United States Court of Appeals

For the Eighth Circuit

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No. 14-2947

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RSA 1 Limited Partnership; Iowa RSA 2 Limited Partnership

lllllllllllllllllllll Plaintiffs - Appellants

v.

ParamountSoftwareAssociates,Inc.,doing business asProfessionalSoftwareofAmarillo

lllllllllllllllllllll Defendant - Appellee

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No. 14-3382

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RSA 1 Limited Partnership; Iowa RSA 2 Limited Partnership

lllllllllllllllllllll Plaintiffs - Appellants

v.

ParamountSoftwareAssociates,Inc.,doing business asProfessionalSoftwareofAmarillo

lllllllllllllllllllll Defendant - Appellee

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Appeals from United States District Court 

for the Southern District of Iowa - Council Bluffs

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 Submitted: April 14, 2015

 Filed: July 17, 2015

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Before WOLLMAN and GRUENDER, Circuit Judges, and DOTY, District 1

Judge.

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GRUENDER, Circuit Judge.

In this breach-of-contract case, two cellular-service providers dispute whether

they owe approximately $260,000 in liquidated damages to a billing-services

company. The district court granted summary judgment to the billing company, 2

Paramount Software Associates. We affirm.

I. Background

In March 2009, Paramount, a Texas company, contracted with two Iowa

cellular-service providers, RSA 1 Limited Partnership and Iowa RSA 2 Limited

Partnership (together, the “RSAs”). The parties agreed that Paramount would provide

billing services by processing RSA customer information and that the RSAs would

pay Paramount $1.05 per month for each RSA customer whose information

Paramount processed. 

Several aspects of the contract are particularly important. First, there is the

$1.05 rate itself. Paramount set this rate to help achieve its target profit margin for

The Honorable David S. Doty, United States District Judge for the District of 1

Minnesota, sitting by designation.

The Honorable John A. Jarvey, now Chief Judge, United States District Court

2

for the Southern District of Iowa.

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its entire business, a small overall margin. Next, there is Section 1 of the contract,

which provided for an initial three-year term, followed by continual renewal for twoyear terms, unless a party gave six months’ notice. Next, Section 12 provided for

early termination and liquidated damages. As relevant here, the RSAs could end the

agreement before the end of a term, but if they did, they would have to pay Paramount

“all projected monthly fees based on the number of unexpired months remaining on”

the term. Paramount intended the prospect of these liquidated damages to dissuade

the RSAs from terminating the contract early. Finally, there is what the contract did

not include: the contract did not guarantee Paramount a minimum number of RSA

customer records to process, nor did it require the RSAs to use Paramount

exclusively.

3

The RSAssigned materially identical contracts with Paramount. The relevant

3

sections read:

1.0 Term

Subject to the provisions of Section 12 hereof, the initial term shall be

thirty six (36) months. This Agreement shall automatically renew for

successive twenty four (24) month terms unless either party notifies the

other of intent not to renew within six (6) months before the end of any

term.

. . . .

12.0 Termination

The early termination fee is the parties’ reasonable pre-estimate of

Servicer’s probable loss from such early termination and represents a

reasonable endeavor by Servicer to estimate foreseeable losses that

might result from such early termination and provides for the payment

of such amounts as liquidated damages in the event of such early

termination. . . . 

12.1 Termination for Non-Payment - In the event Servicer is

not in default under this Agreement and Customer failsto pay any

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For a time, Paramount served the RSAs, spending “a significant amount of

time” on them each month. But in late 2011, the RSAs sent Paramount a letter

explaining that the RSAs were switching billing companies. The letter explained that

the RSAs would “be asking for [Paramount’s] assistance . . . to make the conversion

successful.” The RSAs would “send an official notice to [Paramount] when [they]

want[ed] the system shut down.” They concluded by thanking everyone “who

worked on [their] account over the past years” and wishing Paramount “much success

in the future.”

fees properly invoiced to Customer by Servicer within thirty (30)

days after Customer’s receipt of Servicer’s invoice therefore [sic]

Servicer, in its discretion, after providing ten (10) days notice in

writing to Customer to cure, may terminate this Agreement upon

notice to Customer.

12.2 Termination on Notice - At any time after twelve (12)

months fromthe date of this Agreement, Customer may terminate

this Agreement upon ninety (90) days prior written notice to

Servicer. 

