Trelltex, Inc. D/B/A Texcel v. Intecx, L.L.C. D/B/A Rocky Mountain Industrial Technologies ( 2015 )

ACCEPTED
14-14-00578-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
3/13/2015 2:36:56 PM
CHRISTOPHER PRINE
CLERK
No. 14-14-00578-CV
__________________________________________________________________
FILED IN
14th COURT OF APPEALS
IN THE COURT OF APPEALS HOUSTON, TEXAS
FOR THE FOURTEENTH DISTRICT OF TEXAS3/13/2015 2:36:56 PM
HOUSTON, TEXAS CHRISTOPHER A. PRINE
Clerk
__________________________________________________________________
TRELLTEX, INC. d/b/a TEXCEL
Appellant/Cross-Appellee
VS.
INTECX, L.L.C. d/b/a ROCKY MOUNTAIN INDUSTRIAL TECHNOLOGIES
Appellee/Cross-Appellant
__________________________________________________________________
On Appeal from the 295th Judicial District Court of Harris County, Texas
Cause No. 2012-52277
__________________________________________________________________
APPELLANT’S RESPONSE TO APPELLEE’S CROSS-APPEAL
AND REPLY IN SUPPORT OF APPELLANT’S BRIEF
__________________________________________________________________
DOW GOLUB REMELS & BEVERLY, LLP
Keith M. Remels
Texas Bar No. 16765800
Stephanie A. Hamm
Texas Bar No. 24069841
9 Greenway Plaza, Suite 500
Houston, Texas 77046
Telephone: (713) 526-3700
Facsimile: (713) 526-3750
ATTORNEYS FOR APPELLANT
TRELLTEX, INC. d/b/a TEXCEL
TABLE OF CONTENTS
INDEX OF AUTHORITIES.................................................................................... iii
ISSUE PRESENTED BY CROSS-APPELLANT’S BRIEF ................................. vii
PART ONE: RESPONSE TO RMIT’S CROSS-APPEAL ....................................... 2
SUMMARY OF THE ARGUMENT ........................................................................ 2
ARGUMENT AND AUTHORITIES ........................................................................ 3
I. THE RECORD DEMONSTRATES THAT RMIT WAIVED ITS
RIGHT TO RECEIVE ANY ALLEGED UNDERPAID
COMMISSIONS OWED BY TEXCEL AFTER MAY 1, 2006 .......................... 3
II. THE COURT SHOULD AFFIRM THE TRIAL COURT’S
FINDING OF WAIVER............................................................................. 17
PART TWO: REPLY IN SUPPORT OF APPELLANT’S BRIEF ........................ 18
I. THE DAMAGES AWARDED BY THE TRIAL COURT ARE
INDISPUTABLY BARRED BY LIMITATIONS ............................................. 18
II. THE TRIAL COURT’S CONSTRUCTION OF THE AGREEMENT
RENDERS THE “NOTE” MEANINGLESS .................................................. 24
III. THE TRIAL COURT ERRED BY APPLYING COLORADO LAW .................. 27
IV. THE TRIAL COURT INCORRECTLY AWARDED ADDITIONAL
DAMAGES TO INTECX, LLC .................................................................. 30
CONCLUSION AND PRAYER ............................................................................. 32
CERTIFICATE OF COMPLIANCE ....................................................................... 33
CERTIFICATE OF SERVICE ................................................................................ 34
ii
INDEX OF AUTHORITIES
CASES
Alford, Meroney & Co. v. Rowe,
619 S.W.2d 210 (Tex. Civ. App.—Amarillo 1981, writ ref’d
n.r.e.) ..........................................................................................................3, 16
Amouri v. Sw. Toyota, Inc.,
20 S.W.3d 165 (Tex. App.—Texarkana 2000, pet. denied) .......................... 13
Barker v. Eckman,
213 S.W.3d 306 (Tex. 2006) ......................................................................... 22
Capstone Healthcare Equip. Svcs. v. Quality Home Health Care, Inc.,
295 S.W.3d 696 (Tex. App.—Dallas 2009, pet. denied) .............................. 20
City of Keller v. Wilson,
168 S.W.3d 802 (Tex. 2005) ......................................................................... 17
Compaq Computer Corp. v. LaPray,
135 S.W.3d 657 (Tex. 2004) ......................................................................... 27
Davis Apparel v. Gale-Sobel, a Div. of Angelica Corp.,
117 S.W.3d 15 (Tex. App.—Eastland 2003, no pet.)..............................19, 21
Dow Chemical Co. v. Francis,
46 S.W.3d 237 (Tex. 2001) ....................................................................... 4, 17
El Paso Field Svcs., L.P. v. MasTex N. Am., Inc.,
389 S.W.3d 802 (Tex. 2012) ......................................................................... 26
F.D. Stella Prods. Co. v. Scott,
875 S.W.2d 462 (Tex. App.—Austin 1994, no writ) .................................... 21
Foley v. Capital One Bank, N.A.,
383 S.W.3d 644 (Tex. App.—Houston [14th Dist.] 2012, no pet.) ........ 15, 16
Forbau v. Aetna Life Ins. Co.,
876 S.W.2d 132 (Tex. 1994) ......................................................................... 26
iii
Hart v. Int’l Tel. & Telegraph Corp.,
546 S.W.2d 660 (Tex. App.—San Antonio 1977, writ ref’d n.r.e.) .............. 19
Hemenway Co., Inc. v. Sequoia Pac. Realco,
590 S.W.2d 545 (Tex. Civ. App.—San Antonio 1979, writ ref’d
n.r.e.) ................................................................................................................ 3
Hollander v. Capon,
853 S.W.2d 723 (Tex. App.—Houston [1st Dist.] 1993, writ
denied) ........................................................................................................... 19
In re Estate of Miller,
446 S.W.3d 445 (Tex. App.—Tyler 2014, no pet.) .................................16, 17
In re General Electric Corp.,
203 S.W.3d 341 (Tex. 2006) ........................................................................... 9
In re Key Equip. Finance Inc.,
371 S.W.3d 296 (Tex. App.—Houston [1st Dist.] 2012, no pet.) ................. 13
Intermedics, Inc. v. Grady,
683 S.W.2d 842 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d
n.r.e.) .............................................................................................................. 19
Johnston v. McKinney Am, Inc.,
9 S.W.3d 271 (Tex. App.—Houston [14th Dist.] 1999, pet.
denied) ........................................................................................................... 24
Lyle v. Jane Guinn Revocable Trust,
365 S.W.3d 341 (Tex. App.—Houston [1st Dist.] 2010, no pet.) ........... 20, 21
Med. Sales & Consulting Gp. v. Plus USA Orthopedics, Inc.,
2011 WL 5075970 (S.D. Cal. Oct. 25, 2011) ................................................ 29
Morton v. Hung Nguyen,
369 S.W.3d 659 (Tex. App.—Houston [14th Dist.] 2012),
rev’d in part on other grounds, 412 S.W.3d 506 (Tex. 2013) ...................... 14
PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P’ship,
146 S.W.3d 79 (Tex. 2004) ...............................................................30, 31, 32
iv
PennWell Corp. v. Ken Assoc. Inc.,
123 S.W.3d 756 (Tex. App.—Houston [14th Dist.] 2003, no pet.) .............. 27
Price Pfister, Inc. v. Moore & Kimmey, Inc.,
48 S.W.3d 341 (Tex. App.—Houston [14th Dist.] 2001, pet.
denied) ............................................................................................................. 4
Rader v. Electronic Payment Sys., LLC,
2012 WL 4336175 (D. Colo. Sept. 21, 2012) ............................................... 29
Rodriguez v. Classical Custom Homes, Inc.,
176 S.W.3d 928 (Tex. App.—Dallas 2005, no pet.) ....................................... 3
Slusser v. Un. Bankers Ins. Co.,
72 S.W.3d 713 (Tex. App.—Eastland 2002, no pet.).................................... 21
Spin Doctor Golf, Inc. v. Paymentech, L.P.,
296 S.W.3d 354 (Tex. App.—Dallas 2009, pet. denied) ........................19, 20
Stine v. Stewart,
80 S.W.3d 586 (Tex. 2002) .....................................................................19, 22
Tenneco Inc. v. Enter. Prods. Co.,
925 S.W.2d 640 (Tex. 1996) ..................................................................... 3, 14
Ulico Cas. Co. v. Allied Pilots Ass’n,
262 S.W.3d 773 (Tex. 2008) ........................................................................... 3
Vickrey v. Comm’n for Lawyer Discipline,
5 S.W.3d 241 (Tex. App.—Houston [14th Dist.] 1999, pet.
denied) ........................................................................................................... 16
Woods v. William M. Mercer, Inc.,
769 S.W.2d 515 (Tex. 1988) ......................................................................... 22
STATUTES
TEX. CIV. PRAC. & REM. CODE § 16.004................................................................... 19
v
RULES
TEX. R. APP. P. 9.4(i)(1) ........................................................................................... 33
TEX. R. APP. P. 9.4(e) ............................................................................................... 33
TEX. R. CIV. P. 299 ................................................................................................... 17
vi
ISSUE PRESENTED BY CROSS-APPELLANT’S BRIEF
1. Whether the trial court properly found that RMIT waived its right to receive
any alleged underpaid commissions owed by Texcel after May 1, 2006.
vii
No. 14-14-00578-CV
__________________________________________________________________
IN THE COURT OF APPEALS
FOR THE FOURTEENTH DISTRICT OF TEXAS
HOUSTON, TEXAS
__________________________________________________________________
TRELLTEX, INC. d/b/a TEXCEL
Appellant/Cross-Appellee
VS.
INTECX, L.L.C. d/b/a ROCKY MOUNTAIN INDUSTRIAL TECHNOLOGIES
Appellee/Cross-Appellant
__________________________________________________________________
On Appeal from the 295th Judicial District Court of Harris County, Texas
Cause No. 2012-52277
__________________________________________________________________
APPELLANT’S RESPONSE TO APPELLEE’S CROSS-APPEAL
AND REPLY IN SUPPORT OF APPELLANT’S BRIEF
__________________________________________________________________
TO THE HONORABLE FOURTEENTH COURT OF APPEALS:
Appellant, Trelltex, Inc. d/b/a Texcel (Texcel), submits this (i) response to
Cross-Appellant’s Brief, filed by Appellee, Intecx, L.L.C. d/b/a Rocky Mountain
Industrial Technologies, Inc. (RMIT); and (ii) reply in support of Texcel’s
Appellant’s Brief.
1
PART ONE: RESPONSE TO RMIT’S CROSS-APPEAL
SUMMARY OF THE ARGUMENT
RMIT’s cross-appeal is limited to the contention that there was either no
evidence or insufficient evidence to support the trial court’s conclusion that RMIT
waived its right to receive any alleged underpaid commissions owed by Texcel
after May 1, 2006. 1 The evidence in the record, however, demonstrates that
(i) RMIT, for more than ten years, received monthly detailed sales reports from
Texcel that clearly reported the 5% commissions being paid on each of RMIT’s
sales; (ii) RMIT reviewed these monthly detailed sales reports; (iii) on at least one
occasion, RMIT contacted Texcel to discuss its commission check; (iv) the
contract at issue was purportedly assigned to the Appellee, Intecx, LLC d/b/a
RMIT, pursuant to a bill of sale in April 2006 (the month before the trial court
determined that RMIT waived its right to receive any alleged underpaid
commissions owed by Texcel); (v) RMIT knew that Texcel was paying it a 5%
commission; and (vi) RMIT never once complained about its 5% commission rate
until after Texcel terminated the Agreement in 2012. This evidence is sufficient to
prove that RMIT waived its right to receive a 9% commission rate as of May 1,
2006. Accordingly, the trial court correctly determined that Texcel proved its
affirmative defense of waiver. RMIT’s sole point of error should be overruled.
1
Cross-Appellant’s Brief, pp. 6–12.
2
ARGUMENT AND AUTHORITIES
I. THE RECORD DEMONSTRATES THAT RMIT WAIVED ITS RIGHT TO
RECEIVE ANY ALLEGED UNDERPAID COMMISSIONS OWED BY TEXCEL
AFTER MAY 1, 2006.
Waiver is an intentional relinquishment of a known right and is either made
expressly or indicated by conduct that is inconsistent with an intent to claim the
right. Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 778 (Tex. 2008).
Evidence of waiver generally takes one of three forms. There may be
evidence of an express renunciation of the known right. There may be
evidence of silence or inaction, coupled with knowledge of the
known right, for such an unreasonable period of time as to
indicate an intention to waive the right. Finally, waiver may be
evidenced by other conduct of the party knowingly possessing the
right of such a nature as to mislead the opposite party into an
honest belief that the waiver was intended or assented to.
Alford, Meroney & Co. v. Rowe, 619 S.W.2d 210, 213 (Tex. Civ. App.—Amarillo
1981, writ ref’d n.r.e.) (emphasis added). See also Tenneco Inc. v. Enterprise
Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996) (“Silence or inaction, for so long a
period as to show an intention to yield [a] known right, is [] enough to prove
waiver.”); Rodriguez v. Classical Custom Homes, Inc., 176 S.W.3d 928, 932 (Tex.
App.—Dallas 2005, no pet.) (same); Hemenway Co., Inc. v. Sequoia Pac. Realco,
590 S.W.2d 545, 548 (Tex. Civ. App.—San Antonio 1979, writ ref’d n.r.e.)
(“Intentional conduct that is inconsistent with the claim of a right constitutes a
waiver.”).
3
The trial court concluded that “Texcel has proven RMIT waived its right to
receive the underpaid commission that were owed to RMIT by Texcel after May 1,
2006.”2 RMIT admits that the trial court made the following findings of fact in
support of its conclusion:
 “After May 1, 2006, RMIT received monthly statements from Texcel
that showed the amount of the sales each month and the amount of the
commissions that were paid.”
 “RMIT could have calculated that it was only being paid 5% from
those monthly statements after May 1, 2006 and RMIT never made
those calculations.”
 “After May 1, 2006, RMIT never complained about underpaid
commissions before the contract was terminated by Texcel.”3
See Cross-Appellant’s Brief, p. 7.4 But RMIT then goes on to say that there is no
evidence (or insufficient evidence)5 in the record that RMIT ever “unequivocally
2
CR 557, Conclusion No. 4.
3
CR 556, Finding Nos. 13–15.
