United States Court of Appeals,
Fifth Circuit.
No. 95-11146.
ARA AUTOMOTIVE GROUP, Plaintiff-Counter Defendant-Appellant-
Cross-Appellee,
v.
CENTRAL GARAGE, INC., Defendant-Counter Claimant-Appellee-Cross-
Appellant,
Robert A. Bauman, Jr., Defendant-Counter Claimant-Appellee-Cross-
Appellant.
Oct. 10, 1997.
Appeals from the United States District Court for the Northern
District of Texas.
Before JONES, STEWART and DENNIS, Circuit Judges.
EDITH H. JONES, Circuit Judge:
This dispute stems from the termination of Central Garage,
Inc. as an ARA Automotive Group ("ARA") distributor. ARA sued on
a sworn account for goods delivered, and Central Garage
counterclaimed for breach of contract, breach of fiduciary duty,
and Texas DTPA violations. After offsetting jury verdicts in favor
of both sides, the district court entered a modest net judgment for
Central Garage.
Both sides now appeal on multiple grounds. Our principal
conclusion is that there is insufficient evidence to support the
jury's finding that ARA owed Central Garage a fiduciary duty.
Accordingly, we reverse and remand for recalculation of the effect
of the offsetting jury verdicts.
I. Background
1
Based on the facts revealed at trial, ARA manufactured air
conditioners and other auto parts in Grand Prairie, Texas. Central
Garage, a distributor of ARA products in Florida from 1953 until
1989, had become ARA's largest distributor by the mid-1980s. The
parties had a written distributorship agreement that was terminable
at will and negotiated a new marketing agreement every November to
cover prices, credit, and other terms for the coming year. The
parties generally followed this new agreement beginning December 1,
although the written agreement might not be signed until as late as
January or February of the next year. The last marketing agreement
was signed in January 1988. Central Garage's obligation to ARA
under the agreements was secured by guarantees executed first by
Robert Bauman, Sr., who ran Central Garage until 1982, and later by
Robert Bauman, Jr., who succeeded his father in the business. In
addition to the distributorship and marketing agreements, the
companies entered into several other written contracts, including
agreements for Central Garage to provide engineering services in
the development of ARA after-market power locks and power windows,
and an agreement for Central Garage to open a retail store
featuring ARA products with an annual $50,000 subsidy from ARA.
Other agreements between the parties were not reduced to
writing. The most fiercely disputed agreement in the case was a
promise allegedly made in early 1988 by Mark Kalupa, then ARA's
president. Kalupa testified that he told Bauman, Jr. that Central
Garage could maintain a balance on its account with ARA of up to
$500,000, interest-free. The alleged purpose of this "floating
2
balance" arrangement was to assist Central Garage with its plans to
expand its retail operations in Florida. Although Kalupa did not
specify a duration for the arrangement, both he and Bauman, Jr.
testified that they assumed it would last at least until Central
Garage's new Florida stores were comfortably established, or
approximately three to five years.
ARA representatives testified that they had no knowledge of
this arrangement before Kalupa was fired in December 1988,1 and
that if he did make it, it was unauthorized. No documentary
evidence of a $500,000 floating balance was introduced at trial.
While the existence of the floating balance arrangement is
disputed, it is undeniable that as of the end of 1988, the balance
in Central Garage's account with ARA had ballooned. When Kalupa
was dismissed, he was replaced by Howard Blank. As confirmed by
ARA documents, Blank set out to improve ARA's profit margin on
sales in Florida either by collecting the Central Garage account or
entering the retail market directly.
Although ARA and Central Garage had agreed on pricing terms
for a renewal of the marketing agreement to begin on December 1,
1988, no written marketing agreement had been executed as of
February 1989. In February, Blank and other ARA officers initiated
a series of meetings with Central Garage to renegotiate the
marketing agreement for 1989 and to cause Central Garage to reduce
its account balance. Negotiations were unpleasant and
1
Kalupa was apparently fired for reasons not directly related
to the subject matter of this suit. After his termination, Kalupa
filed suit against ARA for breach of his employment contract.
3
unsuccessful. ARA terminated the relationship, ending sales of its
products through Central Garage and subsidy payments under the
retail store subsidy agreement.