12.3 Termination Fee - In the event either Servicer or Customer

terminates this Agreement pursuant to Section 12.1 or Section

12.2, Customer shall pay to Servicer an early termination fee. 

The early termination fee will be the greater amount of the

following two methods of calculation.

A. Equal to the fees paid or accrued by Customer during

the six (6) month period prior to the giving of notice.

B. The total of all projected monthly fees based on the

number of unexpired months remaining on the current

Agreement.

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Over the next year orso, Paramount continued to serve the RSAs while helping

them transfer to their new billing company. Before the transfer was finished, the

initial, three-year term of the contract ended, and the contract renewed for a two-year

term. Finally, in January 2013, the RSAs stopped using Paramount entirely, with

over a year remaining on the renewed term.

From its reading of Section 12, Paramount believed that the RSAs had

terminated the contract early and, accordingly, that they owed liquidated damages. 

The RSAs contended they did not. The RSAs sought a declaratory judgment,

Paramount counterclaimed for breach of contract, both sides moved for summary

judgment, and the district court granted summary judgment to Paramount. The RSAs

nowappeal, challenging variousrulings on termination, interpretation, enforceability,

and the calculation of damages. 

II. Analysis

“[W]hen a party appeals both the denial of its motion for summary judgment

and the grant of summary judgment in favor of the appellee, we may review both

orders.” United Fire & Cas. Co. v. Titan Contractors Serv., Inc., 751 F.3d 880, 886

(8th Cir. 2014). We review de novo. Id. at 883. Summary judgment is proper when

the movant shows that there is no genuine dispute as to any material fact and that the

movant is entitled to judgment as a matter of law. Torgerson v. City of Rochester,

643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). The movant must identify portions

of the record that he “believes demonstrate the absence of a genuine issue of material

fact.” Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). After that,

“the nonmovant must respond by submitting evidentiary materials that set out

‘specific facts showing that there is a genuine issue for trial.’” Id. (quoting Celotex,

477 U.S. at 324). “[F]acts must be viewed in the light most favorable to the”

nonmovant, but only “if there is a genuine dispute as to those facts.” Id. (quoting

Ricci v. DeStefano, 557 U.S. 557, 586 (2009)). As the parties agree that Texas law

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controls, we follow on-point precedent of the Supreme Court of Texas; where there

is none, we predict how it would rule. See Blankenship v. USA Truck, Inc.,

601 F.3d 852, 856 (8th Cir. 2010); Matrix Grp. Ltd., Inc. v. Rawlings Sporting Goods

Co., 477 F.3d 583, 589 (8th Cir. 2007).

 

A. The RSAs terminated the contract.

The RSAs argue that they never terminated the contract and thus that they

cannot owe early termination fees. In their view, because the contract never promised

Paramount exclusivity or a minimum number of customer records to process, the

RSAs could stop using Paramount’s services and start using another provider’s, all

without terminating the contract. 

This argument fails preciselybecause it negates the contract’s early-termination

and liquidated-damages provisions. The Supreme Court of Texas reads all parts of

a contract together, giving “meaning to every sentence, clause, and word to avoid

rendering any portion inoperative.” Balandran v. Safeco Ins. Co. of Am.,

972 S.W.2d 738, 740-41 (Tex. 1998). Here, Section 12.2 explained that “[a]t any

time after twelve (12) months from the date of this Agreement, [the RSAs] may

terminate this Agreement upon ninety (90) days prior written notice to [Paramount].” 

If the RSAs had no obligation to use Paramount’s services, this clause had no

purpose: the RSAs never would have needed to terminate an agreement that did not

obligate them to do anything. Similarly, Section 12.3 explained that if the RSAs did

terminate the agreement under Section 12.2, they would owe Paramount liquidated

damages. TheRSAs’ interpretation effectively rendersthis clause inoperative as well

because the RSAs never would have owed damagesfor termination after notice—not

when they simply could have stopped using Paramount instead. Thus, the contract

as a whole showsthat the RSAs did agree to use Paramount’s servicesto some extent. 

So when they told Paramount they were switching billing companies, asked it to shut

down its system, thanked its employees, and eventually stopped using Paramount

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entirely, the RSAs terminated the agreement. See Hughes v. Cole, 585 S.W.2d 865,

866-67, 869 (Tex. Civ. App. 1979) (explaining that the contract there could “be

terminated by either party by giving notice of or doing something sufficient to

indicate to the other party an intention to do so”).

