Modis, Inc v. Net Matrix Solutions, Inc. ( 2015 )


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  • Reversed and Rendered and Memorandum Opinion filed March 3, 2015.
    In The
    Fourteenth Court of Appeals
    NO. 14-14-00238-CV
    MODIS, INC, Appellant
    V.
    NET MATRIX SOLUTIONS, INC., Appellee
    On Appeal from the County Civil Court at Law No. 3
    Harris County, Texas
    Trial Court Cause No. 1015435
    MEMORANDUM                     OPINION
    Following a bench trial, Modis, Inc. appeals a judgment in favor of Net
    Matrix Solutions, Inc. on Net Matrix’s breach-of-contract claim. We reverse the
    trial court’s judgment and render a take-nothing judgment in favor of Modis.
    BACKGROUND
    Modis and Net Matrix are consulting companies that provide individuals
    possessing technical expertise for specific computer-related projects. Net Matrix’s
    president testified that his company employs approximately 30 computer
    consultants that it hires out to other companies. Net Matrix generates revenue
    based on the difference between what it pays the consultants and what it charges
    for supplying them to other companies.          Net Matrix sometimes provides
    consultants as a subcontractor for other computer consulting companies that
    contract directly with end-users. Net Matrix protects its revenue through contract
    terms restricting the ability of a general contractor or an end-user to hire Net
    Matrix’s consultants directly.
    Net Matrix signed a “Subcontractor Agreement” with Modis on March 4,
    2011, to provide computer consulting employees to Modis’s client LyondellBasell.
    The contract defined Modis as “Contractor,” Net Matrix as “Subcontractor,” and
    LyondellBasell as “Client.”
    The Net Matrix-Modis contract states several restrictive terms, including the
    following:
    [8]C. Subcontractor agrees that during the term of this Agreement
    and for six (6) months thereafter, Subcontractor shall not, without the
    prior written consent of Contractor, allow or cause any Subcontractor
    Personnel (who worked for Subcontractor at any time within the
    twelve (12) months preceding the latter of the termination of this
    Agreement or the final completion of service) to provide work or
    services to Client, through Subcontractor directly or through any other
    person or entity.
    [8]D. Subcontractor agrees that during the term of this Agreement and
    for six (6) months thereafter, Subcontractor and Subcontractor
    Personnel shall not, without the prior written consent of Contractor,
    directly or indirectly, solicit or hire any employee or contractor of
    Client or Contractor.
    [8]F. During the term of this Agreement, Contractor agrees it shall
    not recruit, hire or otherwise solicit Subcontractor’s Personnel
    assigned to perform services hereunder.
    Net Matrix employed Ravikant Nistane as a computer consultant and provided him
    2
    to LyondellBasell pursuant to the Subcontractor Agreement between Net Matrix
    and Modis. Nistane resigned from Net Matrix on January 31, 2012, and obtained
    employment at Millennium, Inc., another computer consulting company.
    Millennium had a subcontractor agreement with Modis to provide computer
    consulting services to LyondellBasell.         Millennium provided Nistane to
    LyondellBasell pursuant to Modis’s and Millennium’s subcontractor agreement
    beginning in February 2012.      Modis also signed a contract with Millennium
    agreeing that Nistane would provide services to LyondellBasell, and Modis
    confirmed Nistane’s employment on the LyondellBasell project for Nistane’s visa
    application. From February 2012 until trial in October 2014, Nistane provided
    computer consulting services to LyondellBasell as an employee of Millennium
    pursuant to Modis’s and Millennium’s subcontractor agreement.
    Net Matrix’s president testified that Nistane told him in November 2011 that
    he was leaving Net Matrix and the LyondellBasell project for a job with Staples in
    Boston, Massachusetts.     The trial court admitted a series of emails in which
    Nistane wrote Net Matrix’s president and a Modis representative that he was
    leaving the LyondellBasell project. The Modis representative testified that he
    knew Nistane’s statement was untrue, but did not correct the statement for Net
    Matrix’s benefit.
    Net Matrix sued Modis for breach of contract in connection with Nistane’s
    departure from Net Matrix’s employment. Net Matrix alleged that Modis breached
    Subcontractor Agreement paragraph 8F by “continuing to utilize Nistane’s services
    for the LyondellBasell project” after Nistane left Net Matrix.
    The trial court signed a judgment in favor of Net Matrix on January 7, 2014,
    after a bench trial, and awarded Net Matrix $63,840 in damages. This amount
    represented the profit Net Matrix asserted it would have made had Nistane
    3
    remained a Net Matrix employee and continued working on the LyondellBasell
    project.