In April 1989, ARA opened a company-owned retail store in the
Tampa area in direct competition with Central Garage. ARA used
information about Central Garage's operations to pursue customer
leads and set its prices, initially at two dollars lower than
Central Garage on most products. ARA hired four employees from
Central Garage's retail operations and offered substantial product
incentives to induce dealers and other major Central Garage
customers to patronize its store. Central Garage lost customers,
and testimony at trial in 1994 indicated that many of those
customers had not come back. Former ARA officers called the
company's move into Tampa "predatory" and "malicious." Even so,
ARA's foray into retailing was short-lived: in October 1990, it
went out of business nationwide.
In May 1989, ARA filed this suit for payment of the
outstanding balance in Central Garage's account. Central Garage
counterclaimed that ARA had breached the power window, power door
lock, and retail store subsidy agreements and had violated the
Texas Deceptive Trade Practices Act. Central Garage also alleged
that ARA and Central Garage had developed a fiduciary relationship
in which each side shared confidential information and undertook to
look out for the other party's interests. Central Garage contended
that when Blank refused to honor the promise of a $500,000 floating
balance, requested payment of the account, terminated Central
4
Garage's distributorship, and entered the Tampa retail market
itself, ARA breached a fiduciary relationship that had been formed
over a number of years.
After a trial that began in September 1994, the jury agreed,
and awarded Central Garage $741,843.75 in damages for breach of
fiduciary duty. The jury also awarded $100,000 to Central Garage
on a claim that ARA's refusal in 1989 to continue subsidy payments
under the retail store subsidy agreement was a breach of contract.
However, the jury rejected Central Garage's DTPA claim and its
claim that ARA breached the power door and windows agreements.
In ARA's behalf, the jury found that Central Garage owed
$810,333.23 for goods delivered.2 The court awarded each side
$100,000 in attorneys' fees. An offset of these awards resulted in
a $31,510.52 net judgment for Central Garage. The district court
then awarded pre-judgment interest from June 30, 1990, the date on
which the court found that the damages caused by ARA's breach of
fiduciary duty accrued. Both parties now appeal.
II. ARA's appeal
A. Breach of fiduciary duty.
ARA contends that there is insufficient evidence to establish
a fiduciary relationship between itself and Central Garage and
challenges the district court's refusal to grant judgment as a
matter of law on this claim. We review the jury's verdict to
determine if the facts and reasonable inferences point so strongly
2
The jury also found that Robert Bauman, Sr. and Robert
Bauman, Jr. personally guaranteed Central Garage's debt to ARA, but
that Bauman, Sr. had been released from his guarantee by ARA.
5
and overwhelmingly in favor of one party that reasonable minds
could not arrive at a different verdict. See Brock v. Merrell Dow
Pharmaceuticals, Inc., 874 F.2d 307, 308 (5th Cir.1989), cert.
denied, 494 U.S. 1046, 110 S.Ct. 1511, 108 L.Ed.2d 646 (1990).
Under Texas law, a supplier/distributor relationship is not
the type of formal relationship that automatically gives rise to a
fiduciary duty. Crim Truck & Tractor v. Navistar Int'l, 823 S.W.2d
591, 594 (Tex.1992); Adolph Coors Co. v. Rodriguez, 780 S.W.2d
477, 481 (Tex.App.—Corpus Christi 1989, writ denied). A fiduciary
relationship may arise from a variety of relationships where the
parties are "under a duty to act for or give advice for the benefit
of another upon matters within the scope of their relation." Texas
Bank and Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex.1980). The
existence of a fiduciary relationship, outside of formal
relationships that automatically give rise to fiduciary duties, is
usually a fact intensive inquiry. Moore, 595 S.W.2d at 508.
However, when the evidence offered is no evidence of a fiduciary
relationship, the issue can be determined as a matter of law. Crim
Truck, 823 S.W.2d at 594. Under Texas law, "a fiduciary duty will
not be lightly created" since "it imposes extraordinary duties" and
requires the fiduciary to "put the interests of the beneficiary
ahead of its own if the need arises." Floors Unlimited, Inc. v.
Fieldcrest Cannon, Inc., 55 F.3d 181, 188 (5th Cir.1995). ARA
contends that Central Garage only presented evidence demonstrating,
at best, subjective trust, cordiality, length of relationship and
other matters that do not support a finding of fiduciary
6
relationship.3
Central Garage points to the parties' long history of "oral
and written agreements, joint undertakings, shared confidences and
cooperative ventures" which support the jury's verdict. Bauman,
Jr. remembered ARA executives staying at his family's home when his
grandfather was running Central Garage in the 1950s. Robert
Baccus, President of ARA until 1986, and Bauman, Sr., who owned
Central Garage until 1982, were close friends. The Bauman and
Baccus families socialized often, vacationed together, and often
did business on a handshake basis. ARA paid for the honeymoon
trips of Bauman, Sr.'s children. ARA's Baccus wrote in a business
letter to Central Garage in 1979: "I would lean over backwards to
avoid hurting you regardless of its effect on ARA."
