Simulis, L.L.C. v. General Electric Capital Corporation , 2014 Tex. App. LEXIS 8409 ( 2014 )

Affirmed and Majority and Dissenting Opinions filed July 31, 2014.
In The
Fourteenth Court of Appeals
NO. 14-13-00383-CV
SIMULIS, L.L.C., Appellant
V.
GENERAL ELECTRIC CAPITAL CORPORATION, Appellee
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Cause No. 2005-37556
MAJORITY OPINION
Simulis, L.L.C. challenges two orders on appeal: (1) a “Final Summary
Judgment” signed on January 29, 2013, in which the trial court directed that
Simulis take nothing on its counterclaims against General Electric Capital Corp.
(“GE Capital”); and (2) an “Order Enforcing Jury Waiver Agreement” signed on
February 11, 2013. Simulis contends that the trial court erred in signing the first
order and lacked subject matter jurisdiction to sign the second order. We affirm
the trial court’s grant of summary judgment.
BACKGROUND
This is the fourth appeal arising from a decade-long commercial dispute
between GE Capital and software company Simulis in connection with a failed
software marketing effort.
Two prior appeals addressed the disposition of Simulis’s claims against GE
Capital. See Simulis, L.L.C. v. General Electric Capital Corp., 392 S.W.3d 729(Tex. App.—Houston [14th Dist.] 2011, pet. denied) (“Simulis II”); Simulis, L.L.C.
v. General Electric Corp., No. 14-06-00701-CV, 2008 WL 1747483 (Tex. App.—
Houston [14th Dist.] Apr. 17, 2008, no pet.) (“Simulis I”). The third appeal
addressed the propriety of a post-judgment garnishment obtained by GE Capital in
connection with its claim against Simulis to collect on a promissory note. Simulis,
L.L.C. v. G.E. Capital Corp., 276 S.W.3d 109 (Tex. App.—Houston [1st Dist.]
2008, no pet.).
Simulis’s claims are grounded on allegations that GE Capital, which
provides commercial financial services, approached Simulis in 2000 about forming
a “strategic alliance” to market Simulis’s training software to other companies and
entities associated with General Electric.
Simulis is a limited liability company formed under Delaware law. GE
Capital invested $5 million in Simulis in late 2000 in exchange for a 20 percent
ownership interest. Under the “Second Amended and Restated Limited Liability
Company Agreement of Simulis, L.L.C.,” effective as of September 29, 2000, GE
Capital became a “member” of the limited liability company and held 20 percent of
the “units” in Simulis. See 6 Del. C. §§ 18-101(11), 18-303. GE Capital loaned an
additional $100,000 to Simulis in 2002.
2
According to Simulis’s live pleading, the “strategic alliance” between GE
Capital and Simulis contemplated that (1) “G.E. companies would have access to
Simulis software and development techniques;” and (2) “Simulis’ association with
G.E. would ensure even greater credibility in the marketplace, as well as access to
additional markets and business relationships.” GE Capital allegedly told Simulis
to “‘staff up’ in order to meet the product needs of G.E.’s industrial divisions;”
maintain “an additional office;” meet “minimum employment targets;” and create
“working mock-ups of the products that would be supplied.”
Simulis contends that GE Capital represented “these extraordinary
expenditures would be accompanied by G.E. company investments in Simulis
products.” Simulis alleges: “Despite the promises and representations by G.E.
Capital, no G.E. company ever purchased a single product from Simulis.” It
continues: “Ultimately, Simulis incurred millions of dollars in additional costs and
expenses in reliance on G.E. Capital’s representations that it had the ability to
provide business from its G.E. sister divisions.” Simulis further alleges: “. . . G.E.
Capital did not have the ability to secure G.E. business for Simulis, and it never
did. And it was G.E. Capital’s representation that it did have this ability, or its
failure to tell Simulis the truth about the matter, that caused damage to Simulis.”
PROCEDURAL HISTORY
The legal fight began when GE Capital sued Simulis in 2005 for breach of
contract and asserted a sworn account claim after Simulis defaulted on a
promissory note in connection with GE Capital’s $100,000 loan.
GE Capital moved for summary judgment on its claims. Simulis did not
deny liability; instead, Simulis asserted an offset defense and counterclaims against
GE Capital for breach of contract, promissory estoppel, and quantum meruit. After
the trial court granted an interlocutory summary judgment in favor of GE Capital
3
on the note, GE Capital filed a combined no-evidence and traditional motion for
summary judgment on Simulis’s counterclaims and defenses. The trial court
granted summary judgment, and Simulis pursued the first appeal in this case.