    The trial court made findings of fact and conclusions of law. It found:
    Although Nistane had informed Net Matrix that he would be leaving
    the LynondellBassell [sic] project, Nistane in fact remained on the
    same project and continued to work on the project through a
    subcontractor other than Net Matrix. From the date he left the employ
    of Net Matrix to the date of trial, Nistane was employed by a
    subcontractor of Modis for the benefit of Modis on the
    LyondellBassell [sic] project.
    The court concluded:
    In continuing to utilize Nistane’s services for the LyondellBasell
    project after he resigned from Net Matrix, Modis breached paragraph
    8(F) [sic] of the Subcontractor Agreement, which provides: ‘During
    the term of this Agreement, Contractor agrees that [sic] it shall not
    recruit, hire or otherwise solicit Subcontractor’s Personnel assigned to
    perform services hereunder.’
    Modis timely appealed.
    ANALYSIS
    In four issues Modis contends (1) the damages awarded are speculative and
    not recoverable; (2) the record does not establish that Modis breached paragraph
    8F of the Subcontractor Agreement; (3) paragraph 8F is an unenforceable restraint
    of trade; and (4) Net Matrix caused its own damages by not taking any action
    against Nistane. We address only Modis’s second issue because it is dispositive of
    this appeal.
    Modis challenges the trial court’s determination that Modis breached
    paragraph 8F by allowing Millennium to provide Nistane to LyondellBasell
    pursuant to Modis’s and Millennium’s subcontractor agreement. Modis does not
    4
    specifically challenge the trial court’s findings of fact, and our review of the record
    confirms that the findings are supported by adequate evidence; therefore, we are
    bound by the trial court’s findings. See Reich & Binstock, LLP v. Scates, No. 14-
    13-00906-CV, 
    2014 WL 6851606
    , at *3 (Tex. App.—Houston [14th Dist.] Dec. 4,
    2014, no. pet. h.) (unchallenged findings of fact are binding on an appellate court
    unless the contrary is established as a matter of law, or if there is no evidence to
    support the findings). We review the trial court’s legal conclusions de novo to
    determine whether the conclusions drawn from the facts are correct. See id.;
    Zagorski v. Zagorski, 
    116 S.W.3d 309
    , 314 (Tex. App.—Houston [14th Dist.]
    2003, pet. denied) (op. on reh’g).
    The parties do not dispute that the Subcontractor Agreement signed by
    Modis, a Florida corporation, contains a Florida choice-of-law provision and is
    governed by Florida law. We respect contracting parties’ choice-of-law decisions
    if the parties’ issue in dispute can be resolved by an explicit contract provision.
    See Exxon Mobil Corp. v. Drennen, No. 12-0621, 
    2014 WL 4782974
    , at *3 (Tex.
    Aug. 29, 2014); McKeehan v. McKeehan, 
    355 S.W.3d 282
    , 291 (Tex. App.—
    Austin 2011, pet. denied). Modis’s and Net Matrix’s dispute can be resolved by
    our construction of paragraph 8F; therefore, we apply Florida law. See 
    McKeehan, 355 S.W.3d at 291
    ; Ill. Tool Works, Inc. v. Harris, 
    194 S.W.3d 529
    , 532 (Tex.
    App.—Houston [14th Dist.] 2006, no pet.) (applying Illinois principles of contract
    construction to resolve a contract dispute).
    The Subcontractor Agreement addresses the hiring of employees in multiple
    places. Paragraphs 8C and 8D address the hiring of a Contractor’s employees by a
    Subcontractor. Paragraph 8C states:
    Subcontractor agrees that during the term of this Agreement and for
    six (6) months thereafter, Subcontractor shall not, without the prior
    written consent of Contractor, allow or cause any Subcontractor
    5
    Personnel (who worked for Subcontractor at any time within the
    twelve (12) months preceding the latter of the termination of this
    Agreement or the final completion of service) to provide work or
    services to Client, through Subcontractor directly or through any other
    person or entity.
    Paragraph 8D states:
    Subcontractor agrees that during the term of this Agreement and for
    six (6) months thereafter, Subcontractor and Subcontractor Personnel
    shall not, without the prior written consent of Contractor, directly or
    indirectly, solicit or hire any employee or contractor of Client or
    Contractor.
    In contrast, paragraph 8F addresses the hiring of a Subcontractor’s employees by a
    Contractor. Paragraph 8F states:
    During the term of this Agreement, Contractor agrees it shall not
    recruit, hire or otherwise solicit Subcontractor’s Personnel assigned to
    perform services hereunder.