When it was time for Bauman, Jr. to take over Central Garage,
Baccus persuaded Bauman, Sr. to retire earlier than he otherwise
would have. Baccus respected Bauman, Jr., and saw him as a more
aggressive businessman than his father. Baccus even considered
hiring Bauman, Jr. for an officer position at ARA. Bauman, Jr.
considered his relationship with Baccus to be almost like a
"father-son" relationship.
After Bauman, Jr. took over Central Garage in 1982, he was
invited by ARA to attend meetings at ARA offices with top
3
See Crim Truck, 823 S.W.2d at 594 ("fact that one businessman
trusts another, and relies upon his promise to perform a contract,
does not rise to a confidential relationship"; cordiality and long
duration are no evidence of a fiduciary relationship); Thigpen v.
Locke, 363 S.W.2d 247, 253 (Tex.1962) ("Mere subjective trust alone
is not enough to transform arms-length dealing into a fiduciary
relationship").
7
executives. Bauman, Jr. was privy to information about ARA's
strategy, products, and pricing, but, although he was asked not to
reveal what he learned, he was not asked to sign a confidentiality
agreement. Bauman, Jr. traveled with Baccus on several occasions
to help evaluate business opportunities for ARA. Bauman, Jr. met
with ARA Vice President Jerry O'Pry in 1988 to help set the prices
that ARA would charge all of its distributors. Bauman, Jr. made
recommendations to ARA regarding its choice of suppliers for power
window and keyless entry products. Norman Vail, a national sales
manager for ARA, testified that in working with Bauman, Jr. on
engineering projects, they "were like brothers."
Mark Kalupa, who succeeded Baccus as president of ARA in 1986,
and Bauman, Jr. testified that the parties regarded aspects of
their relationship as a partnership.4 By contract, Central Garage
employees provided engineering services for ARA's after-market
power locks and windows, in return for a royalty for every product
sold by ARA.5 Bauman, Jr. also made instructional presentations to
4
Mark Kalupa testified:
Q: What was the nature of your working relationship
between ARA on the one hand and Central Garage on the
other as they approached these agreements and followed
through on them?
A: Very close relationships. It was a partnership
agreement between two firms. I would say it was a very
close working relationship between the two companies.
Bauman, Jr.'s testimony about a "partnership" was in the
context of assisting O'Pry with the pricing and marketing
plans.
5
The written power window and power lock agreements called for
Central Garage to receive $1.00 from each unit sold, rather than a
8
other ARA distributors and was well-respected at ARA.
ARA's parent company set a goal of building ARA from $130
million in revenues in 1986 to $500 million by 1991. To achieve
this goal, ARA began to work with Central Garage to expand sales of
ARA products. Central Garage was the only ARA distributor to
receive a promise that ARA would assist its expansion into new
markets.6 In 1987, ARA agreed to subsidize Central Garage's
development of new retail stores, beginning with a small prototype
store in a strip mall. ARA would provide $50,000 for each of the
prototype store's first three years of operation, and Central
Garage allowed ARA to approve how the money was spent and provided
ARA with marketing and financial information about the store.
ARA's Kalupa attempted to persuade Central Garage to pursue a
significant number of free-standing retail stores. To encourage
this expansion, Kalupa orally agreed7 to the $500,000 floating
balance arrangement. Central Garage began to rely on Kalupa's
fee for engineering services.
6
An April 1987 letter from ARA's Dan Kelly to Central Garage
read:
We at ARA anticipate continued growth at Central Garage
which will, we believe, command an ever-growing
commitment of funds to Central Garage.... This financing
may take the form of direct financing of expansion by
Central Garage into new markets and/or products.
7
Kalupa testified:
I just had an oral agreement with Rob [Bauman] that I had
a lot of faith in. There was no need for it [a writing].
It was an oral agreement, a partnership with someone we
had a great deal of trust in, and we didn't put it in
writing.
9
promise, taking full advantage of the $500,000 floating balance to
help finance new stores.