4
Although RMIT’s brief cites to Finding Nos. 11–13 at page 549 of the Clerk’s Record,
its citation is to an unsigned, proposed draft of findings of fact and conclusions of law submitted
to the trial court by RMIT. See CR 545–551. The Findings of Fact and Conclusions of Law
signed by the trial court are found at pages 554–558 of the Clerk’s Record.
5
RMIT’s brief does not distinguish between its no evidence and insufficient evidence
arguments. As the Court is aware, when reviewing a factual-sufficiency challenge, appellate
courts must assess all of the evidence and may not substitute its judgment for that of the trier of
fact. Further, when the challenge is to a finding on which the prevailing party had the burden of
proof, an appellate court may reverse the judgment only if the challenged finding shocks the
conscience or clearly shows bias, or if the favorable evidence is so weak as to make the
judgment clearly wrong and manifestly unjust. Dow Chemical Co. v. Francis, 46 S.W.3d
237, 242 (Tex. 2001) (emphasis added); see also Price Pfister, Inc. v. Moore & Kimmey, Inc., 48
S.W.3d 341, 347 (Tex. App.—Houston [14th Dist.] 2001, pet. denied).
4
manifested any intention to accept commissions of less than 9%.” Id. at p. 9–10.
The contention that there is no evidence in the record to support the trial court’s
finding of implied waiver is clearly false. And as to the argument that the evidence
is insufficient, RMIT is also incorrect.
Texcel’s opening brief detailed the significant evidence in the record
supporting the trial court’s finding of waiver. See Appellant’s Brief, pp. 15–18.
And contrary to RMIT’s contentions, the evidence supporting waiver is
substantially more than mere evidence that (i) RMIT accepted payments for less
than what it contends it was owed or (ii) RMIT was simply inattentive. 6
Specifically, it is undisputed that RMIT—for more than ten years—received
from Texcel monthly detailed sales reports from which its commission rate could
easily be calculated.7 Robert Merkin admits that he looked at these reports, and, on
at least one occasion, he contacted Texcel on behalf of RMIT to discuss its
commission check.8 Although RMIT’s lawyer now contends that these detailed
sales reports were somehow “confusing” and contained “numeric entries under a
6
Cross-Appellant’s Brief, p. 10.
7
RR Vol. 6 at 151–RR. Vol. 8 at 68 (Defendant’s Trial. Ex. 16) (RMIT monthly detailed
sales analyses); RR Vol. 3 at 43:13–44:5, 44:20–52:10.
8
RR Vol. 3 at 21:9–19, 44:13–18; RR Vol. 8 at 81 (Defendant’s Trial Ex. 20).
5
commissions column that resembled IP addresses, not dollars,”9 Mr. Merkin had no
trouble deciphering these reports at trial:
Q: And it was your testimony a few minutes ago that you would
use these detailed sales reports to do what you call [a] sales
analysis to see who was buying and who wasn’t buying,
correct?
A: Correct.
Q: And let’s just take a look at the very first page of Exhibit 16, if
you would. It’s Texcel 334 there. Do you see that?
A: Yep. Yes.
Q: Okay. If you look at that, this is Applied Industrial
Technologies. So give me an example – when you look
through here and you see each item that they bought . . . you
knew what these products were, right?
A: Yeah. They were buying skirt board.
…
Q: Okay. So you got this and as part of your sales analysis, you
would see that Applied Industrial Technologies bought $2,060
that month, right?
A: Yes.
Q: And look with me – and I just find this really curious. If you
look with me at the very first entry on that, the first order was
$240 and if you go over to the very next column, it says the
commission was $12, right?
…
A: Yep.
Q: True?
9
Cross-Appellant’s Brief, p. 11.
6
A: Yes.
Q: And not to belabor the point, but you’ve got a bachelor of
science in engineering. You know that’s 5 percent, right?
A: If I did the calculation, yes, I could determine that.
…
Q: And you’ll agree with me that you don’t have to do any
complex calculation to figure out that $12 is 5 percent of 240,
right?
A: That’s not a complex calculation, no.
Q: And if you go just a few lines down to the last order that
Applied Industrial Technologies made, it was $50 and the
commission was $2.50, right?
A: If you say so. I’m not looking at that line. Which account?
Q: It’s also for Applied Industrial Technologies for Bozeman,
Montana?
…
A: Bozeman, yes, I see it.
Q: That jumps out at you as being a round number of 5 percent,
doesn’t it?
A: If you looked, it could jump out at you, yes.
…
Q: And here on Texcel 339, it says the sales were a little over
25,000 and the commission was a little over $1250, right?
A: Right.
Q: Again, that[’s] pretty easy to tell that’s 5 percent, right?
A: You can do the calculation. I think we said that now three
times.10
10
RR Vol. 3 at 44:15–52:7.
7
Additionally, the very contract at issue in this case was purportedly assigned
to the Appellee, Intecx, LLC d/b/a RMIT, pursuant to a bill of sale in April 2006
(which the trial court clearly considered to be a significant event in light of its
finding of waiver as of May 1, 2006).11 And, Mr. Merkin’s testimony at trial made
clear that RMIT knew that Texcel was paying RMIT a 5% commission rate.12 Yet,
RMIT never once complained to Texcel about its 5% commission rate until after
Texcel terminated the Agreement in 2012.13 Had it done so, or had it otherwise
insisted upon a higher commission rate, Texcel would simply have terminated the
Agreement according to its terms and limited its liability for damages. 14 But
because RMIT never said or did anything consistent with its purported right to
continue receiving a 9% commission rate despite the numerous expansions to its
11
RMIT erroneously states in its brief that Rocky Mountain Industrial Technologies, Inc.
is the successor of Appellee, Intecx, LLC d/b/a Rocky Mountain Industrial Technologies. Cross-
Appellant’s Brief, p. vii. The opposite is true—Rocky Mountain Industrial Technologies, Inc. is
the predecessor of Appellee, Intecx, LLC. This distinction is important, particularly in light of
the trial court’s finding of waiver as of May 2006—the very next month following Rocky
Mountain Industrial Technologies’ assignment of the Agreement to Intecx, LLC.
12
RR Vol. 3 at 56:4–58:4 (set out in Appellant’s Brief at pages 16–17); see also RR Vol.
4 at 170–171 (Plaintiff’s Trial Ex. 12).
13
RR Vol. 3 at 127:8–11.
14
See, e.g., RR Vol. 3 at 161:9–20 (testimony of E. Nasta) (“Q: If you had talked to Mr.
Merkin before this contract was signed and you had talked about a 20 percent commission rate, it
is your position that under this note, Mr. Merkin could have suggested that the contract rate – he
could then say, well, the contract rate goes up to 20 percent? A: Well, if he had said that, I had,
you know, everything available to me to remedy the situation, which is, no, we didn’t agree to
that and, no, we don’t agree to 20 percent. So if we disagree, let’s just send each other 30 days’
notice and be done with my damages.”).
8
sales territory, Texcel reasonably assumed in good faith that it was properly
compensating RMIT under the Agreement. See RR Vol. 3 at 156:14–17
(testimony of E. Nasta) (“Q: Do you believe at all times Texcel was paying
commissions to RMIT as provided for in [the Agreement]? A: Yes, absolutely,
yes.”).
Although RMIT cites to In re General Electric Corp., 203 S.W.3d 314 (Tex.