    Paragraph 8F controls here in connection with a dispute about whether Contractor
    Modis violated the agreement based upon its conduct involving an employee of
    Subcontractor Net Matrix.
    Modis argues that, while paragraph 8F prohibited it from hiring Nistane
    directly during the term of the agreement, the parties did not intend the term “hire”
    in paragraph 8F to encompass the situation in this case. Instead of being hired by
    Modis, Nistane was hired by a Modis subcontractor; in turn, that subcontractor
    provided Nistane to LyondellBasell. Modis argues that if the parties had intended
    to prohibit Modis from “indirectly hiring” Nistane in this manner, then the parties
    could have prohibited indirect hiring through specific contract language as they did
    in paragraphs 8C and 8D.
    Net Matrix counters that Modis’s actions satisfy the meaning of “hire” as
    6
    used in paragraph 8F.1 It argues that Modis’s breach is established by (1) the
    acknowledgement of Modis’s vice president that Modis hired Nistane; (2)
    Nistane’s false statement about leaving LyondellBasell for a job at Staples and
    Modis’s failure to correct this statement; and (3) Florida and federal employment
    law recognizing that an employer may hire an employee indirectly.
    Under Florida law, the intent of the parties to a contract governs
    construction. Am. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 
    593 So. 2d 195
    , 197 (Fla. 1992). “Where the terms of a contract are clear and unambiguous,
    the parties’ intent must be gleaned from the four corners of the document.”
    Crawford v. Barker, 
    64 So. 3d 1246
    , 1255 (Fla. 2011). In such a situation, the
    language of the contract is the best evidence of the parties’ intent and its plain
    meaning controls. 
    Id. The interpretation
    of a contract, including whether the contract or one of its
    terms is ambiguous, is a question of law. Real Estate Value Co. v. Carnival Corp.,
    
    92 So. 3d 255
    , 260 (Fla. Dist. Ct. App. 2012). Courts should read provisions of a
    contract harmoniously in order to give effect to all provisions. City of Homestead
    v. Johnson, 
    760 So. 2d 80
    , 84 (Fla. 2000); Sch. Bd. of Broward Cnty. v. Pierce
    Goodwin Alexander & Linville, 
    137 So. 3d 1059
    , 1066 (Fla. Dist. Ct. App. 2014)
    (“In interpreting a contract, the court must review the contested phrases or words
    as part of the whole contract, rather than looking at the words or phrases
    1
    Paragraph 8F states that Modis shall not “recruit, hire or otherwise solicit” Net Matrix’s
    personnel. We do not consider whether Modis breached paragraph 8F by “recruit[ing]” or
    “otherwise solicit[ing]” Nistane because Net Matrix has not argued that Modis breached the
    contract by anything other than “hir[ing]” Nistane. Net Matrix asserted in its petition that Modis
    violated paragraph 8F by “continuing to utilize Nistane’s services for the LyondellBasell project”
    after Nistane left Net Matrix. Net Matrix also contended at oral argument that Modis satisfied
    the meaning of “hire” by facilitating Nistane’s move to Millennium; signing a contract with
    Millennium for Nistane’s services on the LyondellBasell project; and attesting to Nistane’s
    employment on the project for his visa application.
    7
    separately.”). Contractual language is ambiguous if it is susceptible to more than
    one reasonable interpretation. Vyfvinkel v. Vyfvinkel, 
    135 So. 3d 384
    , 385-86 (Fla.
    Dist. Ct. App. 2014). “However, ‘[a] true ambiguity does not exist merely because
    a contract can possibly be interpreted in more than one manner. Indeed, fanciful,
    inconsistent, and absurd interpretations of plain language are always possible. It is
    the duty of the trial court to prevent such interpretations.’” BKD Twenty-One
    Mgmt. Co. v. Delsordo, 
    127 So. 3d 527
    , 530 (Fla. Dist. Ct. App. 2012) (quoting
    Am. Med. Int’l, Inc. v. Scheller, 
    462 So. 2d 1
    , 7 (Fla. Dist. Ct. App. 1984)).
    “[W]here one interpretation of a contract would be absurd and another would be
    consistent with reason and probability, the contract should be interpreted in the
    rational manner.” BKD Twenty-One Mgmt. 
    Co., 127 So. 3d at 530
    .
    We determine that paragraph 8F is unambiguous; the term “hire”
    encompasses direct action only.      Our interpretation harmonizes Subcontractor
    Agreement paragraphs 8C, 8D, and 8F, and gives effect to all contract provisions.
