Floors Unlimited, Inc. v. Fieldcrest Cannon, Inc.

United States Court of Appeals,

Fifth Circuit.

No. 94-10680.

FLOORS UNLIMITED, INC., d/b/a First Floors, Plaintiff-Appellant,

v.

FIELDCREST CANNON, INC., Defendant-Appellee.

June 15, 1995.

Appeal from the United States District Court for the Northern
District of Texas.

Before DAVIS, SMITH and WIENER, Circuit Judges:

WIENER, Circuit Judge:

Plaintiff-Appellant Floors Unlimited (Floors), a carpet

retailer and dealer, appeals the district court's summary judgment

dismissal of Floors' breach of contract and breach of fiduciary

duty claims against Fieldcrest Cannon, Inc. (Fieldcrest), a carpet

manufacturer. As we conclude that, as a matter of law, the oral

dealership agreement between Floors and Fieldcrest did not fall

within the parol evidence proscription of Section 26.01(b)(6) of

the Texas statute of frauds, we reverse the district court's

dismissal of Floors' breach of contract claim and remand for

further proceedings consistent with this holding. We affirm the

district court's dismissal of Floors' claim for breach of a

fiduciary duty by Fieldcrest, however, agreeing with the court that

no fiduciary relationship existed between the parties.

I

FACTS AND PROCEEDINGS

Floors is a carpet retailer and dealer which sells carpet to

1
residential and commercial customers in North Texas. Fieldcrest is

a carpet manufacturer which markets its product through dealers

like Floors. Fieldcrest's practice was to market its "Karastan"

line of carpeting only through a limited number of authorized

dealers.

According to Floors, it entered into an oral agreement with

Fieldcrest in 1982 whereby Floors became an authorized dealer for

Fieldcrest's "Karastan" line. Floors alleged that the agreement

required it to acquire carpeting, carpet samples, display racks,

and promotional material from Fieldcrest. The agreement allegedly

required Floors to sell and advertise Fieldcrest's product in

conformity with certain rules promulgated by Fieldcrest. Floors

claimed that Fieldcrest agreed not to terminate the contract (and,

therefore, Floors' designation as an authorized "Karastan" dealer)

except for "good cause," specifically, for Floors' failure to

comply with Fieldcrest's strict marketing requirements. In oral

argument before this court the parties acknowledged that Floors was

not required to buy any minimum quantity of carpet or to meet any

continuing sales quotas or goals to retain its dealership.

In February 1993, however, Fieldcrest terminated its

eleven-year relationship with Floors, unilaterally and without

explanation. That Floors never violated any of Fieldcrest's

marketing requirements is undisputed.

Floors sued Fieldcrest in Texas state court, alleging breach

of contract, promissory estoppel, and breach of fiduciary duty.

Fieldcrest removed the case to federal court based on diversity

2
jurisdiction and moved for summary judgment on all claims. The

district court granted Fieldcrest's summary judgment motion,

finding that (1) the parties' oral agreement, as a "satisfaction

contract," could not possibly be performed within one year, and

thus was unenforceable under the Texas statute of frauds; (2) the

promissory estoppel claim had no merit, as Floors had conceded that

there was no "second promise" to reduce the parties' oral agreement

to writing; and (3) no fiduciary relationship existed between

Floors and Fieldcrest.

Floors timely filed an appeal to this court, asserting that

(1) the oral contract was for an indefinite duration and therefore

was not subject to the statute of frauds; and (2) genuine issues

of material fact remained regarding the existence of a fiduciary

relationship between the parties, precluding summary judgment

dismissal of Floors' claim of breach of a fiduciary duty by

Fieldcrest.1

II

ANALYSIS

A. STANDARD OF REVIEW

We review a grant of summary judgment de novo, applying the

1
Floors did not challenge or address the district court's
grant of summary judgment with regard to the promissory estoppel
claim. Consequently, we need not, and therefore do not, consider
that issue on appeal. See Cinel v. Connick, 15 F.3d 1338, 1345
(5th Cir.1994) (appellant abandons all issues not raised and
argued in its initial brief on appeal), cert. denied, --- U.S. --
--, 115 S.Ct. 189, 130 L.Ed.2d 122 (1994).