2006) for the proposition that “[c]onduct that might be inattention or a lack of care
are not sufficient to prove the requisite intent for waiver based upon silence or
inaction,” In re General Electric Corp. is distinguishable from the facts and
circumstances in this case. The issue in In re General Electric Corp. was whether
General Electric waived its contractual right to a non-jury trial by failing to object
for ten months after the opposing party moved the case to the jury docket. 230
S.W.3d at 314. The only notice General Electric received of the change, though,
was an inconspicuous notation on the court’s notice of trial setting, in which the
trial’s date and time was moved up one line from the “non-jury trial” line to the
“jury trial” line. Id. at 315–16. But as soon as General Electric noticed that the
case was no longer on the court’s non-jury docket, it objected. Id. Therefore, and
in light of the fact that General Electric had already positively asserted its
contractual right by requesting a non-jury trial when filing suit, the court was not
persuaded that General Electric’s conduct constituted an implied waiver. See id.
9
But here, RMIT received—and reviewed—monthly detailed sales reports for
125 months and never said a word about its commission rate, despite the fact that
the commission payments were clearly noted next to each and every transaction,
and, as Mr. Merkin admitted at trial, the commission rate being paid by Texcel was
easily calculated. It was only after Texcel terminated the Agreement that RMIT
complained for the very first time. There is certainly evidence in the record to
support the conclusion that RMIT did not remain silent for ten years simply
because it was inattentive or exercised a lack of care, but instead that RMIT knew
it was only being paid a 5% commission rate and intentionally chose not to say
anything—at least until after Texcel terminated the Agreement—either because it
knew that the parties had contemplated reducing RMIT’s commission rate
commensurate with the expansions of its territory, or because it did not want to risk
its professional relationship with Texcel. After all, even assuming that the addition
of Western New Mexico in 2002 had not warranted the reduction of RMIT’s
commission rate from 9% to 5%, as of 2006, there is no question that Texcel would
never have agreed to continue paying RMIT a 9% commission rate on its greatly
expanded territory. As noted above, it would have terminated the Agreement and
limited its liability for damages. Given that the parties had expressly contemplated
reducing RMIT’s commission rate as its territory was increased, it is certainly
reasonable to conclude that RMIT knew that Texcel would terminate the
10
Agreement if RMIT insisted upon a 9% commission rate despite the numerous
expansions to its sales territory, and therefore intentionally remained silent.
RMIT attempts to diminish the importance of the monthly detailed sales
reports that it received—and reviewed—for 125 months by arguing that “there
were no commissions actually reported on the monthly sales reports provided by
Texcel to RMIT until September 5, 2006.” 15 This is not true. From the very
beginning, the detailed sales reports contained the commissions RMIT earned on
each transaction.16 The detailed sales report contained in Defendant’s Trial Exhibit
16, which begin in September 2006, are not all-inclusive—rather, they are what
was produced during discovery in the course of RMIT prosecuting its claim for
underpaid commissions allegedly owed during the years 2008 to 2012. The
testimony at trial, though, demonstrates that the detailed sales reports always
contained the commission information:
Q: And Exhibit 9 is Mr. Merkin’s email confirming with Mr.
Palmissano his itinerary looks good for Utah and the customers
they’ll be calling on; is that right?
A: Yes.
Q: You don’t have any kind of exchange like that related to the
change in the commission rate, do you?
A: We actually do.
15
Cross-Appellant’s Brief, p. 11.
16
RR Vol. 2 at 62:10–64:3.
11
Q: What email do you have where you say, “Mr. Merkin, we’ve
changed your commission rate from 9 percent to 5 percent?
A: We did that in the form of 120 some sales reports. It’s a form
of communication. Email and written letter is a form of
communication.17
Moreover, at trial, Mr. Merkin never denied that he had received the detailed sales
reports each and every month since he first began representing Texcel’s product
line in 2001, and there is certainly no evidence in the record that the detailed sales
reports changed in September 2006 to include, for the very first time, the
commission payment information. RMIT’s suggestion to the contrary is nothing
more than a transparent attempt to mislead this Court.
RMIT also argues that “there can be no implied waiver” because “there is no
evidence in the record that Mr. Merkin or anyone else at RMIT ever made any
calculation of the commissions reported or knew the commissions owed were
being underpaid at any time before February 2012.”18 Again, RMIT is incorrect.
Mr. Merkin negotiated the 9% commission rate in the contract on behalf of RMIT,
and therefore knew that the contract provided for a 9% commission rate.19 He also
17
RR. Vol. 2 at 62:6–18 (emphasis added).
18
Cross-Appellant’s Brief, p. 11.
19
RR Vol. 2 at 38:9–40:9, 43:2–44:12; RR Vol. 3 at 22:22–23:24; RR Vol. 4 at 142–145
(Plaintiff’s Trial Ex. 3); RR Col. 4 at 172–175 (Plaintiff’s Trial Ex. 13).
12
knew, though, that Texcel was only paying 5%.20 Further, the fact that Texcel was
paying 5% was apparent on the face of each detailed sales report (e.g., $2.50 on a
$50.00 sale), which Mr. Merkin admits he reviewed, so no complex “calculations”
were required to determine what rate RMIT was being paid by Texcel—it is simple
math. 21 Mr. Merkin’s self-serving testimony that he simply “forgot”—at some
unidentified point—that the contract called for 9%,22 even if actually true, is of no
consequence because he is charged with knowledge of the content of the contract.
In re Key Equip. Finance Inc., 371 S.W.3d 296, 302 (Tex. App.—Houston [1st
Dist.] 2012, no pet.) (“[A]bsent fraud or mistake, Texas courts presume that a party
who signs a contract knows its contents.”) (internal citations and quotations
omitted); see also Amouri v. Sw. Toyota, Inc., 20 S.W.3d 165, 169 (Tex. App.—
Texarkana 2000, pet. denied).
RMIT further contends that certain findings made by the trial court are
inconsistent with a finding of implied waiver, namely that (i) “RMIT never
expressly relinquished its right to be paid the 9% commissions before the contract
was terminated by Texcel;” (ii) RMIT never approved the unilateral reduction of
20
See Appellant’s Brief, pp. 16–18 (detailing Mr. Merkin’s knowledge that Texcel was
paying RMIT a 5% commission rate); see also RR Vol. 3 at 37:13–38:4, 56:4–58:4; RR Vol. 4 at
170–171 (Plaintiff’s Trial Ex. 12); RR Vol. 8 at 81 (Defendant’s Trial Ex. 20).
21
RR Vol. 3 at 21:9–19, 43:13–44:5, 44:13–52:10; RR Vol. 6–RR Vol. 8 at 68
(Defendant’s Trial Ex. 16).
22
See RR Vol. 3 at 58:11–17.
13
its commission from 9% to 5% under the contract;” (iii) “RMIT never intended to
make Texcel’s unilateral reduction of the commission from 9% to 5% valid;” and
(iv) “RMIT never agreed to modify or revise the commission rate under its contract
with Texcel from 9% to 5%.”23 RMIT has not established that these findings are
irreconcilable with a finding of implied waiver, and it cannot do so because, as
explained below, none of these findings are inconsistent with a finding of implied
waiver. See Morton v. Hung Nguyen, 369 S.W.3d 659, 674 (Tex. App.—Houston
[14th Dist.] 2012), rev’d in part on other grounds, 412 S.W.3d 506 (Tex. 2013)
(appellate courts will not set aside a judgment because of conflicting findings of
fact by a judge or jury if the conflict can be reconciled, and the court must
reconcile apparent conflicts where there is any reasonable basis to do so).