The pivotal case for evaluating this evidence is the Texas
Supreme Court decision in Crim Truck, which reversed a jury verdict
finding a fiduciary duty between a franchisor and franchisee. 823
S.W.2d at 592. The Crim Truck court found no evidence of a
confidential, or fiduciary, relationship between Navistar and the
Crim family, who had operated a Navistar (formerly International
Harvester) franchise since 1943. Id. at 593. The evidence of
confidence, trust and reliance over the course of the parties' 42-
year relationship was held to be no evidence of a relationship that
required Navistar "to put the Crims' interests before its own,"
because
this argument clashes with the rule that a party to a contract
is free to pursue its own interests, even if it results in a
breach of that contract, without incurring tort liability.
The fact that one businessman trusts another, and relies upon
his promise to perform a contract, does not rise to a
confidential relationship. Every contract includes an element
of confidence and trust that each party will faithfully
perform his obligation under the contract.
Id. at 594-95 (citations omitted).
During the 42-year relationship, the Crims "had always done
the things requested by the Franchisor ...," including moving their
store and setting up a "prototype building suggested by
International Harvester." Id. at 595, n. 6. The franchisor had
previously held the Crims out as "an excellent dealership with whom
they hope to continue a long and fruitful relationship." Id. The
parties had operated for the first 15 years without any written
agreement at all. Id. at 593. The written contract only allowed
10
for termination if the Crims violated one of eleven conditions and
explicitly stated that the agreement was one "involving mutual
confidence and trust...." Id. at 595-96. Notwithstanding their
lengthy relationship, Navistar unilaterally terminated the Crims
for failing to purchase a new computer system required by Navistar,
a decision decried as arbitrary, since fewer than fifty percent of
all the franchisees were using the new system. Id. at 602 (Mauzy,
J., dissenting).
Following Crim Truck, this court has twice dealt with attempts
to impose a fiduciary relationship on otherwise arms-length
business relationships. In Floors Unlimited, we affirmed summary
judgment for a carpet manufacturer on a fiduciary claim brought by
a terminated dealer. 55 F.3d at 188. The manufacturer had
repeatedly used the term "partnership" with its dealers, allegedly
to create the image of a more than "arms length" transaction. Id.
However, we rejected the use of the term "partnership" as evidence
of a fiduciary relationship because it was "mere conversation."
Id. The parties had operated for 11 years based only on an oral
agreement. Id. The court also rejected evidence of trust and
confidence between the parties as support for a fiduciary duty,
since this is "what is customarily shared between business
associates." Id. at 188. The manufacturer and dealer agreed "to
work together out of self-interest, [but] they had different goals
and were free to pursue their own interests." Id.
Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 557-560 (5th
Cir.1991), modified 951 F.2d 54, relied on Crim Truck in reversing
11
a jury verdict that found a fiduciary relationship between a
developer and a retailer. The developer, Lee, had bought land and
constructed stores under oral assurances that Wal-Mart would later
sign a lease. Id. at 556. In the disputed transactions, Lee
relied on Wal-Mart's encouragement to purchase land for
development, but Wal-Mart backed out. Id. We held that the
asserted "relationship based on repeated transactions" and a
profitable business arrangement was not a fiduciary relationship
under Crim Truck and earlier Texas cases. Id. at 557. Earlier
Texas cases had recognized fiduciary duties only when parties "were
looking to profit from a shared risk, e.g., an oil and gas well, or
the sale of a particular property" and not where the "parties'
positions, harmonized for purposes of self-interest, were yet
naturally antagonistic." Id. at 558-59.8 We ultimately concluded
that Wal-Mart could not be required to bear the responsibility to
look out for Lee's best interest. Id. at 559.
The parallels between the present case and the previous cases
are obvious, yet Central Garage's briefs make no attempt to
distinguish them. Instead, it cites cases enumerating the various
factors present in this case as indicative of a fiduciary
relationship.9 Since Crim Truck, however, few Texas cases have
8
Citing Schiller v. Elick, 150 Tex. 363, 240 S.W.2d 997, 1000
(1951); Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 261
(1951); MacDonald v. Follett, 142 Tex. 616, 180 S.W.2d 334, 339
(1944); Gaines v. Hamman, 163 Tex. 618, 358 S.W.2d 557 (1962).