In its first appeal, Simulis challenged only the trial court’s grant of summary
judgment with respect to the counterclaims for promissory estoppel and quantum
meruit; Simulis did not challenge summary judgment with respect to the
underlying promissory note, its offset defense, or its breach of contract claim.
Simulis I, 2008 WL 1747483, at *1.
This court affirmed the grant of summary judgment on Simulis’s
counterclaim for promissory estoppel. Id. at *2. “While a specific, detailed
promise might support a promissory estoppel claim, relying on a vague, indefinite
promise of future business is unreasonable as a matter of law.” Id. (citations
omitted).
“Here, Simulis presented evidence that GE promised that Simulis would
‘receive business’ and that the volume of business would be a ‘company maker’
for Simulis.” Id. “The parties never discussed or negotiated the specific pieces of
business, the price, when and for how long such transactions would occur, or any
other terms.” Id. “Relying on such promises is unreasonable as a matter of law
and cannot be the basis for a promissory estoppel claim.” Id. This court
distinguished cases relied upon by Simulis because they “all involve much more
definite promises that GE made here.” Id. at *2 n.1 (citing Preload Tech., Inc. v.
A.B. & J. Constr. Co., 696 F.2d 1080, 1082-83, 1085 (5th Cir. 1983); CWTM Corp.
v. AM Gen. LLC, No. Civ. A. H-04-2857, 2005 WL 1923605, at *1 (S.D. Tex.
Aug. 10, 2005); ‘Moore’ Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934,
937-38 (Tex. 1972); Wheeler v. White, 398 S.W.2d 93, 94-95 (Tex. 1965); Frost
Crushed Stone Co. v. Odell Geer Constr. Co., 110 S.W.3d 41, 45 (Tex. App.—
4
Waco 2002, no pet.)).
This court reversed the grant of summary judgment on Simulis’s
counterclaim for quantum meruit after concluding that the evidence raised a fact
issue with respect to whether GE Capital received valuable services from Simulis.
Id. at *3. Accordingly, this court reversed and remanded “for further proceedings
consistent with this opinion.” Id.
Simulis did not pursue its quantum meruit claim on remand. Simulis II, 392
S.W.3d at 732. Instead, Simulis amended its pleadings to add more than half a
dozen new causes of action. Id.
GE Capital filed special exceptions in response to the amended pleadings.
Among other things, GE Capital contended that Simulis violated this court’s
Simulis I mandate by adding new causes of action on remand. Id. The trial court
granted GE Capital’s special exceptions and ordered Simulis to replead. Id.
After Simulis filed another amended pleading that still contained new causes
of action, GE Capital filed a motion to dismiss on grounds that Simulis had failed
to comply with the trial court’s order. The trial court signed another order, in
which it required Simulis to file an amended petition asserting only a claim for
quantum meruit. Id. Simulis again filed an amended pleading containing new
causes of action. GE Capital again moved to dismiss based on a failure to comply
with the trial court’s order to replead and assert only a claim for quantum meruit.
Id. The trial court granted GE Capital’s motion and dismissed all of Simulis’s
claims with prejudice. Id. Simulis then pursued the second appeal in this case.
This court reversed. “Because our opinion and mandate did not include any
language limiting Simulis to a quantum meruit claim only, Simulis was free to
amend its pleadings to add new claims or parties, except as to those claims on
5
which we rendered summary judgment in GE’s favor.” Id. at 735. This court
expressed no opinion on the merits of GE Capital’s additional assertions that
Simulis’s newly added claims were foreclosed by res judicata, collateral estoppel,
and law of the case based on the decision in Simulis I. See Simulis II, 392 S.W.3d
at 735 n.7. This court again remanded “for proceedings consistent with this
opinion.” Id. at 736.
After the second remand, Simulis filed its fifth amended counterclaim. This
is the live pleading for purposes of the current appeal.
Simulis’s fifth amended counterclaim asserts claims based on (1) breach of
fiduciary duty; (2) fraudulent misrepresentation; (3) fraud by nondisclosure; (4)
negligent misrepresentation; (5) misappropriation of trade secrets; (6) gross
negligence; and (7) exemplary damages.1 Simulis also asserts its entitlement to
attorneys’ fees. GE Capital filed a traditional motion for summary judgment under
Texas Rule of Civil Procedure 166a(c) on November 16, 2012. Simulis filed its
response on December 7, 2012. The trial court signed a “Final Summary
Judgment” on January 25, 2013, in which it dismissed all of Simulis’s
counterclaims with prejudice and stated that “Simulis shall take nothing on its
claims.”
