Phoneternet, L.L.C. v. LexisNexis Risk Solutions

Case: 19-11194 Document: 00515439784 Page: 1 Date Filed: 06/03/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
June 3, 2020
No. 19-11194 Lyle W. Cayce
Summary Calendar Clerk
PHONETERNET, L.L.C., doing business as Maestro,
Plaintiff–Appellant,
v.
LEXISNEXIS RISK SOLUTIONS, INCORPORATED; RELX,
INCORPORATED,
Defendants–Appellees.
Appeal from the United States District Court
for the Northern District of Texas
No. 3:18-CV-1719
Before OWEN, Chief Judge, and SOUTHWICK and WILLETT, Circuit Judges.
PER CURIAM:*
The case is about alleged inaccuracies in a business data report
maintained by the defendant, LexisNexis Risk Solutions, Inc. (LexisNexis).
The plaintiff, Phoneternet, L.L.C. (Phoneternet), argues that LexisNexis’s
failure to fix the errors promptly in LexisNexis’s business data report caused
Phoneternet to lose a lucrative business contract with the Lexus Division of
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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Toyota Motor Corporation (Toyota). Phoneternet sued LexisNexis and its
parent company, RELX, in state court. After removal and several rounds of
amendments to the complaint, the district court dismissed Phoneternet’s
claims pursuant to Rule 12(b)(6). Phoneternet now appeals part of that
dismissal. We affirm.
I
In early 2017, Phoneternet was in negotiations with Toyota to provide
its personal assistant service, “MyStar,” for use in Toyota’s Lexus Division.
According to Phoneternet, Toyota was prepared to sign a multimillion-dollar
agreement for the service. “The only caveat before signing the agreement [was]
whether [Phoneternet] had a clean business report as reviewed by Toyota’s
procurement department.”
Toyota requested a business report on Phoneternet from LexisNexis.
The report was not favorable to Phoneternet. Indeed, the report rated
Phoneternet as being high risk. In June 2017, Toyota told Phoneternet that it
“needed to address the business credit report[] in order to proceed with
the . . . contract.” Toyota asked Phoneternet to “reach back out” after it
“worked out any potential changes” in the report.
Slightly more than one month later, Phoneternet sent a letter to
LexisNexis “identifying and correcting fifteen . . . separate discrepancies and
errors” in the report. In October 2017, Phoneternet received a letter from
LexisNexis, stating that LexisNexis had “modified the data as requested.”
Phoneternet claims that this statement was false; LexisNexis had only
changed one of the fifteen discrepancies Phoneternet had identified in its
earlier letter. After receiving this letter from LexisNexis, Phoneternet started
calling the LexisNexis Small Business Advocacy Center—at least three times
a week—requesting that the information be corrected. According to
Phoneternet, the LexisNexis customer service team as well as managers and
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supervisors assured Phoneternet that the “information would be updated in
the database.” Phoneternet claims that it was told “more than once that the
issue of Phoneternet’s data had been passed upon by senior decision makers at
LexisNexis and would be fixed promptly.”
In early January 2018, Phoneternet sent a final letter to LexisNexis
requesting that LexisNexis “rectify its mistakes.” That next month,
LexisNexis sent a letter to Phoneternet directed towards Phoneternet’s
managing director, with only one change made in the entire report. According
to Phoneternet, LexisNexis “continued to stand by [its] data [even] after
[Phoneternet’s] multiple attempts” to have the data fixed. Indeed, Phoneternet
claims that, as of January 2019, LexisNexis still had not made the requested
changes to Phoneternet’s business report.
Phoneternet sued LexisNexis and its parent company, RELX, asserting,
among other things, causes of action for negligence, gross negligence, malice,
tortious interference with prospective business relations, business
disparagement, negligent misrepresentation, promissory estoppel, and
negligent breach of special duty. After several amendments by Phoneternet,
the district court dismissed all of Phoneternet’s claims. Phoneternet appeals
only the dismissal of its claims against LexisNexis for negligence, negligent
misrepresentation, tortious interference with prospective business relations,
and promissory estoppel. Phoneternet does not appeal the dismissal of any of
its claims as they relate to LexisNexis’s initial publication of the allegedly false
report. Rather, Phoneternet only appeals its claims as they relate to
LexisNexis’s failure to correct the allegedly incorrect data. Phoneternet seeks
both monetary damages and injunctive relief.