9
See Thigpen, 363 S.W.2d at 253 (communication of confidential
information; but declining to find fiduciary relationship between
trust officer of bank and grocery store owners who were "close
friends" and saw each other frequently; bank officer helped
12
found fiduciary relationships outside of legal relationships that
carry fiduciary duties as a matter of law.10 No Texas case cited
by Central Garage or uncovered in our research has affirmed a
fiduciary obligation in the context of a franchisor-franchisee,
manufacturer-distributor relationship, or other transactional
setting involving experienced managers. Federal courts that have
applied Texas law to such relationships have not found a fiduciary
guaranteed loans for owners, served as a business advisor, and was
shareholder in owners' corporation); Consolidated Bearing & Supply
Co., Inc. v. First Nat'l Bank of Lubbock, 720 S.W.2d 647, 649
(Tex.App.—Amarillo 1986, no writ) (length and nature of the
relationship between the parties; but affirming judgment finding
no fiduciary between bank and long-time customer, despite
relationship of trust and disclosing information customer would not
disclose to public; "only proof of long-standing banker-depositor
relationship"); Harris v. Sentry Title Co., Inc., 715 F.2d 941,
946 (5th Cir.1983), modified, 727 F.2d 1368, cert. denied 469 U.S.
1037, 105 S.Ct. 514, 83 L.Ed.2d 404 (1984) (parties' close,
personal or family like ties; but reversing finding of fiduciary
duty allegedly based on single joint venture); Consolidated Gas &
Equip. Co. v. Thompson, 405 S.W.2d 333, 336 (Tex.1966) (degree of
trust reposed in one party by another; but reversing imposition of
constructive trust; "usual cases of fiduciary relationship have
been attorney-and-client, partners, close family relationships such
as that of parent-and-child, and joint adventurers, particularly
when there is an agreement among the joint venturers to share
financial gains and losses"); United Teachers Assoc. Ins. Co. v.
MacKeen & Bailey, Inc., 99 F.3d 645, 649-650 (5th Cir.1996)
(affirming district court's finding of fiduciary relationship
between insurer and actuary on whom insurer relied).
10
See, e.g., General Resources Organization, Inc. v. Deadman,
907 S.W.2d 22, 31 (Tex.App.—San Antonio 1995, writ denied)
(affirming jury verdict on breach of fiduciary duty against
attorney who provided false guarantees to buyer in gold scam);
Sassen v. Tanglegrove Townhouse Condo. Ass'n, 877 S.W.2d 489, 492
(Tex.App.—Texarkana 1994, writ denied) (affirming jury verdict on
fiduciary breach against attorney-in-fact of condo owner). See
also United Teachers Associates, 99 F.3d at 649; Heden v. Hill,
937 F.Supp. 1230, 1238 (S.D.Tex.1996) (denying summary judgment on
fiduciary claim against attorney who represented plaintiff's former
partner and former company); Sanders v. Casa View Baptist Church,
898 F.Supp. 1169, 1176 (N.D.Tex.1995) (denying summary judgment on
fiduciary claim against plaintiffs' marriage counselor).
13
obligation.11
We decline to be the first. Even given the extensive evidence
of cooperation and friendship cited by Central Garage, the jury's
verdict cannot be sustained consistent with Texas law. These two
sophisticated businesses entered into a number of contracts for
mutual benefit, but the evidence does not demonstrate that either
party agreed to put the other's interests ahead of its own. See
Crim Truck, 823 S.W.2d at 594. Every major agreement governing the
relationship between ARA and Central Garage, with the exception of
the "floating balance" arrangement, was eventually reduced to a
writing that explicitly set out the parties' obligations. The
distributorship agreement, the annual marketing agreements, the
power window agreement, and the power lock agreement all permitted
either party to terminate the contract, for any reason, upon thirty
days notice. Central Garage did not have an exclusive territory.
The power lock and power windows agreements specifically stated
that Central Garage was an independent contractor, despite Bauman,
Jr.'s input into the selection of the supplier. Compare Crim
Truck, 823 S.W.2d at 596, n. 7 (agreement only cancelable for
enumerated causes; recited that it was "a personal agreement,
involving mutual confidence and trust ..."). ARA insisted on and
got individual guaranties from the Baumans. The testimony
11
See Floors Unlimited, 55 F.3d at 188 (affirming summary
judgment for carpet manufacturer against dealer); Lee, 943 F.2d at
557-60 (reversing jury verdict finding fiduciary duty between
developer and retailer); Hionis Intern. Enterprises v. Tandy
Corp., 867 F.Supp. 268, 274 (D.Del.1994), aff'd 61 F.3d 895 (3d
Cir.1995) (applying Texas law) (granting summary judgment for
manufacturer against dealer).