On January 22, 2013, GE Capital filed a separate document entitled “GE
Capital’s Motion to Enforce Jury Waiver Agreement.” This filing asserted that the
trial court should dismiss all of Simulis’s counterclaims based on the then-pending
motion for summary judgment; in the alternative, GE Capital contended that the
case should be tried to the bench if it went forward because Simulis signed a jury
1
Under the heading “Theories of Recovery” in its fifth amended counterclaim, Simulis
also includes a separate paragraph designated as “Detrimental Reliance.” This paragraph does
not appear to assert a separate cause of action; rather, it appears to be an elaboration of the
reliance element of other causes of action included as “Theories of Recovery.”
6
waiver agreement. Simulis filed no response to this motion. The trial court signed
an order granting GE Capital’s motion on February 11, 2013.
Simulis filed a motion for new trial on February 26, 2013. The Clerk’s
Record contains no order expressly overruling this motion. Simulis timely filed its
notice of appeal on April 25, 2013.
STANDARD OF REVIEW
We review the grant of summary judgment de novo. City of Lorena v.
BMTP Holdings, L.P., 409 S.W.3d 634, 645 (Tex. 2013). The movant who seeks a
traditional summary judgment under Rule 166a(c) must show that there is no
genuine issue of material fact, and that it is entitled to judgment as a matter of law.
Tex. R. Civ. P. 166a(c); Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex.
1997). To be entitled to traditional summary judgment, a defendant must
conclusively negate at least one essential element of each of the plaintiff's causes
of action or conclusively establish each element of an affirmative defense. Sci.
Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997). Once the defendant
establishes its right to summary judgment as a matter of law, the burden shifts to
the plaintiff to present evidence raising a genuine issue of material fact. Walker v.
Harris, 924 S.W.2d 375, 377 (Tex. 1996).
ANALYSIS
I. Summary Judgment
GE Capital moved for traditional summary judgment on the following
grounds.
1. Any justifiable reliance on Simulis’s part is foreclosed based on the
evidence contained in the summary judgment record, which is fatal to
Simulis’s claims for fraudulent misrepresentation, fraud by
7
nondisclosure, negligent misrepresentation, and breach of fiduciary
duty.
2. Any justifiable reliance on Simulis’s part is foreclosed by law of the
case in light of Simulis I, which is fatal to Simulis’s claims for
fraudulent misrepresentation, fraud by nondisclosure, negligent
misrepresentation, and breach of fiduciary duty.
3. Simulis’s claim for misappropriation of trade secrets pertains only to
General Electric entities other than GE Capital because “Simulis does
not complain that GE Capital itself misused the software technology.”
4. GE Capital did not owe a fiduciary duty to Simulis and did not breach
such a duty.
5. Simulis did not rely in fact on GE Capital’s alleged representations
because the sums Simulis allegedly was induced to spend based on
promises of future business came entirely from GE Capital’s own $5
million investment in Simulis.
6. Any alleged expectancy damages are speculative.
The trial court’s January 25, 2013 “Final Summary Judgment” dismissed all claims
asserted in the fifth amended complaint without specifying particular grounds for
doing so. We resolve this appeal based on grounds (1) and (4) raised in GE
Capital’s motion for summary judgment; these grounds focus on the inability to
establish justifiable reliance on this record with respect to fraud and negligent
misrepresentation, and on the absence of a fiduciary duty running from GE Capital
to Simulis.
Simulis contends that summary judgment was erroneous with respect to its
causes of action for fraudulent misrepresentation, fraud by nondisclosure, negligent
8
misrepresentation, and breach of fiduciary duty. Simulis contends on appeal that
the trial court erred in granting summary judgment for the following reasons.
1. The reliance-related evidence before the trial court in the latest round
of summary judgment filings differs from the reliance-related
evidence submitted in connection with the first summary judgment
motion that resulted in the Simulis I opinion. The new evidence
suffices to raise a fact issue on reliance.
2. GE Capital cannot rely on “unanswered interrogatory responses” to
satisfy its traditional summary judgment burden under Rule 166a(c),
nor can it rely on an interrogatory response by Simulis that refers to
unspecified documents produced by Simulis in response to requests
for production.
3. Simulis raised a fact issue by submitting evidence showing that GE
Capital’s misrepresentations “were more than vague statements of
opinion,” and that these misrepresentations “identified specific
business, at specific values, and upon discussed circumstances.”