3
same standard as the district court.2 Summary judgment is

appropriate if the record, judged in the light most favorable to

the non-moving party, discloses that "there is no genuine issue as

to any material fact and that the moving party is entitled to a

judgment as a matter of law."3 The moving party must demonstrate

by competent evidence that no issue of material fact exists.4 The

non-moving party then has the burden of showing the existence of a

specific factual issue which is disputed.5 If any element of the

plaintiff's case lacks factual support, the district court should

grant summary judgment.6 To the extent a district court's grant of

summary judgment is based on an interpretation of state law, our

review of that determination is also de novo.7

B. BREACH OF CONTRACT CLAIM

Two provisions of the Texas statute of frauds, which requires

that specified types of agreements be in writing to be enforceable,

2
See Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th
Cir.1994).
3
See Fed.R.Civ.P. 56(c); Brothers v. Klevenhagen, 28 F.3d
452, 455 (5th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct.
639, 130 L.Ed.2d 545 (1994).
4
See Isquith v. Middle South Utilities, Inc., 847 F.2d 186,
198-99 (5th Cir.1988), cert. denied, 488 U.S. 926, 109 S.Ct. 310,
102 L.Ed.2d 329 (1988).
5
See Celotex Corp. v. Catrett, 477 U.S. 317, 321-22, 106
S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).
6
See id.
7
See Commons W. Office Condos, Ltd. v. Resolution Trust
Corp., 5 F.3d 125, 127 (5th Cir.1993) (citing Salve Regina
College v. Russell, 499 U.S. 225, 231-32, 111 S.Ct. 1217, 1221,
113 L.Ed.2d 190 (1991)).

4
are implicated in this case.

1. Contract to be Performed Within One Year

Section 26.01(b)(6) of the Texas statute of frauds requires

that, to be enforceable, any agreement which is "not to be

performed within one year from the date of making the agreement"

must be in writing.8 The district court concluded that the oral

contract alleged by Floors was not intended to be performed within

one year of its making and, therefore, was unenforceable under the

statute of frauds. We disagree.

In his deposition, the president of Floors stated that he

believed the oral contract between his company and Fieldcrest would

last "forever and ever and ever" and that Fieldcrest would not

terminate the dealership agreement except for "good cause." In

addition, Floors' president asserted his belief that his company's

designation as a "Karastan" dealer "would continue ... as long as

[Floors] complied with the rules and regulations that [Fieldcrest]

established for its authorized dealers." We conclude from this

evidence—essentially uncontradicted by Fieldcrest—that the oral

agreement between Fieldcrest and Floors was of an indefinite

duration, terminable only for "good cause." Thus, we are squarely

faced with the question of law: Is an indefinite term contract,

terminable only for good cause, required to be in writing under

Section 26.01(b)(6) of the Texas statute of frauds?