B. Section 12 applied during the renewed term.

TheRSAs also argue that the liquidated-damages provision applied only during

the initial, three-year term, not during the renewed term when they stopped using

Paramount. Specifically, Section 1 provided that “Subject to the provisions of Section

12 hereof, the initial term shall be thirty six (36) months.” (emphasis added). The

RSAs read the emphasized language to mean that Section 12’s liquidated damages

could arise only during the initial term. But this is plainly not what that language

means. Again, Section 12 allowed for early termination. Thus, the initial, three-year

termdescribed in Section 1 might have been shorter had the contract terminated early. 

“Subject to the provisions of Section 12” meant only that. In the RSAs’ alternative

interpretation, all sections, except one, renew. The contract cannot bear this curious

reading.

C. The liquidated-damages provision is enforceable.

Next, the RSAs challenge whether the liquidated-damages provision is

enforceable. This is question of law. Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex.

1991). In Texas, a liquidated-damages provision is enforceable if “(1) ‘the harm

caused by the breach is incapable or difficult of estimation,’ and (2) ‘the amount of

liquidated damages called for is a reasonable forecast of just compensation.’” FPL

Energy, LLC v. TXU Portfolio Mgmt. Co., L.P., 426 S.W.3d 59, 69 (Tex. 2014)

(quoting Phillips, 820 S.W.2d at 788). Here Section 12.3(B) called for the RSAs to

pay Paramount “[t]he total of all projected monthly fees based on the number of

unexpired months remaining on the current Agreement”—or in other words, $1.05

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each time an RSA customer’s information would have been processed from January

2013, when the RSAs ended the contract, to March 2014, the last month of the

renewed term.

The RSAs do not seriously dispute that the harm caused by early termination

of the contract was difficult to estimate. Rather, in their primary argument, the RSAs

claim that this provision cannot be a reasonable forecast of just compensation. Just

compensation, of course, is what Paramount would have gained during the remainder

of the term—its lost profit. See Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952)

(“The universal rule for measuring damages for the breach of a contract is just

compensation for the loss or damage actually sustained.”); Texaco, Inc. v. Phan,

137 S.W.3d 763, 771-73 (Tex. App. 2004). But the liquidated-damages provision

here awards lost revenues and does not account for any of Paramount’s expensesthat

the RSAs’ early termination might have avoided. This substitution of revenue for

profit, the RSAs argue, necessarily means the provision does not reasonably forecast

just compensation.

Though we agree that revenue-based liquidated damages may be unreasonable

sometimes, we conclude that there is no genuine issue as to whether they are an

unreasonable forecast of just compensation here. First, for certain businesses, lost

revenue may well be the same as lost profit. If the performance of a contract incurs

no incremental expense, then there is nothing to deduct from lost revenue to

determine lost profit. This will not be the case with the usual manufacturer, the costs

of which varywith goods produced. For a data-processing company, however, “zero”

may well be a reasonable approximation of the expense of additional electronic

processing. 

Moreover, in Henshaw v. Kroenecke, 656 S.W.2d 416 (Tex. 1983), the

Supreme Court of Texas enforced a liquidated-damages provision based on revenue

rather than profit. Henshaw and Kroenecke had been business partners. Id. at 417. 

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They had agreed that if Kroenecke left the partnership, he would not compete with

Henshaw for three years. Id. If he did, he would owe as liquidated damages “12

times the average monthly partnership billing”—not the average partnership

profit—for “each client or prior client with whom [he did] business.” Id. The court

explained that the “amount of liquidated damages, one year’s average billing, is not

an unreasonable sum, but is based on a formula representing the parties estimation of

the value of the business which would be taken” if Kroenecke competed. Id. at 419.

We hesitate to deem Henshaw binding outright. It is unclear whether the court

considered the revenue-profit distinction, and if the court did, it did not explain its

reasoning. See also Urban TV Network Corp. v. Liquidity Solutions, L.P.,

277 S.W.3d 917, 918, 919-20 (Tex. App. 2009) (approving liquidated damages based

on revenue without considering the revenue-profit distinction). Moreover, as the

RSAs note, Kroenecke could have owed one year’s revenue for diverting up to three

years’ profits. In that case, the liquidated damages in Henshaw could underestimate

actual damages. But here, because the liquidated damages were based on the number

of months remaining on the term, the RSAs argue that they were guaranteed to

overpay.