II
Phoneternet presents four main arguments on appeal. First,
Phoneternet argues that the district court erred in dismissing its claims for
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negligent misrepresentation and promissory estoppel. Second, Phoneternet
argues that the district court erred in dismissing its negligence claim.
Specifically, Phoneternet argues that the district court erred in concluding that
there is no duty under Texas law requiring a business credit reporting agency
to correct allegedly inaccurate business reports when the company that is the
subject of the report has notified the agency of the alleged inaccuracies. Third,
Phoneternet argues that this court should certify the question of whether a
duty exists under the circumstances outlined in its second argument to the
Supreme Court of Texas. Finally, Phoneternet argues that the district court
erred in dismissing its claim for tortious interference with prospective business
relations and in denying its request for injunctive relief.
A
We turn first to Phoneternet’s claims for negligent misrepresentation
and promissory estoppel, reviewing the district court’s dismissal of each claim
de novo.1 The district court dismissed both claims after determining, among
other things, that Phoneternet’s “reliance on any statement by LexisNexis that
it had or would correct certain alleged inaccuracies was not justified.” On
appeal, Phoneternet argues that the district court mischaracterized its
allegations and relied on an improper evidentiary standard in dismissing the
claims. After careful review, we conclude that the district court properly
dismissed both claims.
Under Texas law, both negligent representation and promissory estoppel
require “reasonable and justified” reliance by the plaintiff on a statement or
representation made by the defendant.2 Here, Phoneternet alleges that it
1 See Budhathoki v. Nielson, 898 F.3d 504, 507 (5th Cir. 2018) (citing Wampler v. Sw.
Bell Tel. Co., 597 F.3d 741, 744 (5th Cir. 2010)).
2 Ortiz v. Collins, 203 S.W.3d 414, 421 (Tex. App.—Houston [14th Dist.] 2006, no pet.);
see Davis v. Tex. Farm Bureau Ins., 470 S.W.3d 97, 108 (Tex. App.—Houston [1st Dist.] 2015,
no pet.) (discussing how a promise, for purposes of a promissory estoppel claim, “must be
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relied on LexisNexis’s alleged statement that the data in the business report
had been “modified . . . as requested” and LexisNexis’s alleged statement that
it would “correct the erroneous data promptly.”
Phoneternet’s subsequent actions and later communications with
LexisNexis belie any claim that Phoneternet reasonably and justifiably relied
on LexisNexis’s statement that the alleged errors in Phoneternet’s business
report had been “modified . . . as requested.” Shortly after LexisNexis’s alleged
statement that the errors in the report had been “modified . . . as requested,”
Phoneternet started calling LexisNexis requesting that the errors in the report
be corrected. In fact, Phoneternet claims that it received several assurances
from various LexisNexis personnel that the remaining errors would be
corrected during these calls.
If Phoneternet believed the errors had already been corrected, there
would have been no reason for Phoneternet to repeatedly call LexisNexis. In
that case, Phoneternet would be asking LexisNexis to correct already accurate
information. Moreover, to the extent Phoneternet did rely on LexisNexis’s
alleged statement that all fifteen errors in the report had been “modified . . .
as requested,” such reliance cannot be considered reasonable and justified.
Given the alleged importance of this report—the only remaining obstacle
between Phoneternet and a lucrative multimillion-dollar contract with
Toyota—Phoneternet should have at least confirmed that the errors had been
corrected before blindly relying on LexisNexis’s representation. Further, it
was unreasonable for Phoneternet to rely on LexisNexis’s earlier
sufficiently specific and definite so that it would be reasonable and justified for the promisee
to rely on it as a commitment to future action.” (citing Comiskey v. FH Partners, LLC, 373
S.W.3d 620, 635 (Tex. App.—Houston [14th Dist.] 2012, pet. denied)); Grant Thornton LLP
v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010) (first citing Ernst & Young,
L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001); and then citing Fed. Land
Bank Ass’n v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991)).
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representation that the business report had been “modified . . . as requested,”
after the multiple calls to LexisNexis. According to Phoneternet, LexisNexis
assured Phoneternet in these calls that the errors in the report would be
corrected. At this point, Phoneternet should have known that LexisNexis had
not modified all the alleged errors in the report as Phoneternet had earlier
requested.