In Falconer v. Soltex Polymer Corp.9, we held that an oral

8
Tex.Bus. & Com.Code Ann. § 26.01(b)(6).
9
886 F.2d 1312 (5th Cir.1989) (unpublished opinion).

5
contract of employment that was alleged by the employee to last

"forever," "so long as he obeyed the company rules and did his

job," was an employment contract for an indefinite term, and was

therefore barred by the Texas statute of frauds.10 Our subsequent

decision in Pruitt v. Levi Strauss & Co.11, however, observed that

our decision in Falconer was questionable because, under Texas law,

"[i]f an oral employment agreement can cease upon some contingency,

other than by some fortuitous event or the death of one of the

parties, the agreement may be performed within one year, and the

statute of frauds does not apply."12

In Pruitt, we reviewed applicable Texas law and recognized

that Texas courts generally held that when no period of performance

is stated in an oral employment contract, the statute of frauds

does not apply because the contract is performable within a year.13

The Texas courts, we observed, drew a distinction between contracts

of an unstated or indefinite duration, which fell outside the

statute of frauds, and contracts of a specified duration longer

than a year, which fell within the statute of frauds.14

Despite our acknowledgement of Texas jurisprudence on the

10
See id.
11
932 F.2d 458 (5th Cir.1991).
12
See id. at 463-64 (citing McRae v. Lindale Indep. School
Dist., 450 S.W.2d 118, 124 (Tex.Civ.App.-Tyler 1970, writ ref'd
n.r.e.); Fruth v. Gaston, 187 S.W.2d 581, 584 (Tex.Civ.App.-
Austin 1945, writ ref'd w.o.m.)).
13
See id. at 463-65.
14
See id.

6
issue, we nonetheless held that the oral employment contract in

Pruitt, which had not specified any length of time for performance,

fell within the statute of frauds and was therefore unenforceable.

The reason for our manifestly conflicting decision was that under

the stare decisis rule of this Circuit—which provides that one

panel cannot overturn the decision of a prior panel in the absence

of en banc reconsideration or a superseding Supreme Court

decision—we were bound by the precedent of Falconer.15

In Pruitt we also acknowledged the corollary of our stare

decisis rule, articulated in our decision in Farnham v. Bristow

Helicopters, Inc.16, that in diversity cases we must follow

subsequent state court decisions that are clearly contrary to one

of our prior decisions.17 We examined one Texas state court

decision subsequent to Falconer—namely, Winograd v. Willis18, which

we read as not "clearly contrary" to Falconer—and concluded that we

were still bound by Falconer.19

15
See id. at 465 (citing Farnham v. Bristow Helicopters,
Inc., 776 F.2d 535 (5th Cir.1985).
16
776 F.2d 535, 537 (1985).
17
See Pruitt v. Levi Strauss & Co., 932 F.2d 458, 465-66
(5th Cir.1991) (citing Farnham, 776 F.2d at 537). See also Exxon
Co. v. Banque De Paris Et Des Pays-Bas, 889 F.2d 674, 676 (5th
Cir.1989) (federal court sitting in diversity is bound to follow
decisions of state's intermediate appellate courts unless it is
"convinced by other persuasive data that the highest court of the
state would decide otherwise."), cert. denied, 496 U.S. 943, 110
S.Ct. 3230, 110 L.Ed.2d 676 (1990).
18
789 S.W.2d 307 (Tex.Ct.App.-Houston [14th Dist.] 1990,
writ denied).
19
See Pruitt, 932 F.2d at 465-66.

7
 Since we decided Pruitt, there have been two published

decisions by Texas Courts of Appeals that have addressed the

applicability of the statute of frauds to an indefinite term

employment contract.20 In determining that the oral contract in the

instant case was subject to the statute of frauds, the district

court concluded that those subsequent Texas court decisions were

not "clearly contrary" to our holding in Pruitt and that the court

therefore could not disregard the holdings of Falconer and Pruitt.

Our close examination of those subsequent Texas cases leads us to

the contrary conclusion, i.e., that they are "clearly contrary" to

our decisions in Falconer and Pruitt. That in turn compels us to

conclude that Falconer is not a correct statement of Texas law and

thus is no longer binding precedent in this Circuit.

The first case decided subsequent to Pruitt was Goodyear Tire

& Rubber Co. v. Portilla.21 In Goodyear, the oral employment

agreement allegedly provided that the plaintiff's employment would

last "as long as I ... done my job right."22 The Goodyear court

held that the employer's representation to the plaintiff that she

would not be discharged except for unsatisfactory performance

20
The two cases are Gerstacker v. Blum Consulting Eng'rs.,
Inc., 884 S.W.2d 845 (Tex.Ct.App.-Dallas 1994, writ denied) and
Goodyear Tire & Rubber Co. v. Portilla, 836 S.W.2d 664
(Tex.Ct.App.-Corpus Christi 1992), aff'd on other grounds, 879
S.W.2d 47 (Tex.1994).
21
836 S.W.2d 664 (Tex.Ct.App.-Corpus Christi 1992), aff'd on
other grounds, 879 S.W.2d 47 (Tex.1994).
22
See id. at 667.