14
referring to the parties' relationship as a "partnership" does not
change its nature. See Floors Unlimited, 55 F.3d at 188;
Thanksgiving Tower Partners v. Anros Thanksgiving Partners, 64 F.3d
227, 231 (5th Cir.1995).
Central Garage relies heavily on Baccus's 1979 letter
promising that he would "lean over backwards to avoid hurting you
regardless of its effect on ARA." Baccus wrote to assuage Central
Garage's complaints about ARA's selling MAPA parts in Florida. The
next lines read:
However, I do have a responsibility to our company and to the
market place. And unless there is more evidence than we have
covered in our discussion, I have no alternative but to
approve the use of the MAPA line as it is now being programmed
in Florida.
This letter is hardly evidence of a fiduciary relationship:
Baccus, Bauman, Jr.'s father figure, put Central Garage on notice
that when their interests diverged, ARA would look out for itself.
It would be patently unreasonable for Central Garage to believe
that ARA would put its own interests aside, in a fiduciary-like
manner, to further the interests of Central Garage.
The other key factors supporting a fiduciary relationship
under the Texas cases are simply not present here. There is no
agreement to share profits or losses. ARA did not exercise such
control over Central Garage, its largest and most important
distributor, as to create a situation of "disproportionate
bargaining power and control" inherent in other relationships where
a fiduciary duty has been found. See Arnold v. National County
Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987) (unequal
15
bargaining power and exclusive control of insurer gives rise to
fiduciary duty to insured in settling claims); Adolph Coors Co.,
780 S.W.2d at 481 ("the supplier-distributor relationship does not
require special protection, nor does the supplier have the same
exclusive control over the distributor's business that the insurer
has over the insured's claim").
Taking Bauman, Jr.'s descriptions of his relationships with
Baccus and other ARA officers to their fullest implications, there
is insufficient evidence to support a finding of fiduciary duty.
See Crim Truck, 823 S.W.2d at 594-95.12 Even Baccus, who was
arguably Bauman, Jr.'s closest confidant at ARA, expressly informed
Central Garage that ARA's interests ultimately came first. In any
event, Baccus retired in 1986. Although Bauman, Jr. describes a
friendship with Kalupa, nothing in his testimony raises it above a
cordial business relationship. And Kalupa was not the key to doing
business with ARA; other investors controlled the company.
Although Bauman, Jr. may have had reason to believe that Chip Hart,
an owner and member of the board, supported Central Garage's
expansion plans until early 1988, there is absolutely no indication
that his relationship with the Harts could have given rise to a
fiduciary duty. But if he had any expectation that ARA ownership
was looking out for Central Garage's interests, it should have
ended as of August 1988, when Bauman, Jr. learned that the Harts
12
See also Rutherford v. Exxon Co., 855 F.2d 1141, 1146 (5th
Cir.1988) ("We cannot equate faith built up over years of a
business relationship such as the one in this case with the
confidence that, for example, a client places in her attorney").
16
had placed ARA up for sale.
Furthermore, unless routine manufacturer-distributor
relationships are to be considered fiduciary, the jury verdict can
not be sustained in this case on the basis that ARA possessed
confidential information. All of the "confidential" information,
for example, the computer printout of all the ARA parts bought by
Central Garage in 1987 and 1988, is information that would normally
be exchanged between a manufacturer and a large distributor. A
manufacturer can hardly be expected not to have a list, by part
number, of all inventory sold to each customer. Other information,
such as Central Garage's sales and profits, is not unusual in any
agreement where a manufacturer will be extending significant
credit. Central Garage's price list was public and could be
obtained from any of its customers. The retail store blueprints
and merchandising layouts were bargained for by ARA as part of the
written retail subsidy agreement for the explicit purpose of using
them in other ARA stores.
Although ARA's subsequent use of this information might have
been improper under an unfair competition theory, the mere
possession of this information by a manufacturer could not give
rise to a fiduciary duty without stretching the Texas cases beyond
recognition. As the Texas Supreme Court has opined, "a
constructive trust [imposed upon breach of a fiduciary duty] does
not arise on every moral wrong and [ ] cannot correct every
injustice." Pope v. Garrett, 147 Tex. 18, 211 S.W.2d 559, 562
(1948).