First, “[t]he affirmative defense of waiver can be asserted against a party
who intentionally relinquishes a known right or engages in intentional conduct
inconsistent with claiming that right.” Tenneco Inc., 925 S.W.3d at 643
(emphasis added). Accordingly, the fact that RMIT never “expressly relinquished”
its right to receive 9% commissions does not preclude a finding that RMIT
impliedly waived such right through its silence and action for more than ten years,
coupled with its knowledge that it was receiving only 5% commissions instead of
9% commissions. Second, the remaining findings all relate to Texcel’s other
23
Cross-Appellant’s Brief, p. 10; CR 556 at Finding Nos. 16–19.
14
affirmative defenses, e.g., ratification, modification, and quasi-estoppel, and none
of them preclude a finding that RMIT impliedly waived its rights under the
Agreement. See, e.g., CR 558 at Conclusion No. 11 (“The Defendant, Texcel, has
failed to prove any of its alleged affirmative defenses other than waiver.”). Simply
because RMIT did not affirmatively agree to modify the terms of the Agreement or
to ratify Texcel’s reduction of the commission rate does not mean that RMIT could
not waive its rights under the Agreement by choosing not to complain about its
commission payments for more than ten years, despite receiving and reviewing
detailed sales reports—which clearly noted the commission payments for every
transaction—each and every month for 125 months.
Finally, although the trial court did not specifically include a finding of fact
that RMIT “unequivocally manifested” an intent to waive its known right or that it
had actual knowledge that it was receiving 5% instead of 9%, such findings are
presumed in favor of the trial court’s finding of implied waiver—and RMIT cannot
now rebut the presumptions. “On appeal, an omitted element of a ground of
recovery will be presumptively found in support of the judgment if three
conditions are met: (1) an element of the ground of recovery was included in the
findings of fact; (2) the omitted element has not been properly requested; and
15
(3) the omitted finding is supported by the evidence.”24 “To prevent a missing
element from being deemed on appeal, an appellant may request additional
findings on omitted elements. The failure to do so waives the party’s right to
complain on appeal about a presumed finding.”25
“The elements of waiver [] are established by evidence that the party
possessing the right (1) is aware of the right and (2)(a) expressly relinquishes it or
(2)(b) acts in a manner inconsistent with, or fails to act in a manner consistent with,
an intent to claim the right.” Rowe, 619 S.W.2d at 213–14. The evidence is
undisputed that RMIT knew that the Agreement called for a 9% commission rate,
and the trial court found that RMIT never expressly relinquished its right to be paid
9%. See CR 556 at Finding No. 16. RMIT concedes that the trial court made
some findings in support of its conclusion that RMIT impliedly waived its right to
receive any alleged underpaid commission owed by Texcel after May 1, 2006. See
Cross-Appellants’ Brief, p. 7. RMIT did not request any additional findings from
the trial court on the issue of waiver, so it has therefore waived its right to
complain that any omitted findings of fact supported by the evidence are presumed
24
Foley v. Capital One Bank, N.A., 383 S.W.3d 644, 648 (Tex. App.—Houston [14th
Dist.] 2012, no pet.) (internal citations and quotations omitted); see also Vickery v. Comm’n for
Lawyer Discipline, 5 S.W.3d 241, 250 (Tex. App.—Houston [14th Dist.] 1999, pet. denied)
(there is a general presumption of validity extending to the judgment of a court of general
jurisdiction, regardless of whether the judgment results from a jury trial or a bench trial).
25
In re Estate of Miller, 446 S.W.3d 445, 450 (Tex. App.—Tyler 2014, no pet.) (internal
citations and quotations omitted).
16
in favor of the trial court’s judgment. In re Estate of Miller, 446 S.W.3d at 450;
see also TEX. R. CIV. P. 299. As detailed above, there is evidence in the record to
support a finding that RMIT knew that Texcel was paying its commissions at 5%
instead of 9% and intentionally chose not to say anything until after Texcel
terminated the Agreement.
II. THE COURT SHOULD AFFIRM THE TRIAL COURT’S FINDING OF WAIVER.
There is more than a mere scintilla of evidence in the record to support the
trial court’s conclusion that RMIT intentionally relinquished its right to receive 9%
commission payments as of May 1, 2006, as evidenced by its silence and inaction
for more than ten years despite its knowledge that Texcel was paying RMIT a 5%
commission rate instead of a 9% commission rate. City of Keller v. Wilson, 168
S.W.3d 802, 827 (Tex. 2005) (“No evidence” challenges may be sustained only
when the record discloses: (i) a complete absence of evidence of a vital fact;
(ii) the court is barred by rules of law of evidence from giving weight to the only
evidence offered to prove a vital fact; (iii) the evidence offered to prove a vital fact
is no more than a mere scintilla; or (iv) the evidence establishes conclusively the
opposite of the vital fact.). Moreover, RMIT has not demonstrated (and cannot
demonstrate) that the trial court’s finding of waiver “shocks the conscience,”
clearly evidences bias, or is otherwise clearly wrong or unjust. Dow Chemical Co.,
46 S.W.3d at 242. The Court should therefore overrule RMIT’s sole point of error,
17
and affirm the trial court’s finding that RMIT waived its right to receive any
alleged underpaid commissions owed by Texcel after May 1, 2006.
PART TWO: REPLY IN SUPPORT OF APPELLANT’S BRIEF
As explained below, and in Texcel’s opening brief, the Court should reverse
the trial court’s judgment in favor of RMIT, render a take-nothing judgment on all
of RMIT’s claims against Texcel, render judgment in favor of Texcel on its request
for declaratory relief, and remand this case to the trial court with instructions to
award Texcel its attorneys’ fees
I. THE DAMAGES AWARDED BY THE TRIAL COURT ARE INDISPUTABLY
BARRED BY LIMITATIONS.
In its Response, RMIT argues for the very first time that even though it filed
its breach of contract lawsuit against Texcel in 2012, it is entitled to damages from
Texcel going back to 2001 because “there is no dispute” that the Agreement
constitutes a “continuing contract” such that limitations did not begin to run until
Texcel terminated the Agreement in 2012.26 But RMIT’s argument misconstrues
both the law and the facts. As noted in its opening brief, the Agreement is an
installment contract whereby each alleged breach gave rise to a separate cause of
action, and only those claims arising within four years of RMIT filing suit would
26
Cross-Appellant’s Brief, pp. 13–17.
18
not be barred by limitations.27 Accordingly, all claims for underpaid commissions
arising before September 10, 2008 are barred as a matter of law.28
Although RMIT takes issues with Texcel’s citation to Davis Apparel v.
Gale-Sobel, a Division of Angelica Corporation, 117 S.W.3d 15, 19 (Tex. App.—
Eastland 2003, no pet.)—just one of the cases cited by Texcel on this issue, albeit
one that is directly on point and exceptionally instructive—the case law clearly
establishes that any alleged underpaid commissions owed by Texcel more than
four years before RMIT filed this lawsuit are time-barred:
A four-year statute of limitations applies to contract actions. TEX.