8
formed a satisfaction contract.23 As the contract did not specify

how long the employment term would last, the court held that it was

not barred by the statute of frauds because the contract was

performable within one year.24 The Goodyear court distinguished its

case from others in which Texas courts had ruled that agreements

promising to retain the employee until retirement had to be in

writing to be enforceable under the statute of frauds, unless

retirement was scheduled to occur within one year.25

The district court held that Goodyear was not "clearly

contrary" to Falconer because the Goodyear court noted that "[a]t

no time did [the plaintiff] contend that she presumed to have a job

until she retired."26 From this statement, the district court

concluded that Goodyear "cannot be said to stand for the

proposition that satisfaction contracts never fall within the

statute of frauds." We think that the district court

misinterpreted Goodyear.

The statement in Goodyear on which the district court relies

merely indicates that the contract involved in Goodyear was an

indefinite term contract. If the contract had specified that it

would last "until retirement," the contract would have been for a

definite term and would fall within the statute of frauds unless

normal retirement age was to occur within one year. We read

23
See id. at 668.
24
See id. at 669.
25
See id. at 669-671.
26
Id. at 670.

9
nothing in the passage quoted by the district court as being

contrary to the general rule; indeed, the Goodyear court's

statement merely echoes our conclusion that definite term contracts

fall within the Texas statute of frauds whereas indefinite term

contracts do not.

The second relevant Texas case decided after Pruitt was

Gerstacker v. Blum Consulting Eng'rs., Inc.27 The court in

Gerstacker held that the statute of frauds did not apply to an

employer's oral promise to employ the plaintiff "during [his] good

performance and satisfactory performance of his duties."28 The

court proceeded to determine the applicability of the statute of

frauds by ascertaining the parties' intent regarding the duration

of employment at the time of the confection of the contract.29

Concluding that the parties had agreed that the intended term for

performance of employment was until the occurrence of an express

contingency (unsatisfactory performance), the court held that the

contract could conceivably be performed within one year and that

the statute of frauds therefore did not apply.30

Another Texas case decided subsequent to Pruitt, Collins v.

27
884 S.W.2d 845 (Tex.Ct.App.-Dallas 1994).
28
See id. at 847.
29
See id. at 850-51.
30
See id. at 851 (citing Hardison v. A.H. Belo Corp., 247
S.W.2d 167, 168-69 (Tex.Civ.App.-Dallas 1952, no writ) (holding
that statute of frauds does not apply to oral agreement providing
employment as long as employee does satisfactory work because
contingency may happen within one year)).

10
Allied Pharmacy Management31, although not clearly contrary to

Pruitt, is significant in reinforcing our conclusion that the

instant agreement is enforceable because it falls outside the

statute of frauds. The Collins court illustrated the converse

doctrine of Goodyear when it held that, because the alleged oral

employment agreements were for specified terms of three years, they

had to be in writing to be enforceable even though there existed

the possibility of termination for cause within a year.32 The

Collins court rejected the plaintiffs' argument that the

possibility of termination for cause took their three-year oral

contracts outside the statute of frauds, concluding instead that

the agreements' specified durations trumped the mere possibility of

termination for cause: Such a possibility simply did not

constitute "performance" of these specified-term contracts under

their own terms.33

We believe that Goodyear and Gerstacker are "clearly contrary"

to our antecedent decisions in Falconer and Pruitt, and that

Collins, although not "clearly contrary" to our decisions because

it involved a definite term contract, lends support to our

conclusion that Falconer is no longer a correct statement of Texas

law. Under Farnham, therefore, we are precluded from following

Falconer because subsequent Texas law is "clearly contrary" to its

31
871 S.W.2d 929 (Tex.App.-Houston [14th Dist.] 1994, no
writ).
32
See id. at 934.
33
See id. at 934.

11
holding.

