s fees.
In December 2015, Gideon filed a motion for summary judgment seeking traditional
summary judgment on the grounds that there was no genuine issue of material fact precluding
judgment in favor of Gideon because the license agreement is a unilateral contract and
unenforceable. Gideon also moved for no-evidence summary judgment on the ground that there
was no evidence of an enforceable contract, no consideration for the license agreement, and no
damages proximately caused by the alleged breach. Gideon argued further that, without an
enforceable contract, Chatelain had no claims for declaratory judgment, injunction, or attorney’s
fees.
As the specific grounds for no-evidence summary judgment, Gideon alleged Chatelain
was not able to show: (1) a valid, enforceable contract exists; (2) any contract is supported by
consideration; (3) [Gideon] breached the agreement; (4) [Chatelain] suffered any damage; or (5)
any breach by [Gideon] was the proximate cause of any injury sustained. Gideon alleged certain
“undisputed summary judgment facts” including the assertion nothing was requested in return for
the license agreement and a 10% discount was offered for those that would sign and return the
license agreement. This assertion was supported by a letter attached to the motion indicating
–3–
that, in January 2012, Gideon was “moving into franchising all new centers” and requested that
all current licensees sign the license agreement by January 31, 2012. In exchange, Gideon
offered a 10% discount on online store purchases from the time the licensee signed the
agreement until July 1, 2012.
In further support of its motion, Gideon asserted Chatelain did not pay anything of value
to Gideon in exchange for the license agreement; Chatelain is free to terminate the license
agreement at any time; Chatelain has no obligation to purchase any materials from Gideon under
the license agreement; Chatelain did not have to change any aspect of the way she ran her
business when she signed the license agreement; and Chatelain has no obligations under the
license agreement that are not illusory because she can simply walk away from the relationship
with Gideon without any cost or penalty. Based on these facts, Gideon asserted the license
agreement is unilateral because Chatelain has no obligation that is not illusory.
Gideon also argued the license agreement is not supported by sufficient consideration
because Chatelain paid nothing for the license, paid no royalties, and took on no obligations she
did not already have under the license agreement. To the extent the license agreement contained
a covenant not to compete, Gideon argued the license agreement did not meet the criteria
required of an enforceable covenant not to compete. Regarding Gideon’s use of Google maps to
determine drive times, Gideon argued Chatelain had waived the issue by continuing her
relationship with Gideon after learning in 2013 that Gideon used Google maps, and quasi-
estoppel barred Chatelain from disputing the use of Google maps by accepting the use of Google
maps in 2013. Finally, Gideon sought a declaratory judgment that the license agreement was not
enforceable.
In January 2016, Chatelain filed a response to Gideon’s motion for summary judgment
arguing the licensing agreement was enforceable but, even if it were not, Gideon should be
–4–
estopped from denying the enforceability of its own agreement. Chatelain argued she
“purchased her materials from [Gideon] and exhibited [Gideon’s] sign or trademark to generate
business.” Gideon sold educational materials to Chatelain and did not argue that the licensing
agreement was unenforceable when Chatelain complained about the proximity of a new center.
Instead, Gideon argued that the new center was in compliance with the terms of the agreement.
Chatelain argued the licensing agreement “confers upon [Chatelain] the right to use materials
developed and sold by [Gideon] as long as [Chatelain] complies with various terms and
conditions, none of which [Chatelain] has been accused of violating.” As long as she abides by
the terms of the license agreement and buys Gideon’s materials, Chatelain argued, she has the
right to operate under the Gideon name, a name which has value. In support of her response,
Chatelain attached the deposition testimony of Stephanie Coppedge, Gideon’s managing
member, who testified she believes “there is some value to the name Gideon Math & Reading
and the instructional system” it employs, and she had “25 or 26 other people who agree with
[her] and use [her] system and buy [her] materials to tutor and instruct people.”