    The phrases “through any other person or entity” in paragraph 8C and “directly or
    indirectly” in paragraph 8D signal the parties’ intent that prohibited actions include
    indirect action only where explicitly provided. To hold otherwise would render
    these phrases meaningless. See City of 
    Homestead, 760 So. 2d at 84
    . Paragraph
    8F does not include language stating that indirect action is prohibited; therefore,
    we determine that paragraph 8F does not prohibit indirect action. See 
    id. Under Florida
    law, when the language of a contract is clear and
    unambiguous, a court cannot entertain evidence contrary to its plain meaning.
    
    Crawford, 64 So. 3d at 1255
    (citing Sheen v. Lyon, 
    485 So. 2d 422
    , 424 (Fla.
    1986)); see also Levitt v. Levitt, 
    699 So. 2d 755
    , 757 (Fla. Dist. Ct. App. 1997) (“It
    is only when a term in [an] agreement is ambiguous or unclear that the trial court
    may consider extrinsic evidence as well as the parties’ interpretation of the contract
    8
    to explain or clarify the ambiguous language.”); Duval Motors Co. v. Rogers, 
    73 So. 3d 261
    , 265 (Fla. Dist. Ct. App. 2011) (“The parol evidence rule precludes
    consideration of such evidence to contradict, vary, defeat, or modify a complete
    and unambiguous written instrument, or to change, add to, or subtract from it, or
    affect its construction.”) (internal quotation marks omitted).
    Net Matrix asks us to consider testimony from Modis’s vice president that
    Modis hired Nistane.2         Net Matrix also asks us to consider Nistane’s false
    statement about leaving LyondellBasell for a job at Staples and Modis’s failure to
    disclose to Net Matrix that it knew the statement to be false. We do not consider
    this testimony in interpreting paragraph 8F because we determine the language of
    paragraph 8F to be clear and unambiguous. See 
    Crawford, 64 So. 3d at 1255
    ; see
    also Cont’l Fla. Materials v. Kusherman, 
    91 So. 3d 159
    , 164 (Fla. Dist. Ct. App.
    2012) (“We are not empowered to rewrite a clear and unambiguous provision, nor
    should we attempt to make an otherwise valid contract more reasonable for one of
    the parties.”) (internal quotation marks and brackets omitted).
    Net Matrix cites cases construing the Florida workers’ compensation statute,
    the Fair Labor Standards Act, and the Seasonal Agricultural Worker Protection Act
    for the proposition that an employer may hire an employee indirectly. See Antenor
    v. D & S Farms, 
    88 F.3d 925
    (11th Cir. 1996); Orama v. Dunmire, 
    552 So. 2d 924
    (Fla. Dist. Ct. App. 1989); Stone v. Buckley, 
    132 So. 2d 613
    (Fla. Dist. Ct. App.
    2
    Excerpts from the deposition transcript of Modis’s vice president were admitted at trial.
    The excerpts show the following exchange:
    [NET MATRIX’S COUNSEL]: At some point a contract was signed between
    Modis and Millennium for Mr. Nistane’s services?
    [MODIS’S VICE PRESIDENT]: Yes.
    [NET MATRIX’S COUNSEL]: So at some point in time, though you may not
    know the exact date, Modis did hire Mr. Nistane through Millennium?
    [MODIS’S VICE PRESIDENT]: Yes.
    9
    1961).     The parties, however, do not dispute that an individual may hire an
    employee indirectly. Indeed, the parties prohibited indirect hiring in paragraph 8D.
    Net Matrix has not explained how the statutory provisions at issue in the cases it
    cites parallel the language of paragraph 8F.
    Modis’s conduct is not actionable for breach of contract on this record as a
    matter of law in light of paragraph 8F’s unambiguous language as construed under
    Florida law. At most, the evidence shows that Millennium hired Nistane and
    provided him to LyondellBasell pursuant to Modis’s and Millennium’s
    subcontractor agreement. Modis signed a contract with Millennium, and Modis
    attested to Nistane’s employment on the project for his visa application. Even if
    this conduct could be characterized as “indirectly” hiring under the broader
    terminology in paragraph 8D, it does not come within paragraph 8F’s narrower
    prohibition under which Modis agreed not to “hire” Net Matrix’s personnel. We
    sustain Modis’s second issue.3
    CONCLUSION
    The trial court erred in signing a judgment in favor of Net Matrix on Net
    Matrix’s breach-of-contract claim.         We reverse the trial court’s judgment and
    render a take-nothing judgment in favor of Modis.
    /s/    William J. Boyce
    Justice
    Panel consists of Chief Justice Frost and Justices Boyce and McCally.
    3
    Modis also argues that the trial court erred in admitting hearsay evidence. We need not
    address this contention in light of the resolution above.
    10