As we suggested in Pruitt, we are now satisfied that, if faced

with this issue, Texas courts would conclude that a contract for an

indefinite duration, terminable only for cause, falls outside the

statute of frauds. And in light of such satisfaction, we deny

Floors' motion for certification of that question of law to the

Supreme Court of Texas.

The oral dealership agreement between Floors and Fieldcrest in

the instant case is a satisfaction contract for an indefinite

term—"as long as [Floors] followed certain rules and

regulations"—and not for a specified duration. The contract

therefore falls outside the purview of Section 26.01(b)(6) of the

Texas statute of frauds.

2. Contract for Sale of Goods for $500 or More

Fieldcrest also argued in its motion for summary judgment that

the oral agreement alleged by Floors is unenforceable under Section

2.201(a) of the Texas Business and Commerce Code, which provides

that a contract for the sale of goods at a price at or over $500 is

not enforceable unless it is in writing.34 The district court did

34
The relevant portion of Section 2.201 reads as follows:

(a) Except as otherwise provided in this section a
contract for the sale of goods for the price of $500 or
more is not enforceable by way of action or defense
unless there is some writing sufficient to indicate
that a contract for sale has been made between the
parties and signed by the party against whom
enforcement is sought or by his authorized agent or
broker. A writing is not insufficient because it omits
or incorrectly states a term agreed upon but the
contract is not enforceable under this paragraph beyond
the quantity of goods shown in such writing.

12
not address this argument, instead basing its summary judgment

dismissal of Floors' claims on Section 26.01(b)(6) of the Texas

statute of frauds.

As we find that Section 26.01(b)(6) does not apply to the

parties' oral agreement, we turn to Fieldcrest's alternative

argument for summary judgment dismissal grounded in Section

2.201(a) of the Texas statute of frauds. The parties have failed

to cite any relevant Texas cases expressly addressing the issue

whether Section 2.201(a) is applicable to dealership or dealership

contracts, and we have been unable to locate any such cases

independently. Given the apparent absence of Texas law on the

subject, we decline the invitation to address the issue whether a

dealership agreement such as the one in the instant case falls

within the statute of frauds provision regarding contracts for the

sale of goods priced at $500 or more. It would not be prudent for

us to render decision on such an uncertain issue when the district

court has not yet addressed it.35

Although we do not express any opinion on the applicability of

Section 2.201(a) to the agreement in this case, we note that if the

district court on remand decides that a dealership agreement such

Tex.Bus. & Com.Code Ann. § 2.201(a).
35
For the same reason, we would be premature in certifying
this issue to the Supreme Court of Texas at this time. If,
however, the district court on remand rules on the applicability
of § 2.201 to the dealership agreement here at issue and the case
is thereafter appealed to this court, the question might well be
one ripe for certification, given the split of authority
throughout the country and the dearth of Texas authority on the
issue.

13
as the one between Floors and Fieldcrest is subject to Section

2.201(a) of the Texas statute of frauds, it must then reexamine the

issue whether, separately or in combination, Fieldcrest's letters

to Floors constitute a writing sufficient to meet the requirements

of the statute of frauds. The Uniform Commercial Code Comment

accompanying Section 2.201 states that the "phraseology of this

section is intended to make clear that ... [t]he required writing

need not contain all the material terms of the contract and such

material terms as are stated need not be precisely stated."36 The

comment also provides that "[a]ll that is required is that the

writing afford a basis for believing that the offered oral evidence

rests on a real transaction."37 In light of this commentary

interpreting the statutory language at issue, the district court on

remand should closely examine Fieldcrest's various letters to

Floors to determine whether, under Texas law, the correspondence

meets the writing requirement of Section 2.201 of the Texas statute

of frauds.