CIV. PRAC. & REM. CODE § 16.004 (Vernon 2002). A breach of
contract claim accrues at the time of breach. Stine v. Stewart, 80
S.W.3d 586, 592 (Tex. 2002). When recovery is sought on an
obligation payable in installments, the statute of limitations runs
against each installment from the time it becomes due. Intermedics,
Inc. v. Grady, 683 S.W.2d 842, 845 (Tex. App.—Houston [1st Dist.]
1984, writ ref’d n.r.e.). Thus, a suit for the breach of a contract
requiring payment in periodic installments may include all
payments due within the four-year statute of limitations period,
even if the initial breach was beyond the limitations period.
Recovery of any payment more than four years overdue is barred.
Hollander v. Capon, 853 S.W.2d 723, 726–27 (Tex. App.—Houston
[1st Dist.] 1993, writ denied).
…
Like the commissions payable in Davis Apparel and [Hart v.
International Telephone & Telegraph Corp., 546 S.W.2d 660, 662
(Tex. App.—San Antonio 1977, writ ref’d n.r.e.)], Paymentech was to
27
Appellant’s Brief, pp. 24–28.
28
In light of trial court’s finding of implied waiver as of May 1, 2006, RMIT has waived
all claims against Texcel that are not barred by the statute of limitations. See CR 557 at
Conclusion Nos. 4 and 5.
19
make periodic payments to Spin Doctor. Although the payments were
not commissions, they were calculated periodically based on Spin
Doctor’s credit card sales. Neither the commission payments nor the
payments payable to Spin Doctor were fixed payments. They were
payments to be calculated on a periodic basis . . . We hold that the
parties’ agreement constituted a continuing contract and claims
based on breaches within four years before April 20, 2005, the
date the lawsuit was filed, are not bared by limitations. As such,
the initial breach that occurred prior to April 20, 2001 is barred
by limitations. However, alleged contract breaches occurring
after April 20, 2001 are not barred.
Spin Doctor Golf, Inc. v. Paymentech, L.P., 296 S.W.3d 354, 362–63 (Tex. App.—
Dallas 2009, pet. denied) (emphasis added).
Limitations begins to run on [a continuing] contract at the earlier of
(1) the completion of the work; (2) the termination of the contract
under its own terms; or (3) the anticipatory repudiation of the contract
by one part and the adoption of the repudiation by the other party.
However, if the terms of a continuing contract call for fixed,
period performance during the course of the agreement, a cause
of action for the breach of the agreement may arise at the end of
each period, before the contract is completed. The injured party
has four years from each breach to bring suit.
Capstone Healthcare Equip. Svcs., Inc. ex rel. Health Sys. Gp., L.L.C. v. Quality
Home Health Care, Inc., 295 S.W.3d 696, 700 (Tex. App.—Dallas 2009, no pet.)
(internal citations and quotations omitted) (emphasis added).
[I]f the terms of an agreement call for periodic payment during the
course of the contract, a cause of action for such payments may arise
at the end of each period, before the contract is completed. Therefore,
the statute of limitations here, where the 1919 Assignment
contemplated a monthly accounting and payment for the one-
fourth royalty, only bars recovery of the royalty payments
accruing more than four years prior to the filing to the suit.
20
Lyle v. Jane Guinn Revocable Trust, 365 S.W.3d 341, 355 (Tex. App.—Houston
[1st Dist.] 2010, no pet.) (internal citations and quotations omitted) (emphasis
added).
If the parties’ agreement contemplates a continuing contract for
performance, the limitations period does not usually commence until
the contract is fully performed. However, where the terms of an
agreement call for fixed, periodic payments, a separate cause of
action arises for each missed payment.
…
The evidence in the record demonstrates that the parties treated their
agreement as an installment contract whereby Gale-Sobel made
monthly payments of commission to Davis Apparel . . . [A] separate
cause of action arises for each missed payment under an installment
contract. Accordingly, Davis Apparel’s claims for damages arising
after December 1, 1996 [four years before Davis Apparel filed suit]
were not barred by limitations.
Davis Apparel, 117 S.W.3d at 18–19 (emphasis added) (internal citations omitted).
See also Slusser v. Un. Bankers Ins. Co., 72 S.W.3d 713, 717 (Tex. App.—
Eastland 2002, no pet.) (“Where the terms of an agreement call for fixed, periodic
payments, a separate cause of action arises for each missing payment.”); F.D.
Stella Prods. Co. v. Scott, 875 S.W.2d 462, 466 (Tex. App.—Austin 1994, no writ)
(statute of limitations runs separately on each missed monthly lease payment).
RMIT argues that Davis Apparel is distinguishable because the plaintiff in
that case “clearly knew” that it was being underpaid its commissions, whereas
RMIT allegedly did not know that it was being paid 5% instead of 9% until after
21
Texcel terminated the Agreement in 2012.29 In addition to ignoring the facts that
(i) RMIT received and reviewed detailed sales reports for more than ten years that
clearly listed the 5% commissions being paid on each of RMIT’s sales and
(ii) there is evidence in the record that RMIT did in fact know that it was being
paid a 5% commission, RMIT’s argument misses the point. Limitations on a
breach of contract claim traditionally begins to run at the time of breach. Stine, 80
S.W.3d at 592. Even though Texcel asserted the statute of limitations as an
affirmative defense, RMIT never pleaded the discovery rule or any other ground
for deferring the accrual of its breach of contract claim. See Barker v. Eckman,
213 S.W.3d 306, 312 (Tex. 2006) (for the discovery rule to apply, the plaintiff
must plead and prove the injury was inherently undiscoverable and objectively
verifiable.”); Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988)
(requiring that a party plead and prove the discovery rule to avoid a defense of
limitations). In fact, after Texcel briefed the limitations issue at the summary
judgment stage (in response to RMIT’s motion for summary judgment requesting
damages beginning in January 2008), RMIT conceded that its damages were
limited to the commissions due to be paid in or after September 2008.30 Simply
put, RMIT has never before sought underpaid commission allegedly owed by
29
Cross-Appellant’s Brief, p. 15–16.
30
See CR 305–306, 425–426.
22
Texcel before 2008, and it cannot make this argument for the very first time on
appeal.
Notably, RMIT’s argument throughout the entirety of this dispute—at least
until this appeal—has been that it is entitled to underpaid commissions owed
during the years 2008 to 2012, as succinctly explained by its own counsel at trial:
We believe [Texcel] breached the contract by underpaying these
commissions. The commissions for the time frame from August of
2008, because those sales would have been paid as commissions at
the end of September 2008, through February of 2012 is
$97,986.67. Those are the actual damages.
…
We filed this lawsuit – in September of 2012. We would be entitled
to four years – going back four years of damages, and that’s how
the calculation is. That’s why we start with the August [2008] sales
because they’re not paid until September [2008]. It’s the money that’s
owed. That’s what’s owed in September [2008] going forward.