4. A claim for breach of fiduciary duty does not contain a reliance
element.
5. The law of the case doctrine does not foreclose Simulis’s claims for
fraudulent misrepresentation, fraudulent concealment, negligent
misrepresentation, and breach of fiduciary duty.
6. GE Capital owed a fiduciary duty to Simulis.
7. The summary judgment record establishes that Simulis spent its
financial and business capital in reliance on GE Capital’s
misstatements and promises, resulting in the destruction of all
9
investments made by all members in the company.
In light of the resolution below, we do not reach grounds (4), (5), and (7) raised by
Simulis in opposition to summary judgment. Simulis does not address on appeal
its claims for misappropriation of trade secrets, gross negligence, exemplary
damages, and attorneys’ fees, which also were encompassed in the trial court’s
final summary judgment order, and it does not contend that the trial court erred in
granting summary judgment on these claims. Therefore, we do not address
whether the trial court erred when it dismissed the claims for misappropriation of
trade secrets, gross negligence, exemplary damages, and attorneys’ fees via
summary judgment.
A. Fraud and Negligent Misrepresentation
According to Simulis’s live pleading, its fraudulent misrepresentation claim
rests on affirmative statements that (1) “it was necessary for Simulis to expend
funds on additional personnel and office locations so that Simulis would have the
infrastructure in place to adequately service GE industrial contracts;” (2) GE
Capital “was in the process of arranging for its industrial divisions to purchase
Simulis products;” and (3) GE Capital “had special knowledge regarding these
matters.” The fraud by nondisclosure claim rests on an alleged failure to disclose
that (1) GE Capital “did not, in fact, have the ability to deliver business from its
sister divisions;” and (2) “the expenditures and concessions demanded did not
insure participation from G.E. Capital’s industrial divisions.” Simulis’s live
pleading does not identify the nature of the alleged negligent misrepresentations.
Reliance is an element of Simulis’s claims for fraudulent misrepresentation,
fraud by nondisclosure, and negligent misrepresentation; the parties do not contend
otherwise. See, e.g., Formosa Plastics Corp. USA v. Presidio Eng’rs &
Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998) (fraudulent misrepresentation);
10
Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997) (fraud by
nondisclosure); and Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 436 (Tex.
1997) (negligent misrepresentation). Fraud and negligent misrepresentation claims
share this reliance element in common with promissory estoppel. Ortiz v. Collins,
203 S.W.3d 414, 421 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) (citing
Beal Bank, S.S.B. v. Schleider, 124 S.W.3d 640, 647-54 (Tex. App.—Houston
[14th Dist.] 2003, pet. denied)). Regardless of other differences among claims for
promissory estoppel, fraud, and negligent misrepresentation,2 a common principle
applies to the shared reliance element: “This reliance must be reasonable and
justified.” Ortiz, 203 S.W.3d at 421.
“[R]elying on a vague, indefinite promise of future business is unreasonable
as a matter of law.” Simulis I, 2008 WL 1747483, at *2 (citing Allied Vista, Inc. v.
Holt, 987 S.W.2d 138, 141-42 (Tex. App.—Houston [14th Dist.] 1999, pet.
denied); Gilmartin v. KVTV-Channel 13, 985 S.W.2d 553, 558-59 (Tex. App.—
San Antonio 1998, no pet.); Gilum v. Republic Health Corp., 778 S.W.2d 558, 570
(Tex. App.—Dallas 1989, no pet.)). This court concluded that the trial court
properly granted summary judgment with respect to promissory estoppel because
“Simulis presented evidence that GE promised that Simulis would ‘receive
business’ and that the volume of business would be a ‘company maker’ for
Simulis.” Simulis I, 2008 WL 1747483, at *2. This court reasoned as follows:
“Relying on such promises is unreasonable as a matter of law and cannot be the
basis for a promissory estoppel claim” because “[t]he parties never discussed or
negotiated the specific pieces of business, the price, when and for how long such
2
See, e.g., Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex. App.—Houston [14th Dist.]
1999, pet. denied) (“Significantly, the sort of ‘false information’ contemplated in a negligent
misrepresentation case is a misstatement of existing fact, not a promise of future conduct.”) (original
emphasis) (citing Airborne Freight Corp., Inc. v. C.R. Lee Enters., Inc., 847 S.W.2d 289, 294 (Tex.
App.—El Paso 1992, writ denied)).