In May 2016, the trial court signed a final judgment granting Gideon’s motion for
summary judgment and declaring “that the License Agreement attached hereto is not enforceable
as a matter of law on the grounds that the agreement is unilateral and [Chatelain’s] promises are
illusory, and because it is not supported by sufficient consideration.” This appeal followed.
In a single issue, Chatelain argues the trial court erred in holding there was not an
enforceable agreement between her and Gideon. As a result, she argues, the trial court erred in
granting summary judgment in favor of Gideon.
In reviewing the trial court’s decision to grant summary judgment, we apply well-known
standards. See TEX. R. CIV. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49
(Tex. 1985). A defendant who moves for summary judgment must show the plaintiff has no
–5–
cause of action. A defendant may meet this burden by either disproving at least one essential
element of each theory of recovery or conclusively proving all elements of an affirmative
defense. See Wornick Co. v. Casas, 856 S.W.2d 732, 733 (Tex. 1993). A matter is conclusively
established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence.
See Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex.
1982). After the movant has established a right to summary judgment, the burden shifts to the
nonmovant to present evidence creating a fact issue. See Kang v. Hyundai Corp., 992 S.W.2d
499, 501 (Tex. App.—Dallas 1999, no pet.).
When traditional and no-evidence motions for summary judgment are filed, we review
the no-evidence summary judgment first. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600
(Tex. 2004). We review a no-evidence summary judgment under the same legal sufficiency
standard used to review a directed verdict. See TEX. R. CIV. P. 166a(i); King Ranch, Inc. v.
Chapman, 118 S.W.3d 742, 750 (Tex. 2003). Thus, we must determine whether the nonmovant
produced more than a scintilla of probative evidence to raise a fact issue on the material
questions presented. King Ranch, 118 S.W.3d at 750. When analyzing both traditional and no-
evidence summary judgments, we consider the evidence in the light most favorable to the
nonmovant. See Nixon, 690 S.W.2d at 549 (traditional summary judgment); King Ranch, 118
S.W.3d at 750 (no-evidence summary judgment).
A contract must be based upon a valid consideration, in other words, mutuality of
obligation. Iacono v. Lyons, 16 S.W.3d 92, 94 (Tex. App.—Houston [1st Dist.] 2000, no pet.);
see Texas Gas Util. Co. v. Barrett, 460 S.W.2d 409, 412 (Tex. 1970). Consideration is a
bargained-for exchange of promises. ULICO Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773,
790 (Tex. 2008). Consideration consists of benefits and detriments to the contracting parties. Id.
–6–
The detriments must induce the parties to make the promises and the promises must induce the
parties to incur the detriments. Id.
Here, the summary judgment evidence showed Gideon essentially required all licensees,
including Chatelain, to enter into the license agreement in 2012. As an incentive to sign the
license agreement by a particular date, Gideon offered a discount on purchases from Gideon’s
online store. Under the license agreement, Chatelain could purchase educational materials from
Gideon and use them within certain limitations, but the materials and Gideon’s mark remained
Gideon’s property, and Chatelain was required to return all materials to Gideon if the license
agreement was terminated. The agreement also required Chatelain to maintain her business in a
certain way. In return, Gideon agreed not to place another licensee within a ten minute driving
time from Chatelain’s location. Gideon did not charge any fees in connection with the signing of
the agreement, but the purpose of the agreement was to govern sales of Gideon’s educational
materials and use of Gideon’s mark, which Gideon’s managing member agreed had value.
Under these circumstances, we conclude Chatelain produced more than a scintilla of probative
evidence to raise a fact issue on the questions of whether a valid, enforceable contract existed
between Gideon and Chatelain and whether the agreement was supported by consideration. King
Ranch, 118 S.W.3d at 750. Because fact issues exist as to the agreement’s validity and
enforceability, we reject Gideon’s argument that the agreement, to the extent it created a restraint
on trade, was unenforceable because it was not ancillary to an otherwise enforceable contract.