17
Finally, the "floating balance" credit arrangement is not
evidence of a fiduciary relationship. Central Garage officials
testified that this was not uncommon in the industry.13
Furthermore, Kalupa himself testified that, although he did not see
a business justification for doing so, the floating balance
arrangement could be called at any time by the president of ARA.
Accordingly, the jury verdict finding a fiduciary relationship
between ARA and Central Garage is based on legally insufficient
evidence, and the motion for judgment as a matter of law should
have been granted.
B. Breach of retail store subsidy agreement.
Under the retail store subsidy agreement, ARA was to provide
$50,000 per year to Central Garage to subsidize a prototype retail
store. Central Garage sought, and the jury awarded, $100,000 in
damages based on ARA's failure to make the payments for 1989 and
1990. ARA argues that because Central Garage was no longer a
distributor, no longer obtained ARA approval for expenditures, and
no longer reported results of operations to ARA, ARA's obligation
to make the subsidy payments was relieved as a matter of law.
There is, however, sufficient evidence that Howard Blank
breached and/or repudiated the contract before Central Garage
ceased to be a distributor and before the three-year contract
13
See In re Letterman Bros. Energy Securities Litigation, 799
F.2d 967, 975 (5th Cir.1986), cert. denied, 480 U.S. 918, 107 S.Ct.
1373, 94 L.Ed.2d 689 (1987) (creditor-debtor relationship not
fiduciary; breach of promise to provide financing is not breach of
fiduciary duty). In December 1988, while still an ARA distributor,
Bauman, Jr. obtained a $250,000 floating balance arrangement from
another manufacturer.
18
expired; ARA, therefore, is not relieved of its otherwise
contingent obligation.14 Finally, ARA continued to make monthly
payments for six months after telling Central Garage to stop
providing the required information, arguably waiving the conditions
precedent to ARA's liability. The jury verdict must be sustained.
C. Offsetting of damage awards.
In calculating the judgment amount, the court offset the
jury's awards to ARA and Central Garage, and calculated prejudgment
interest on the net judgment of $31,510.52 in favor of Central
Garage.15 ARA argues that the district court should not have offset
the awards before calculating prejudgment interest because the
distributorship agreement and the marketing agreement entitled ARA
to 1.5% per month, or 18% per year, in interest from January 1,
1991 through the date of judgment on its sworn account claim. ARA
contends that the offsetting should have been done after the
calculation of prejudgment interest on the awards at the different
rates.16 Central Garage counters that the district court has the
discretion to prevent unjust enrichment by offsetting jury awards
before calculating prejudgment interest. Infra-Pak (Dallas), Inc.
14
See Rich v. McMullan, 506 S.W.2d 745, 747 (Tex.Civ.App.—San
Antonio 1974, writ ref'd n.r.e.) ("one who prevents or makes
impossible the performance of a condition precedent upon which his
liability under a contract is made to depend cannot avail himself
of its nonperformance").
15
ARA's sworn account claim ($810,333.23)—Central Garage breach
of contract claim ($100,000)—Central Garage's breach of fiduciary
duty claim ($741,843.75) = $31,510.52.
16
By ARA's calculations, it was owed $796,983.97 in prejudgment
interest as of October 1994 (the date of judgment).
19
v. Carlson Stapler & Shippers Supply, Inc., 803 F.2d 862, 866 (5th
Cir.1986). The district court found that the damages for breach of
fiduciary duty were fixed as of June 30, 1990, six months before
the account balance was found due and owing. Since the district
court's decision was predicated on the verdict against ARA for
breach of fiduciary duty, we decline to address the parties'
arguments on this point. The district court ought to revisit this
issue on remand in the absence of the verdict on breach of
fiduciary duty.
D. Calculation of Attorneys' fees
The district court awarded attorneys' fees of $100,000 to
each party and then offset the awards against each other. Although
ARA presented evidence that it had incurred $896,691.20 in
attorneys' fees, the district court found that ARA's sworn account
claim was a relatively simple claim. The district court also found
that the bulk of the trial was focused on Central Garage's
counterclaims, that ARA's fees included bills from two separate law
firms preparing for the trial, and that ARA had three changes in
representation with the inherent duplication that accompanies such
changes. The district court also found that ARA's defense of
Central Garage's counterclaims was not interrelated to or
inseparable from the sworn account claim.