11
transactions would occur, or any other terms.” Id.GE Capital contends that the nature of the alleged representations at issue
defeats the reliance elements of Simulis’s later-added claims for fraud by
misrepresentation, fraud by nondisclosure, and negligent misrepresentation.
Simulis contends that GE Capital did not meet its initial burden as the summary
judgment movant under Rule 166a(c).
We conclude that GE Capital satisfied its summary judgment burden under
Rule 166a(c) by submitting the following reliance-related evidence with its
summary judgment motion. Simulis did not object to this evidence in its summary
judgment response.
 A copy of Simulis’s September 2012 response to GE Capital’s
Interrogatory No. 1 asking Simulis to “quote and describe specifically
each alleged misrepresentation of GE Capital, and for each identify
the date, circumstances, and individuals involved.” Simulis answered
the interrogatory by responding that it “does not possess information
sufficient to ‘quote’ employees of G.E. Capital beyond those
documents produced in response to discovery.” Simulis then stated,
“Simulis can generally describe G.E. Capital’s misrepresentations as
follows: G.E. Capital told Simulis that it had special knowledge and
abilities, including the ability to insure that various G.E. divisions
would use Simulis as their simulation training provider, provided
Simulis follow[ed] G.E. Capital’s advice.” Simulis’s response
continued: “G.E. Capital told Simulis personnel that, if Simulis
dedicated its financial resources to obtaining G.E. division business,
including the procurement of additional personnel, programming
resources, and business presence, that this investment would be repaid
12
in the form of G.E. contracts.”
 A copy of Simulis’s September 2012 response to GE Capital’s
Interrogatory No. 3 asking Simulis to “describe as best as you can the
alleged specific facts or information that GE Capital allegedly failed
to disclose to you . . . .” Simulis answered the interrogatory by
responding as follows: “At a point in the parties’ relationship, G.E.
Capital became aware that it did not have the level of influence that it
had originally anticipated.” Simulis’s response continued: “Simulis
does not know the date this occurred, nor could it, but at this time,
G.E. Capital, as [a] Simulis board member, stock holder, and business
partner, should have informed Simulis that it should not continue to
rely on its initial representations as described in response to
Interrogatory No. 1.”
 A copy of an affidavit by Simulis founder and CEO Mark Winter
signed on March 17, 2006. Among other things, Winter’s 2006
affidavit asserted that personnel from General Electric and GE Capital
made the following representations: (1) GE Capital’s investment
would “‘make Simulis;’” (2) Simulis would be compensated for
allowing GE Capital to purchase “a significant ownership interest” in
Simulis by means of “GE hiring and using Simulis’ technology
solutions;” (3) Simulis’s products “for training and competency
assessment would be put into place in many or all operating divisions
of GE;” (4) Simulis needed to “hire, equip and train staff of up to
thirty (30) employees” to address General Electric’s requirements; (5)
GE Medical Systems “wanted Simulis to develop several specific
training products for” GE Medical Systems; (6) Simulis needed to
13
“develop a simulated locomotive control system interface.”
 A copy of an affidavit by Simulis co-founder and board chairman
David Vosbein signed on September 29, 2005. Among other things,
Vosbein’s 2005 affidavit asserted that personnel from GE Capital
made the following representations: (1) a strategic alliance between
General Electric and Simulis would be a “company maker” for
Simulis; (2) Simulis “would receive business from the industrial
divisions” of General Electric; (3) a “large volume of work” was
promised to Simulis; (4) GE Capital would “provide business” to
Simulis, but “Simulis never received any business” as promised and
represented.
The 2006 Winter and 2005 Vosbein affidavits demonstrate that justifiable reliance
is foreclosed here because relying upon vague and indefinite promises of future
business of the sort identified in those affidavits “is unreasonable as a matter of
law.” Simulis I, 2008 WL 1747483, at *2; Allied Vista, Inc., 987 S.W.2d at 141-
42.
We agree with GE Capital that reasonable reliance likewise is foreclosed as
a matter of law based on Simulis’s interrogatory responses referencing (1)
representations that “various G.E. divisions would use Simulis as their simulation
training provider;” (2) representations that Simulis’s investments in personnel and
resources “would be repaid in the form of G.E. contracts;” and (3) GE Capital’s
asserted failures to disclose that “Simulis . . . should not continue to rely on its
initial representations as described in response to Interrogatory No. 1.”
