Friday, February 26, 2021

U.S. Court of Appeals for the Fifth Circuit, WICKFIRE, L.L.C. v. WOODRUFF, Docket No. 17-50340

 

Contract Law

Tortious Interference with Contractual Relations

Tortious Interference with Prospective Business Relations

Civil Conspiracy Claim

Lost Profits

Texas Law

 

 

Appeal from the United States District Court for the Western District of Texas USDC No. 1:14-CV-34.

 

(…) The case at bar presents a different situation than that addressed in Dastar. WickFire has alleged that TriMax created false advertisements appearing to have originated with WickFire in order to, inter alia, harm WickFire’s reputational interests in this industry. WickFire is not alleging TriMax wrongfully incorporated WickFire’s ideas or concepts into TriMax’s advertisements. That is, WickFire is not concerned with protecting an original idea or its creative thought, as Fox was attempting to do in Dastar. Instead, WickFire is interested in protecting the genuineness of its brand. We cannot say, based on Dastar, that WickFire’s claim is frivolous.

 

Gensler v. Strabala, 764 F.3d 735, 737 (7th Cir. 2014) (“Dastar held that a copyright can’t be extended by using the Lanham Act.”).

 

Gen. Universal Sys., Inc., 379 F.3d at 149 (concluding Dastar foreclosed the plaintiff’s Lanham Act claim because the plaintiff was alleging the defendant had “copied the ideas, concepts, structures, and sequences embodied in the plaintiff’s copyrighted work”).

 

To prevail at trial on its tortious interference with contractual relations claim, WickFire needed to present sufficient proof of the following: “(1) an existing contract subject to interference, (2) a willful and intentional act of interference with the contract, (3) that proximately caused the plaintiff’s injury, and (4) caused actual damages or loss.”44

 

44 Prudential Ins. Co. of Am. v. Fin. Rev. Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000) (citing ACS Invs, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997)).

 

Our review of Texas law46 indicates that to prevail on an interference claim, the plaintiff must “present evidence that some obligatory provision of a contract was breached.”47 Intermediate appellate courts in Texas have, on occasion, suggested an actual breach is not required. Relying on those decisions, our own court in Cuba v. Pylant noted the following: “Although it does not appear that an actual breach must occur, the defendant must have intended to induce a breach (even if unsuccessful), thereby making performance more difficult in some way that injured the plaintiff.”48

 

But since Cuba was issued, the Supreme Court of Texas appears to have clarified the law in this area. In El Paso Healthcare System, Ltd. v. Murphy, the Supreme Court of Texas stated the following: “To prevail on a claim for tortious interference with an existing contract, the plaintiff must present evidence that the defendant induced the plaintiff’s cocontracting party to ‘breach the contract,’ and thus interfered with the plaintiff’s ‘legal rights under the . . . contract.’”49 This unequivocal language leaves little doubt that a breach must result from the defendant’s conduct in order for the plaintiff to prevail. To induce commonly connotes not merely attempts at interference, but

46 See El Paso Healthcare Sys., Ltd. v. Murphy, 518 S.W.3d 412, 421-22 (Tex. 2017).

47 Walker v. Beaumont Indep. Sch. Dist., 938 F.3d 724, 749 (5th Cir. 2019) (quoting Better Bus. Bureau of Metro. Houston, Inc. v. John Moore Servs., Inc., 441 S.W.3d 345, 361 (Tex. App.—Houston [1st Dist.] 2013, pet. denied)).

48 814 F.3d 701, 717 (5th Cir. 2016) (citing Fluor Enters., Inc. v. Conex Int’l Corp., 273 S.W.3d 426, 443 (Tex. App.—Beaumont 2008, pet. denied)).

49 518 S.W.3d at 421-22 (first quoting Holloway v. Skinner, 898 S.W.2d 793, 794-95 (Tex. 1995); and then quoting Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 288 (Tex. 1998)).

 

actual interference.50 Accordingly, without sufficient proof that the defendant’s conduct resulted in “some obligatory provision of a contract having been breached,” the plaintiff’s tortious interference claim is infirm as a matter of law.51

 

50 See Induce, MERRIAM–WEBSTER, https://www.merriam-webster.com /dictionary/induce (last visited Feb. 24, 2021) (defining induce to mean either “to move by persuasion or influence” or “to call forth or bring about by influence or stimulation”).

51 Walker, 938 F.3d at 749 (quoting Better Bus. Bureau, 441 S.W.3d at 361); see Duncan v. Hindy, 590 S.W.3d 713, 726-28, 729 (Tex. App.—Eastland 2019, pet. denied) (affirming summary judgment as to a tortious interference claim because the plaintiff offered insufficient proof that a breach resulted from the defendant’s conduct); see also Duradril, L.L.C. v. Dynomax Drilling Tools, Inc., 516 S.W.3d 147, 168 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (“To establish the element of a willful and intentional act of interference, the plaintiff must produce evidence that the defendant was a more-than-willing participant and knowingly induced one of the contracting parties to breach its obligations under the contract. To do so, the plaintiff must present evidence that an obligatory provision of the contract was breached.” (emphasis added) (internal citations omitted)).

 

Next, we consider the evidence offered in support of WickFire’s tortious interference with prospective business relations claim. This claim required proof of the following five elements:

(1) there was a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) the defendant either acted with a conscious desire to prevent the relationship from occurring or knew the interference was certain or substantially certain to occur as a result of the conduct; (3) the defendant’s conduct was independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result.66

66 Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013) (first citing Wal–Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 726 (Tex. 2001); and then citing Bradford v. Vento, 48 S.W.3d 749, 757 (Tex. 2001)).

To recover lost profits under Texas law, a party “must do more than show that it suffered some lost profits”—it must show the amount of profits lost “by competent evidence with reasonable certainty.” “What constitutes reasonably certain evidence of lost profits is a fact intensive determination.” “At a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits may be ascertained.” However, “it is not necessary to produce in court the documents supporting the opinions or estimates.” Although there are a number of valid methods for measuring lost profits, “once a party has chosen a particular method for measuring its lost profits, the party must provide a complete calculation.” “Uncertainty as to the fact of legal damages is fatal to recovery, but uncertainty as to the amount will not defeat recovery.”73

73 Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265, 280 (Tex. 2015) (quoting Sw. Battery Corp. v. Owen, 115 S.W.2d 1097, 1099 (Tex. 1938)).

(74 ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 877 (Tex. 2010) (concluding that the plaintiff did not provide sufficient evidence to support “the amount of damages awarded by the trial court” but did proffer adequate evidence to prove a lesser amount).)

 

 

We turn now to the civil conspiracy claim. The elements of a civil conspiracy under Texas law are as follows:

(1) a combination of two or more persons; (2) the persons seek to accomplish an object or course of action; (3) the persons reach a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts are taken in pursuance of the object or course of action; and (5) damages occur as a proximate result.

(…) But the Supreme Court of Texas has repeatedly emphasized that “civil conspiracy is a ‘derivative tort,’ meaning it depends on some underlying tort or other illegal act.” The court’s “use of the word ‘derivative’ in this context means a civil conspiracy claim is connected to the underlying tort and survives or fails alongside it.”

 

 

(U.S. Court of Appeals for the Fifth Circuit, February 26, 2021, WICKFIRE, L.L.C. v. WOODRUFF, Docket No. 17-50340)

 

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