Nor could Phoneternet have reasonably and justifiably relied on
LexisNexis’s alleged promise that it would “correct the erroneous data
promptly.” Phoneternet claims that it relied on LexisNexis’s assurances that
the remaining errors in the business report would be fixed “promptly” by not
“prepar[ing] an independent report” or “reparative presentation” for Toyota.
But such reliance cannot be considered reasonable. First, it was unreasonable
for Phoneternet to continue to rely on LexisNexis’s alleged promises to fix the
errors in the business report after months of alleged inaction by LexisNexis.
Second, regardless of LexisNexis’s continued assurances that the errors would
be corrected, it was unreasonable for Phoneternet not to present an
“independent report” or “reparative presentation” for Toyota. This is especially
true comparing the relative cost of preparing such a report to the size of the
alleged contract with Toyota—approximately six million dollars.
Thus, because Phoneternet did not reasonably and justifiably rely on
either of LexisNexis’s alleged representations, Phoneternet’s claims for
negligent misrepresentation and promissory estoppel both fail.3
B
Phoneternet’s second argument on appeal concerns its negligence claim.
The district court dismissed that claim, concluding that “LexisNexis owed no
3See FED. R. CIV. P. 12(b)(6); see also Ortiz, 203 S.W.3d at 421 (noting that, under
Texas law, “reasonable and justified” reliance is required for claims of both negligent
misrepresentation and promissory estoppel).
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duty under Texas law as urged by Phoneternet to promptly correct alleged
inaccuracies in the business data maintained by LexisNexis upon
Phoneternet’s request.” Phoneternet now argues that this court should
recognize a common law duty under Texas law requiring a business credit
reporting agency to correct allegedly false data in a commercial business report
when the company that is the subject of the report has notified the agency of
the alleged inaccuracy. Under the Erie doctrine, federal courts are required to
follow state law and are generally prohibited from making new substantive
state-law common law rules.4 Thus, this court cannot recognize, as
Phoneternet requests, a new common law duty under Texas law to correct
allegedly false data in a commercial business report. For these reasons, we
deny Phoneternet’s request to recognize a new duty under Texas common law
and affirm the district court’s dismissal of Phoneternet’s negligence claim.
III
In its third argument on appeal, Phoneternet asks this court to certify
the following question to the Supreme Court of Texas:
Under Texas law, does a business credit reporting agency have a
duty to correct erroneous business credit information when the
business entity on which an erroneous report has been made has
notified the agency of the errors (with proof) and requested
correction?
“The decision of whether to certify a question lies within our sound
discretion.”5 In this case, Phoneternet points to no cases that would make
certification advisable.6 Therefore, we decline Phoneternet’s request.
4 See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
5 In re Deepwater Horizon, 807 F.3d 689, 698 (5th Cir. 2015) (quoting Patterson v.
Mobil Oil Corp., 335 F.3d 476, 487 (5th Cir. 2003)).
6 See Gibson v. Kilpatrick, 838 F.3d 476, 488 (5th Cir. 2016).
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IV
Phoneternet’s final argument on appeal concerns its claim for tortious
interference with prospective business relations and its request for injunctive
relief. Under Texas law, tortious interference with prospective business
relations requires a defendant’s conduct to be independently tortious or
unlawful.7 Similarly, to succeed on a request for injunctive relief, a plaintiff
must show a substantial likelihood of success on the merits.8 As discussed
above, in this case, Phoneternet has failed to allege adequately an independent
tort or any other meritorious claim. Thus, Phoneternet cannot meet the
requirements for its tortious interference with prospective business relations
claim or the requirements for its request for injunctive relief. The district court
did not err in dismissing Phoneternet’s tortious interference claim or in
denying Phoneternet’s request for injunctive relief.
* * *
For these reasons, we AFFIRM the district court’s judgment.
Coinmach Corp. v. Aspenwood Apt. Corp., 417 S.W.3d 909, 923 (Tex. 2013).
7
See, e.g., Clark v. Prichard, 812 F.2d 991, 993 (5th Cir. 1987); Canal Auth. of the
8
State of Fla. v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974).
8