The representations regarding future business identified in response to
Interrogatory No. 1 are no less vague, no less indefinite, and no more capable of
being relied upon than those contained in the 2006 Winter and 2005 Vosbein
14
affidavits. Simulis’s inability to rely on these vague and indefinite promises of
future business also defeats its fraud by nondisclosure claim discussed in response
to Interrogatory No. 3, which asserts that GE Capital should have disclosed the
falsity of the promises identified in response to Interrogatory No. 1. See
Schlumberger Tech. Corp., 959 S.W.2d at 181 (inability to rely on asserted
affirmative representations defeated accompanying fraudulent nondisclosure
allegations that were “simply the converse of Schlumberger’s affirmative
misrepresentations”).
We reject Simulis’s contention that GE Capital could not rely upon
Simulis’s interrogatory responses as affirmative proof against Simulis in support of
GE Capital’s traditional motion for summary judgment under Rule 166a(c). See
Tex. R. Civ. P. 197.3; Yates v. Fisher, 988 S.W.2d 730, 731 (Tex. 1998) (per
curiam). Nothing in the contents of these responses, or in Simulis’s generic
reference to unspecified documents produced in discovery, forecloses their use in
support of GE Capital’s traditional motion for summary judgment. Simulis and the
dissent stretch the Rule 166a(c) standard too far in contending this standard
requires denial of a traditional summary judgment motion whenever evidence from
a non-movant generally references unspecified documents. See, e.g., Hendricks v.
Thornton, 973 S.W.2d 348, 361-62 (Tex. App.—Beaumont 1998, pet. denied)
(affirming trial court’s grant of Rule 166a(c) motion in favor of defendant because
summary judgment record conclusively disproved reliance element of claims for
fraud, negligent misrepresentation, aiding and abetting fraud, and breach of
warranty; defendant obtained traditional summary judgment based on deposition
excerpts in which plaintiffs referenced having received unspecified “papers,’” a
“brochure or prospectus,” a “folder,” unspecified “‘written materials,’” a “brochure
and letter,” and unspecified “written information.”); see also Bedrock Gen.
15
Contractors, Inc. v. Tex. Workers’ Comp. Ins. Fund, No. 03-00-00426-CV, 2001
WL 253594, at *7 (Tex. App.—Austin March 8, 2001, pet. denied) (not designated
for publication); Pennington v. Bennett, 436 S.W.2d 182, 183 (Tex. Civ. App.—
Dallas 1969, writ ref’d n.r.e.).
Even putting aside the interrogatory responses, GE Capital discharged its
summary judgment burden under Rule 166a(c) by including the 2006 Winter and
2005 Vosbein affidavits as affirmative proof in support of its motion. The
dissent’s suggested limitation of the purposes for which the affidavits can be
considered is unwarranted; GE Capital’s motion for summary judgment states as
follows without limitation: “This motion relies on the papers on file and the
attached and accompanying exhibits.” The “attached and accompanying exhibits”
include the 2006 Winter and 2005 Vosbein affidavits.
Contrary to the dissent’s contention, the “purpose the affidavits were
intended to serve” by Simulis is irrelevant to the inquiry at the center of the current
appeal. Presumably, Simulis intended these affidavits to serve the purpose of
defeating GE Capital’s prior request for summary judgment predicated on GE
Capital’s contention that reasonable reliance was foreclosed as a matter of law. If
such an intent on the non-movant’s part were to control whether summary
judgment should be granted, then no summary judgment ever could be granted
against the non-movant’s wishes. The relevant consideration here is what the
affidavits say with respect to representations during 2000-2001 that Simulis
attributed to GE Capital, and Simulis’s asserted reliance on those representations.
The dissent identifies no defect in the substance of these affidavits. Simulis
identifies no defect in form in affidavits that Simulis itself filed during an earlier
stage of the proceedings. Both affidavits expressly address representations and
reliance. The representations identified in these affidavits are not actionable. See
16
Simulis I, 2008 WL 1747483, at *2; Allied Vista, Inc., 987 S.W.2d at 141-42. The
dissent does not contend that the 2000-2001 representations attributed to GE
Capital in the 2006 Winter and 2005 Vosbein affidavits, or Simulis’s claimed
reliance as reflected in those affidavits, suffice to demonstrate a viable basis for
reasonable reliance under Texas law. These affidavits satisfied the movant’s
burden under Rule 166a(c).
Simulis contends that it proffered new evidence in its summary judgment
response sufficient to raise a fact issue for trial and forestall summary judgment
with respect to fraudulent misrepresentation, fraud by nondisclosure, and negligent
misrepresentation. Simulis’s appellate brief lists nine items that it portrays as new,
post-Simulis I evidence establishing “details of the circumstances of . . . the
relationship between the parties, the specificity of G.E.’s representations, and the
circumstances surrounding these representations.”