ARA argues that since it had to defend against the
counterclaims in order to recover on its sworn account, it should
be able to recover attorneys' fees for the work of defending the
20
counterclaims.17 However, given the district court's discretion in
setting the amount of fees18 and its explicit findings, we find no
reason to disturb its calculation of ARA's attorneys' fees.
III. Cross-Appeal of Central Garage.
A. Estoppel defense to ARA's sworn account claim
Central Garage alleges that ARA: 1) encouraged Central
Garage to overextend itself in reliance on Kalupa's promise of
interest-free use of $500,000 for at least three to five years; 2)
declared the account balance due within a year of Kalupa's promise;
3) refused to take back unused inventory; 4) opened a store in
Tampa to drive Central Garage out of business; and 5) filed this
suit for the account balance despite Kalupa's testimony that the
floating balance was not due at the time suit was filed. Central
Garage claims this meets the definition of estoppel: as a result
of one party's words or conduct, another is induced to change his
position for the worse. Wheeler v. White, 398 S.W.2d 93, 96
(Tex.1965).
Although the court instructed the jury on estoppel, Central
Garage contends that the court erred when it refused to give a
separate jury question on the estoppel defense. ARA contends that
because of the separate instruction, the charge, taken as a whole,
17
See Flint & Assoc. v. Intercontinental Pipe & Steel, 739
S.W.2d 622, 624 (Tex.App.—Dallas 1987, writ denied) (if
counterclaims interrelated with or inseparable from plaintiff's
claim, plaintiff allowed attorneys' fees for defending
counterclaims against its claim for purchase price of goods sold).
18
In re Smith, 966 F.2d 973, 978 (5th Cir.1992).
21
correctly instructed the jury. See Coughlin v. Capitol Cement Co.,
571 F.2d 290, 300 (5th Cir.1978). Citing no authorities, Central
Garage counters that the instruction is "meaningless" without a
question for the jury to answer on the estoppel defense.
ARA's argument is persuasive. Central Garage could have
argued to the jury, with the full support of the court's
instruction, that ARA was estopped from seeking recovery on its
account. The court's error, if any, in refusing to submit a
separate interrogatory was harmless.
B. DTPA claim against ARA
Central Garage first argues that there is no evidence to
support the jury's verdict on its DTPA claim and thus Central
Garage should be awarded a new trial on this issue. Central Garage
did not move for a directed verdict below, thus we review the
jury's verdict that ARA did not commit DTPA violations to determine
if there is any evidence to support the finding. Zervas v.
Faulkner, 861 F.2d 823, 832 n. 9 (5th Cir.1988). Although Central
Garage does not credit evidence contrary to its position, such
evidence exists in the record and prevents reversal under our
narrow standard of review.
Second, the parties agree that Texas law on DTPA causation
requires that the deceptive practice be a "producing" cause, not
"proximate" cause of the plaintiff's injuries. They also agree
that the district court erroneously instructed the jury to apply
the more demanding proximate cause standard to Central Garage's
DTPA interrogatory. But as Central Garage did not object to this
22
instruction, it may only insist on appeal that the wording is a
plain error warranting a new trial on the DTPA issue.19 Fed.Rule
Civ.P. 51. To show plain error, Central Garage must show that "an
incorrect statement of law was probably responsible for an
incorrect verdict, leading to substantial injustice." Fruge v.
Penrod Drilling Co., 918 F.2d 1163, 1169 (5th Cir.1990). Based on
the facts developed at trial and Central Garage's theory of DTPA
violations, we cannot find plain error in this case.
Third, Central Garage argues that the district court erred in
submitting a jury question on ARA's estoppel defense to the DTPA
claim. The jury found in favor of ARA on this issue, but the
common law defense of estoppel cannot defeat a Texas DTPA claim.
Kennemore v. Bennett, 755 S.W.2d 89, 91 (Tex.1988). Since we have
affirmed the jury verdict that there was no DTPA violation, the
error in giving the estoppel instruction was harmless.
IV. Conclusion
For the foregoing reasons, we REVERSE the denial of judgment
as a matter of law on the fiduciary duty claim, VACATE the
judgment, and REMAND for entry of judgment in favor of ARA
rejecting the fiduciary duty claim and for further proceedings in
accordance herewith.
19
Central Garage did submit an instruction with a "producing"
cause standard, but this was not included in the court's final
charge.
23