4

Despite these differences, Henshaw is informative. We think it enough,

together with the preceding discussion of incremental expenses, to conclude that the

Supreme Court of Texas would not automatically invalidate a liquidated-damages

provision based on lost revenue. This is not to say that Texas law would always

This argument is not exactly correct. The number of RSA customers whose 4

data Paramount processed could vary each month. As such, because the liquidated

damages were based on projections of customer numbers, liquidated damages still

could have been less than actual damages if Paramount, but for the termination,

would have processed the information ofsufficientlymore customersthan projected. 

However, we acknowledge that liquidated damages never would have been less than

actual damages if Paramount’s projections were always accurate.

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approve such a provision either, but merely that the provision’s validity will turn on

the facts of the case. And here, the RSAs have not shown a genuine issue as to the

validity of the liquidated-damages provision. 

First, the RSAs have not raised a genuine issue as to whether Paramount’s

projected revenue was an unreasonable approximation of just compensation because

Paramount avoided sufficient incremental expense. See FPL Energy, 426 S.W.3d at

69-70. Paramount claims its revenue and profit were equal, that in servicing the

RSAsit incurred no incremental expense. And the RSAs cite only evidence showing

that Paramount performed various tasks for the RSAs and that it had a small profit

margin overall. We do not think this evidence raises a genuine issue as to whether

Paramount would have incurred sufficient incremental expensesin serving the RSAs

specifically. Every real business has tasks and margins. These quotidian business

aspects, in themselves, could not convince a reasonable jury that Paramount’s lost

revenue from the RSAs unreasonably approximated just compensation.

The RSAs’ second argument about liquidated damages fails as well. They

claim that Paramount intended the liquidated-damages provision to be a penalty and

thus that the provision was not a reasonable forecast of just compensation. Indeed,

Paramount’s president agreed that the purpose of the liquidated damages “was to

incent people to not terminate before the end of the contract.” It is not entirely clear

whether Paramount’s intent matters. “One line of cases . . . states that the intention

of the parties governs and another line states that their intention is immaterial.” 

Stewart, 245 S.W.2d at 486. With respect to results, however, “there appears but

little disparity between” these lines of cases. Id. The ultimate question is whether

“the amount of liquidated damages called for is a reasonable forecast of just

compensation.” FPL Energy, 426 S.W.3d at 69. Even if intent influences this

question, it appears that Texas law focuses primarily on the reasonableness of the

contract as written. See id. at 71-72 (noting that courts are not bound by the parties’

labels and that there is no “broad power to retroactively invalidate liquidated damages

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provisionsthat appear reasonable as written”); Stewart, 245 S.W.2d at 486-87 (citing

the rule of the Restatement (First) of Contracts § 339 (1932), which is generally

unconcerned with intent); Eakin v. Scott, 7 S.W. 777, 778-79 (Tex. 1888) (equating

the reasonable-forecast prong with “an inspection of the entire instrument”). As just

discussed, the RSAs have not raised a genuine issue as to whether the liquidateddamages provision as written amounted to an unreasonable forecast of just

compensation. Cf. Garden Ridge, L.P. v. Advance Intern., Inc., 403 S.W.3d 432, 441-

42 (Tex. App. 2013) (concluding that liquidated damages were a penalty where

contracting party intended them to be, party did not attempt to forecast actual

damages, and forecast was unreasonable as written). Accordingly, summary

judgment was proper on the enforceability of the liquidated-damages provision. 

D. The liquidated damages were not zero.

In their final argument, the RSAs claim that, after a proper calculation, the

amount of liquidated damages they owe is $0.00. Essentially, they repeat their

argument about termination: because they simply could have stopped using

Paramount, the “total of all projected monthly fees” was zero. Besides misconstruing

the word “projected,” this argument fails for the same reason the earlier one did. 

There is no point to a liquidated-damages provision if those damages are always zero,

and under Texas law, we avoid reading out a contract provision. See Balandran,

972 S.W.2d at 740-41. The RSAs do not otherwise challenge the calculation of the

approximately $260,000 award.

III. Conclusion

We affirm the denial of summary judgment to the RSAs and affirm the grant

of summary judgment to Paramount.

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