RR Vol. 2 at 17:24–18:4 (emphasis added); RR Vol. 3 at 173:11–16 (emphasis
added). After trial, RMIT continued its request for underpaid commissions owed
from September 2008 to February 2012 in its post-trial briefing. See CR 501 (“For
the time frame of September 12, 2008 through the termination of the [Agreement]
by Texcel effective February 29, 2012, Texcel underpaid commissions totaling
$97,986.37.”); CR 510–511 (“There is no factual dispute that Texcel underpaid the
commissions it owed to RMIT under [the Agreement] by $97,986.37 in the time
frame of September 2008 through February 2012. Thus, the credible evidence
before the Court supports the conclusion that Texcel breached the [Agreement]
23
with RMIT and caused actual damages of $97,986.37.”). The issue was therefore
not tried by consent. Johnston v. McKinney Am., Inc., 9 S.W.3d 271, 281 (Tex.
App.—Houston [14th Dist.] 1999, pet. denied) (to determine whether an issue was
tried by consent, it must appear the issue was actually tried, although not pleaded).
In conclusion, RMIT filed its breach of contract lawsuit on September 10,
2012. All of the actual damages awarded by the trial court—which are limited to
underpaid commissions allegedly owed by Texcel from October 1, 2001 to May 1,
2006—are indisputably barred by the four-year statute of limitations applicable to
breach of contract claims. This Court should reverse the trial court’s judgment and,
in light of the fact that RMIT waived its right to receive any alleged
underpayments after May 1, 2006 (i.e., more than four years before it filed suit),
render a take nothing judgment against RMIT on all of its claims against Texcel.
II. THE TRIAL COURT’S CONSTRUCTION OF THE AGREEMENT RENDERS THE
“NOTE” MEANINGLESS.
The trial court found that Texcel breached the Agreement by reducing
RMIT’s commission rate because the Agreement required the reduction to be in
writing and accepted by both parties. 31 RMIT argues that this is the only
31
CR 554 at Finding No. 4.
24
“reasonable” interpretation of the Agreement.32 Both RMIT’s and the trial court’s
construction of the Agreement, though, renders the “Note” meaningless.
Although the Agreement contains a boilerplate provision on the last page
providing that “[a]ny revisions to this agreement must be done in writing and
accepted by both parties,”33 it also contains a very specific “Note” on the first page
providing that “[i]t is understood that this [commission] rate will be evaluated after
some time and possibly adjusted as necessary to allow a greater territory
expansion for RMIT as warranted and or a different commission rate.”34 This
Note (i) was unique to the Agreement between RMIT and Texcel; (ii) was included
for the express purpose of memorializing the parties’ understanding that Texcel
would, as territory became available, expand RMIT’s territory and adjust its
commission rate; and (iii) expressly allowed Texcel to expand RMIT’s territory
and adjust its commission rate.35 Because any such expansions or adjustments are
expressly contemplated by the Agreement, they are clearly not “revisions” to the
Agreement that are required to be in writing and accepted by both parties. Any
other construction renders the Note meaningless because, if the parties were
32
Cross-Appellant’s Brief, p. 19.
33
RR Vol. 4 at 139 (emphasis added).
34
RR Vol. 4 at 137 (emphasis added).
35
Defendant’s Excerpts of Deposition of Robert Penn (attached to Appellant’s Brief as
Exhibit 5) at 17:5–18:23. See also RR Vol. 2 at 47:1–48:19; RR Vol. 3 at 152:11–154:8.
25
required to formally revise the Agreement every time they expanded RMIT’s
territory or adjusted its commission rate, what would be the point of including the
Note at all? It would be purely superfluous. Moreover, had the parties actually
intended for a discussion and mutual agreement to be prerequisites for adjusting
RMIT’s territory and/or commission rate, they would have included such language
in the Note—as they did in a separate provision of the Agreement:
From time to time a specific order may suggest a mutually agreed
upon commission rate. This will be discussed and agreed upon at
the time of quotation.36
In adopting RMIT’s construction of the Agreement, the trial court rendered
the Note meaningless, and also failed to harmonize and give effect to all of its
provisions—including the above-quoted provision that, unlike the Note,
specifically requires the parties to discuss and agree upon certain commission
rates. The trial court therefore erred in finding that Texcel breached the Agreement
and in denying Texcel’s request for declaratory relief. El Paso Field Svcs., L.P. v.
MasTex N. Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012) (courts must “examine and
consider the entire writing in an effort to harmonize and give effective to all the
provisions of the contract so that non will be rendered meaningless”); Forbau v.
Aetna Life Ins. Co., 876 S.W.2d 132, 133–34 (Tex. 1994) (interpretation of an
agreement should not render any material term meaningless). The Court should
36
RR Vol. 4 at 137 (emphasis added).
26
therefore reverse the trial court’s judgment in favor of RMIT, render judgment in
favor of Texcel on its request for declaratory relief, and remand this case to the
trial court with instructions to award Texcel its attorneys’ fees.
III. THE TRIAL COURT ERRED BY APPLYING COLORADO LAW.
Texas courts presume that Texas law applies, and it was RMIT’s burden to
(i) show that a true conflict of law exists and (ii) demonstrate which law should
apply.37 RMIT did not carry its burden.
Nothing in RMIT’s Response disputes the facts that (i) Texcel is a Texas
corporation with its principal place of business located in Houston, Texas; 38
(ii) Texcel drafted and executed the Agreement in Texas; 39 (iii) all customer
invoicing and payments were sent from and received at Texcel’s Houston office;40
(iv) RMIT and Texcel conducted multiple business meetings in Houston;41 (v) the
decision to adjust RMIT’s commission rate from 9% to 5%—the critical decision
42
underlying RMIT’s claims—was made in Houston, Texas; (vi) RMIT’s
37
PennWell Corp. v. Ken Assoc. Inc., 123 S.W.3d 756, 760–61 (Tex. App.—Houston
[14th Dist.] 2003, no pet.); Compaq Computer Corp. v. LaPray, 135 S.W.3d 657, 672 (Tex.
2004).
38
See RR Vol. 3 at 139:8–140:8.
39
See RR Vol. 2 at 44:13–16.
40
See RR Vol. 3 at 45:5–23; see also id. at 148:20–149:6.
41
RR Vol. 3 at 62:9–17.
42
See RR Vol. 2 at 54:19–25, 55:12–17, 68:12–70:1.
27
commission checks were prepared in and mailed from Houston, Texas; 43 and
(vii) the only relevant year in which RMIT’s sales in Colorado exceeded 50% of its
total territory was 2008.44 Although RMIT places great emphasis on what it did
outside of the State of Texas (including in states other than Colorado), the mere
facts that RMIT is a Colorado entity that received its commission checks in
Colorado and that, during certain discrete periods of time, sold more products in
Colorado than the other territories for which it was responsible (i.e., Wyoming,
Montana, Western New Mexico, Western Idaho, and Utah) does not establish that
Colorado has the “most significant relationship” with this dispute—much less that
there is any conflict between the laws of the two states.
Moreover, RMIT does not even address Texcel’s argument that the relevant
Restatement factors of “certainty, predictability and uniformity of results” and
“ease in determination and application of the law to be applied” weigh against the
application of Colorado law in this particular case because the Colorado Statute
does not define any of the terms it uses—including “knowingly”45—nor has any
43
See RR Vol. 3 at 53:20–54:54:15.
44
See Plaintiff’s Trial Ex. 4 (attached to Appellant’s Brief as Exhibit 6).
45
As argued in Texcel’s opening brief, the trial court erred in finding that Texcel acted
“knowingly” in violation of the Colorado Statute. See Appellant’s Brief, pp. 40–44.