Simulis further contends on appeal that it has proffered additional evidence
of “specific business, at specific values” that was promised to it in the future based
on (1) an affidavit signed by David Vosbein on December 6, 2012; (2) a chart
entitled “Exhibit B – GE Opportunities” that appears to have been part of a larger
presentation about the anticipated alliance between Simulis and General Electric;
(3) an undated email entitled “GEMS – Simulis” written by Juan Corsillo of GE
Capital and sent to Ron Carapezzi and Bob Stefanowski; (4) a November 9, 2000
email entitled “Simulis introductions to GE Capital Companies & Strategic GECC
Customers” written by Juan Corsillo and sent to Ron Carapezzi, Bob Stefanowski,
Dominic Cotugno; and (5) a document entitled “Simulis LLC Incentive Warrant
Term Sheet” dated October 20, 2000. According to Simulis, these additional
documents demonstrate that GE Capital “held Simulis out as its business partner;”
identified “specific business, with specific values, and specific time frames, as
17
earmarked for Simulis;” told Simulis that “it needed to make certain expenditures .
. . to meet the upcoming demand;” and “obtain a cut of . . . profits from the
business it promised Simulis.”
Individually and in concert, the additional documents identified by Simulis
evidence nothing beyond “vague, indefinite promise[s] of future business” of the
sort that foreclose reliance. See Simulis I, 2008 WL 1747483, at *2; see also Allied
Vista, Inc., 987 S.W.2d at 141 (“Significantly, the sort of ‘false information’
contemplated in a negligent misrepresentation case is a misstatement of existing
fact, not a promise of future conduct.”) (original emphasis); Airborne Freight
Corp., 847 S.W.2d at 295 (“[N]egligent misrepresentation is a cause of action
recognized in lieu of a breach of contract claim, not usually available where a
contract was actually in force between the parties.”).
Significant portions of Vosbein’s 2012 affidavit overlap with the contents of
his 2005 affidavit and Winter’s 2006 affidavit. Insofar as additional
representations are addressed, Vosbein’s 2012 affidavit states that Simulis was
“excited to learn that G.E. Capital had specific ideas about how Simulis could
work with and support the G.E. industrial divisions;” that G.E. Capital “held us out
as partners;” that G.E. Capital said “we needed to expend a great deal of money in
order to position ourselves as a G.E. vendor and strategic partner;” and that G.E.
Capital said these expenditures were necessary “so that we would be adequately
staffed to handle the volume of G.E. division business that would follow.”
Contrary to Simulis’s suggestion, Vosbein’s 2012 affidavit does not
demonstrate that particular business was “earmarked for Simulis.” Nor is
earmarking demonstrated by (1) a proposed internal memo to a “Preliminary
Distribution List” of General Electric divisions and leaders from Juan Corsillo
stating, “I would encourage you to allow [Simulis] . . . to spend an hour
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introducing its suite of products and follow up as appropriate;” (2) a separate email
from Corsillo recounting Simulis’s unsuccessful efforts to enter into a contract
with General Electric Medical Systems that stalled because the training manager
“can’t seem to get a decision from the division which has ordered the training;” (3)
a presentation slide listing “GE Opportunities” that involved issuance of a Request
for Proposal by two entities; or (4) a term sheet stating that Simulis will issue
warrants to General Electric “[a]s an incentive for GE to use commercially
reasonable efforts to recommend the use of Simulis’s technology and services
throughout the General Electric Company . . . .” This additional evidence touted
by Simulis fails to identify actionable representations.
The remaining items listed in Simulis’s brief address “the circumstances
surrounding these representations” in an effort to show that Simulis’s asserted
reliance on them was reasonable. Because the representations themselves are not
actionable due to their nature, the “circumstances surrounding” these non-
actionable representations are immaterial.
Finally, we reject Simulis’s suggestion that our decision in Simulis II
forecloses summary judgment based on the absence of justifiable reliance. Simulis
II addressed only a narrow appellate procedural issue concerning the scope of the
remand effected in Simulis I, and whether that remand was broad enough to let
Simulis amend its petition to add new causes of action. Simulis II neither
addressed the merits of any specific causes of action nor determined whether any
specific representations are actionable. See Simulis II, 392 S.W.3d at 735 n.7.