C. BREACH OF FIDUCIARY DUTY CLAIM

The district court determined that there was no fiduciary

relationship between Floors and Fieldcrest which would support

Floors' claim that Fieldcrest breached its fiduciary duty. Floors

concedes that there was no legal partnership between it and

Fieldcrest; it asserts, nonetheless, that the nature of its

relationship with Fieldcrest created a question of fact as to the

36
Tex.Bus. & Com.Code Ann. § 2.201 comment 1.
37
See id.

14
existence of a fiduciary obligation which should have precluded

summary judgment. Specifically, Floors contends that an issue of

fact exists because:

[Fieldcrest] took many actions, some of them in writing, to
make its dealers feel that a special relationship—akin to a
partnership—existed. The use of the term "partnership," while
it may not create the legal entity of partnership, was
intentionally used—and repeatedly—by [Fieldcrest] to impress
its dealers that their relationship was more than "arms
length."

We find this contention to be without merit. Under Texas law, a

fiduciary duty will not be lightly created, as it imposes

extraordinary duties.38 The party owing the duty in a fiduciary

relationship must put the interests of the beneficiary ahead of its

own if the need arises.39 Our review of the summary judgment

evidence convinces us that the relationship between Fieldcrest and

Floors did not give rise to any fiduciary duty.

In Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp.40,

the Supreme Court of Texas held that, as a matter of law, the

parties to the written franchise agreement in that case did not

have a fiduciary relationship because there was no evidence of a

"confidential relationship" between them.41 The court noted that,

although the existence of a confidential relationship is

38
See Gillum v. Republic Health Corp., 778 S.W.2d 558, 567
(Tex.Ct.App.-Dallas 1989, no writ).
39
See Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 558-59
(5th Cir.1991) (citing Texas Supreme Court cases finding
fiduciary relationships).
40
823 S.W.2d 591 (Tex.1992).
41
See id. at 594.

15
"ordinarily a question of fact, when the issue is one of no

evidence, it becomes a question of law."42

Floors has not presented any summary judgment evidence that

its relationship with Fieldcrest was anything more than an

longstanding, cordial business relationship. The mere

conversational use of the term "partnership" in Fieldcrest's

correspondence and dealings with Floors does not warrant imposing

a fiduciary relationship between the parties. There is no

indication that the relationship between Fieldcrest and Floors was

one in which influence was "acquired and abused"43 or one in which

there was a "heightened degree of trust and confidence that

surpasses what is customarily shared between business associates."44

On the contrary, the summary judgment evidence as a whole

reveals that Fieldcrest, which took great care to maintain its

"Karastan" product's high-quality image, and Floors, which wanted

to sell as much carpeting as possible, occupied naturally

antagonistic positions. Although the parties entered into an

agreement to work together out of self-interest, they had different

goals and were free to pursue their own interests. Moreover, we

are convinced that the parties' informal dealings for eleven years,

based only on an oral agreement, do not evidence a fiduciary

42
See id.
43
See id. (citing Texas Bank & Trust Co. v. Moore, 595
S.W.2d 502, 507 (Tex.1980)).
44
See United Teachers Assoc. Ins. Co. v. Mackeen & Bailey,
Inc., 847 F.Supp. 521, 530 (W.D.Tex.1994) (finding fiduciary
relationship between actuary and client).

16
relationship. We have previously observed that a fiduciary

relationship does not exist merely because businesspersons choose

to "conduct their affairs on a handshake, without formal written

contracts."45 Agreeing with the district court, we therefore hold

as a matter of law that the relationship between Fieldcrest and

Floors did not give rise to any fiduciary duty.

III

CONCLUSION

Finding that no fiduciary relationship existed between the

parties, we affirm the district court's summary judgment dismissal

of Floors' breach of fiduciary duty claim. We conclude, however,

that the oral dealership agreement between Floors and Fieldcrest is

not covered by the Texas statute of frauds, as that agreement has

an indefinite term not necessarily requiring more than a year to

perform. We therefore reverse the district court's grant of

summary judgment as to Floors' breach of contract claim and remand

this case to the district court for further proceedings consistent

with this opinion. In so doing, we decline Floors' invitation to

certify the Section 26.01(b)(6) statute of frauds issue to the

Supreme Court of Texas.

AFFIRMED in part, REVERSED in part, and REMANDED.

45
See Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 558 (5th
Cir.1991).

17