28
Colorado court published an opinion interpreting its provision.46 Accordingly, a
Texas court is left with little to no guidance as to how to properly apply the
statute—including whether to apply it to sales occurring outside of the State of
Colorado (see Appellant’s Brief, pp. 37–40) and when it is appropriate to find that
a defendant acted “knowingly” in violation of the statute (see Appellant’s Brief,
pp. 40–44).
Because RMIT did not establish a true conflict of law or that Colorado has
the most significant relationship with this dispute, and because the application of
Colorado law leads to uncertainty, unpredictability, and inconsistent results, the
trial court erred in applying Colorado law to this dispute. And, as more thoroughly
discussed in Texcel’s opening brief, the trial court incorrectly applied the Colorado
Statute to all of the sales at issue in this dispute and also erred in applying an
exceptionally low standard of proof in finding that Texcel acted “knowingly” in
violation of the Colorado Statute. The Court should therefore vacate the trial
court’s award of $43,179.76 in additional damages under the Colorado Statute.
46
See Rader v. Electronic Payment Sys., LLC, 2012 WL 4336175, at *3 (D. Colo. Sept.
21, 2012) (copy attached to Appellant’s Brief as Exhibit 8) (“The statute does not attempt to
define any of the terms it uses, nor has the Court located any published authority interpreting
it.”). See also Med. Sales & Consulting Gp. v. Plus Orthopedics USA, Inc., 2011 WL 5075970,
at *15–16 (S.D. Cal. Oct. 25, 2011) (copy attached to Appellant’s Brief as Exhibit 8)
(“Colorado’s Supreme Court has not addressed the meaning of ‘knowingly’ in this statute . . .
None of Colorado’s intermediate courts have addressed the issue and a review of similar statutes
in other jurisdictions and treatises do not provide any guidance.”).
29
IV. THE TRIAL COURT INCORRECTLY AWARDED ADDITIONAL DAMAGES TO
INTECX, LLC.
In response to Texcel’s assertion that additional damages under the Colorado
Statute are punitive in nature and therefore could not have been assigned to the
Appellee, Intecx, LLC (see Appellant’s Brief, pp. 44–46), RMIT argues, without
citing to any authority, that “it appears the additional damages remedy of the
statute is actually remedial, and those additional damages are a supplement to the
actual contractual damages that are recoverable . . . .”47 RMIT bases its argument
on the proposition that the purpose of the Colorado Statute “is to protect the value
of the significant hours and efforts wholesale sales representatives spend in
developing the market for the products of the manufacturers they represent.” 48
RMIT’s novel argument that additional damages under the Colorado Statute are
“remedial” lacks any legal support and is simply incorrect.
For example, the purpose of the DTPA is to protect consumers. See PPG
Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P’ship, 146 S.W.3d 79, 85 (Tex.
2004). DTPA claims are not assignable because they are “punitive rather than
remedial,” particularly in light of the DTPA’s treble damages provision. Id. at 89–
91. As explained by the Texas Supreme Court, “[i]f DTPA claims can be assigned,
a party excluded by the statute [i.e., a non-consumer] could nevertheless assert
47
Cross-Appellant’s Brief, pp. 30–32.
48
Id. at 31.
30
DTPA claims by stepping into the shoes of a qualifying assignor. This would
frustrate the clear intent of the Legislature.” Id. at 85.
Similarly, as discussed in Texcel’s opening brief, even if the underlying
Agreement and breach of contract claim could have been assigned to Intecx, LLC,
a statutory claim for treble damages under the Colorado Statute is personal and
punitive in nature, and is therefore not assignable. RMIT does not even address
Texcel’s comparison of the Colorado Statue to the DTPA, much less cite to any
authority demonstrating that, unlike the DTPA, treble damages under the Colorado
Statute are intended to be remedial as opposed to punitive in nature.
In fact, such additional damages cannot be remedial—in that they do not
simply compensate RMIT for its alleged injuries—because the “value of the
significant hours and efforts” spent by RMIT was already built in to the
commission rate Texcel paid to RMIT. RMIT bargained for a commission
structure that was intended to fully compensate RMIT for developing the market
for Texcel’s products in RMIT’s sales territory, and it is therefore those
commissions to which RMIT is entitled in actual damages—not three times those
commissions. See PPG Indus., Inc., 146 S.W.3d at 89 (“DTPA claims generally
are also punitive rather than remedial . . . Economic damages and attorney’s fees
are certainly remedial, but they were recoverable in contract and warranty long
31
before the DTPA was passed. The DTPA adds mental anguish and punitive
damages—damages that could hardly be more personal.”).
The Colorado Statute’s treble damages provision is clearly intended to
punish manufacturers who underpay their wholesale sales representatives, and to
deter others from engaging in similar conduct. There is no authority to support
RMIT’s contention that such damages are actually remedial simply because the
statute is intended to protect wholesale sales representatives. A claim for treble
damages under the Colorado Statute is therefore not assignable, and the trial court
erred by awarding $43,179.76 in additional damages to Intecx, LLC.
CONCLUSION AND PRAYER
Appellant, Trelltex, Inc. d/b/a Texcel, requests that this Court (i) overrule the
sole point of error raised by Appellee, Intecx, L.L.C. d/b/a Rocky Mountain
Industrial Technologies, (ii) reverse the trial court’s April 24, 2014 Final Judgment
in favor of Appellee, (iii) render a take-nothing judgment on Appellee’s claims,
(iv) render judgment in favor of Appellant on its request for declaratory relief, and
(v) remand this case to the trial court with instructions to award Appellant its
attorneys’ fees.
32
Respectfully submitted,
DOW GOLUB REMELS & BEVERLY, LLP
By: /s/ Keith M. Remels
Keith M. Remels
Texas Bar No. 16765800
kremels@dowgolub.com
Stephanie A. Hamm
Texas Bar No. 24069841
sahamm@dowgolub.com
9 Greenway Plaza, Suite 500
Houston, Texas 77046
Telephone: (713) 526-3700
Facsimile: (713) 526-3750
ATTORNEYS FOR APPELLANT
TRELLTEX, INC. d/b/a TEXCEL
CERTIFICATE OF COMPLIANCE
Pursuant to the Texas Rules of Appellate Procedure, the undersigned
certifies this Brief complies with the type-volume limitations of Texas Rule of
Appellate Procedure 9.4:
1. This Brief complies with the type-volume limitations of Texas Rule of
Appellate Procedure 9.4 because this brief contains 8,006 words,
excluding the parts of the Brief exempted by Texas Rule of Appellate
Procedure 9.4(i)(1).
2. This brief complies with the typeface requirements of Texas Rule of
Appellate Procedure 9.4(e) because this Brief has been prepared in a
proportionally spaced typeface using Microsoft Word 2013 in 14-pt
Times New Roman (Footnotes in 12-pt.)
/s/ Stephanie A. Hamm
Stephanie A. Hamm
33
CERTIFICATE OF SERVICE
This is to certify that, on March 13, 2015, a true and correct copy of
foregoing was forwarded to all counsel of record electronically and via certified
mail, return receipt requested.
Howard R. King
P.O. Box 5379
Kingwood, Texas 77325
/s/ Stephanie A. Hamm
Stephanie A. Hamm
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