On this record, Simulis’s claims for fraud by misrepresentation, fraud by
nondisclosure, and negligent misrepresentation fail as a matter of law because the
nature of the representations at issue means that reliance is foreclosed and
“unreasonable as a matter of law.” See Simulis I, 2008 WL 1747483, at *2; Allied
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Vista, Inc., 987 S.W.2d at 141-42.
B. Breach of Fiduciary Duty
The parties agree that Simulis is a limited liability company (LLC) created
pursuant to the Delaware Limited Liability Company Act, and that Delaware law
governs Simulis’s claim that GE Capital breached a fiduciary duty owed to
Simulis. See Tex. Bus. Org. Code Ann. § 1.102 (Vernon 2012).
Under the “Second Amended and Restated Limited Liability Company
Agreement of Simulis, L.L.C.,” effective as of September 29, 2000, GE Capital
was a “member” of the LLC holding 20 percent of its units. See 6 Del. C. §§ 18-
101(11), 18-303. The September 2000 agreement vested management power in a
four-person “Board of Directors.” See id. § 18-101(1), 18-402.
In its live pleading, Simulis alleges that GE Capital owes a fiduciary duty to
the LLC as a “member” of the LLC; Simulis further alleges that GE Capital acted
“through its agents and employees” to breach this fiduciary duty.
GE Capital contends that summary judgment is mandated because it owed
no fiduciary duty to the LLC under Delaware law. According to GE Capital, the
board’s structure and composition means GE Capital was not a manager of the
LLC; “[t]hus, GE Capital had contractual investor rights as a member, but no
authority to bind or manage the company.” GE Capital further contends that it was
not a controlling member of the LLC because it owned only 20 percent of the LLC
and appointed only one of four board members. Relying on Kuroda v. SPJS
Holdings, LLC, 2010 WL 925853, at *7 (Del. Ch. Mar. 16, 2010), GE Capital
contends that it owed no fiduciary duty to Simulis solely as a “member” of the
LLC because GE Capital was neither a manager of the LLC nor a controlling
member. See id. n.28 (noting absence of statutory or case law authority “that
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imposes fiduciary duties on non-managing or non-controlling members of an
LLC.”).
Simulis responds by arguing that GE Capital “was a member of Simulis’
board of directors, and, therefore, a member-manager of Simulis, LLC.”
According to Simulis, GE Capital itself “was a member of Simulis’s board of
directors” – and thereby owed a fiduciary duty to the LLC under Delaware law –
because the September 2000 agreement appoints a GE Capital officer, Robert
Stefanowski, as a member of the LLC’s board.
Simulis cannot predicate a viable claim on its contention that GE Capital
owed a fiduciary duty to Simulis as a member-manager of the LLC solely by virtue
of Stefanowski’s position on the board of directors. Delaware case law has
rejected a contention that “whenever a director is affiliated with a significant
stockholder, that stockholder automatically would acquire the fiduciary obligations
of the director by reason of that affiliation alone.” Emerson Radio Corp. v. Int’l
Jensen Inc., 1996 WL 483086, at *20 n.18 (Del. Ch. August 20, 1996), appeal
denied, 683 A.2d 58 (Del. 1996). “The notion that a stockholder could become a
fiduciary by attribution (analogous to the result under the tort doctrine of
respondeat superior) would work an unprecedented, revolutionary change in our
law, and would give investors in a corporation reason for second thoughts about
seeking representation on the corporation’s board of directors.” Id.; see also US
Airways Group, Inc. v. British Airways PLC, 989 F. Supp. 482, 494 (S.D.N.Y.)
(“In practice, the imposition of respondeat superior liability on a corporation for
breach of fiduciary duty by its directors on the board of another corporation would
completely undermine Delaware corporate law, which limits such fiduciary duty to
majority and controlling shareholders. The general tort law theory of respondeat
superior cannot be used as [a] means of circumventing clear limitations imposed
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by Delaware corporate law.”) This reasoning applies in this context as well to
foreclose Simulis’s breach of fiduciary duty claim against GE Capital as a matter
of law.
II. Jury Waiver
Simulis contends that the trial court lacked subject matter jurisdiction under
Texas Rule of Civil Procedure 329b to sign the jury waiver order on February 11,
2013 after having signed a final summary judgment on January 29, 2013. In light
of our disposition above, we need not address this contention.
CONCLUSION
We affirm the Final Summary Judgment signed on January 29, 2013.
/s/ William J. Boyce
Justice
Panel consists of Justices Boyce, and Brown (Christopher, J., dissenting).
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