U.S. Court of Appeals for the Fifth Circuit, Universal Truckload, Inc., v. Dalton Logistics, Inc., Docket No. 17-20725

Indication of Interest Letter

Asset Purchase Agreement

Promissory Estoppel

Reliance Damages

Contract Law

Texas Law

Universal Truckload sent Dalton an Indication of Interest Letter and then Don Cochran, president of Universal Truckload’s parent company, and Limback came to North Dakota in April to see Dalton’s operations in person. Dalton claims that since the initial conversation regarding purchasing Dalton, Limback and Cochran were in near-constant communication with Dalton about the purchase, routinely giving assurances that a deal would be finalized soon.

(…) These assurances that the deal would eventually work out allegedly continued for months, all while Dalton continued to deplete its resources to keep the company operational for Universal Truckload’s promised buyout.

In August 2013, Dalton sent financial statements to Universal Truckload. Three weeks later, Universal Truckload sent Dalton an Asset Purchase Agreement offering $10.3 million upfront with a potential two-year earn-out totaling $24.3 million. Dick Meredith called Cochran to object to the new terms and Cochran agreed that this was not the deal Universal Truckload and Dalton had struck in May.

(…) All of Universal Truckload’s claims against Dalton, and Dalton’s crossclaims against Universal Truckload, proceeded to a jury trial. The jury found that Dalton should recover under a promissory estoppel theory. Dalton was awarded $5.7 million in reliance damages—the difference between the amount of cash it had on hand before Universal Truckload’s promise and the “zero” balance in its bank account when Universal Truckload called its bond. The jury awarded Universal Truckload the $1.9 million in freight charges that Dalton owed. The court, however, concluded that the $1.9 million was incurred in reliance on Universal Truckload’s promises and therefore awarded Dalton a $1.9 million offset against Universal Truckload’s breach of contract claim.

(…) Because there was sufficient evidence to conclude Universal Truckload made a promise, Dalton reasonably relied on the promise to its detriment, and that reliance caused Dalton $5.7 million in damages, we affirm the district court’s denial of the JMOL and the jury verdict on Dalton’s promissory estoppel claim.

(…) We have subject-matter jurisdiction under 28 U.S.C. § 1332 because the amount in controversy is over $75,000 and the parties are diverse.

(…) Under the Erie doctrine, this court must apply substantive state law in diversity jurisdiction cases. Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). Here, the parties agree that Texas law applies.

The elements of promissory estoppel in Texas are: “(1) a promise, (2) reliance thereon that was foreseeable to the promisor, and (3) substantial reliance by the promisee to his detriment.” J.D. Fields & Co. v. U.S. Steel Int’l, 690 F. Supp. 2d 487, 503–04 (S.D. Tex. 2009); see also MetroplexCore, L.L.C. v. Parsons Transportation, Inc., 743 F.3d 964, 977 (5th Cir. 2014).

(…) Dalton points to Universal Truckload’s post-promise conduct. The record on appeal shows that Universal Truckload’s leadership had a “running dialog” about the takeover with Dalton leadership for over a year. Universal Truckload repeatedly asked Dalton to “hang in there,” and assured Dalton that it would “get something done.”

(…) We considered similar facts in MetroplexCore. There, an engineering firm bid for a contract to build a passenger rail line in Houston. 743 F.3d at 968. The lead contractor repeatedly assured MetroplexCore, the plaintiff, that it would be included in the project if the defendant’s bid got accepted. Id. at 970. The defendant regularly reassured MetroplexCore by saying “our commitment to you is still in play,” “we are still committed to MetroplexCore being on the management team,” and “we are going to live up to our commitment to you,” among other reassurances. Id. at 970–71. When MetroplexCore was not included in the project, it sued the lead contractor for reliance damages based on its promise. Id. at 971. We held that these numerous, specific statements constituted actionable promises, and accordingly reversed the district court’s grant of summary judgment for the defendant. Id. at 982.

The reassurances made here seem at least as strong as those made in MetroplexCore. The reassurances given were just as continuous, numerous, and specific. Despite Dalton’s lack of action to formalize the promise, the jury was presented with sufficient evidence to find a promise occurred.

(…) Dalton succeeded on a promissory estoppel theory, which requires the absence of a contract. See Wheeler v. White, 398 S.W.2d 93, 96 (Tex. 1965) (explaining that promissory estoppel exists to furnish a remedy for “reasonable reliance upon an otherwise unenforceable promise”).

(…) Connor holds that reliance on a contract is not reasonable after the other party unequivocally repudiates its obligations. 267 F.3d at 436. Here, there is no contract at issue, and therefore there is nothing Universal Truckload could have “unequivocally repudiated.” Connor does not require reliance damages to stop in August 2013, because the promise at issue was not clearly broken until a much later date— when Universal Truckload expressly told Dalton it would not be purchasing the company at all and required Dalton to repay the $1.9 million.

(…) Mistletoe Express Serv. v. Locke, 762 S.W.2d 637, 638–39 (Tex. App.—Texarkana 1988, no writ) (explaining that a promisor is liable for any debts that a promisee incurred as a foreseeable consequence of the promise).

(U.S. Court of Appeals for the Fifth Circuit, January 3, 2020, Universal Truckload, Inc., v. Dalton Logistics, Inc., Docket No. 17-20725)