Gideon argues the licensing agreement imposes on Chatelain no obligations that are not
illusory because she can simply walk away from the relationship with Gideon without any cost
or penalty. Even though a contract is terminable at will, until terminated, the contract is valid
and subsisting. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 689 (Tex. 1989). Further, if
Chatelain walks away from her relationship with Gideon, she must return Gideon’s educational
–7–
materials and stop using Gideon’s mark, both of which the evidence shows have value. We
conclude fact issues preclude summary judgment on the issue of whether Chatelain’s obligations
under the agreement were illusory. See King Ranch, 118 S.W.3d at 750.
Chatelain sought a declaratory judgment regarding her “rights, status, or other legal
relations” under the licensing agreement. Gideon argues Chatelain presented no evidence of
damages. A declaratory judgment, by its nature, is forward looking; it is designed to resolve a
controversy and prevent future damages. Intercontinental Grp. P’ship v. KB Home Lone Star
L.P., 295 S.W.3d 650, 660 (Tex. 2009). It affects a party’s behavior or alters the parties’ legal
relationship on a going-forward basis. Id. An action to declare rights is not an action for money
damages. Id. We sustain Chatelain’s issue to the extent she argues summary judgment was
improper on her declaratory judgment and injunctive relief claims.
Gideon argues Chatelain “produced no evidence at all to prove the elements of an
enforceable agreement supported by sufficient consideration, a breach, damages or proximate
cause with respect to her breach of contract claim.” Gideon’s no-evidence motion for summary
judgment asserted Chatelain presented no evidence that she suffered any damage or that any
breach by Gideon was the proximate cause of any injury sustained. The elements of a breach of
contract claim are (1) the existence of a valid contract; (2) performance or tendered performance
by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the plaintiff
resulting from that breach. Woodhaven Partners, Ltd. v. Shamoun & Norman, L.L.P., 422
S.W.3d 821, 837 (Tex. App.—Dallas 2014, no pet.). Chatelain’s petition alleged she had
“suffered significant actual damages” and sought “compensatory damages” as a result of
Gideon’s alleged breach of contract. Chatelain’s petition did not further address the damages
issue. In her response to Gideon’s motion for summary judgment, Chatelain presented no
evidence to show what damages she incurred, if any, as a result of Gideon’s alleged breach of
–8–
contract. When presenting summary judgment proof in response to a no-evidence motion, a
party must specifically identify the supporting proof on file that it seeks to have considered by
the trial court. See Arredondo v. Rodriguez, 198 S.W.3d 236, 238 (Tex. App.—San Antonio
2006, no pet.); see also TEX. R. CIV. P. 166a(i) cmt. (“To defeat a motion made under paragraph
(i), ... [a nonmovant’s] response need only point out evidence that raises a fact issue on the
challenged elements.”). Accordingly, we conclude the trial court did not err in granting no-
evidence summary judgment on Chatelain’s breach of contract claim. See King Ranch, 118
S.W.3d at 750. We overrule Chatelain’s issue to the extent she challenges the trial court’s
summary judgment on her breach of contract claim.
We affirm the trial court’s summary judgment on Chatelain’s breach of contract claim for
failure to show evidence of damages. In all other respects, we reverse the trial court’s judgment
and remand for further proceedings.
/David L. Bridges/
DAVID L. BRIDGES
JUSTICE
160458F.P05
–9–
S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
SUSAN CHATELAIN, Appellant On Appeal from the 417th Judicial District
Court, Collin County, Texas
No. 05-16-00458-CV V. Trial Court Cause No. 417-01628-2015.
Opinion delivered by Justice Bridges.
GIDEON MATH & READING LLC, Justices Myers and Brown participating.
Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED in part and REVERSED in part. We REVERSE that portion of the trial court's
summary judgment on the declaratory judgment claim, the claim for injunctive relief, and the
claim for attorney’s fees by appellant Susan Chatelain. In all other respects, the trial court's
judgment is AFFIRMED. We REMAND this cause to the trial court for further proceedings
consistent with this opinion.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered August 8, 2017.
–10–