Opinion ID: 36872
Heading Depth: 3
Heading Rank: 2

Heading: Penny Share Agreement

Text: 59 Rodriguez likewise contends that, under Dell's theory of the case, he breached the PSA when the Valero contract was backdated in 1997 and when the irregularities with the vendor transactions occurred. Thus, argues Rodriguez, the claim for breach of the PSA, which was asserted in the suit filed by Dell on March 13, 2002, had prescribed; as a result, he is entitled to judgment as a matter of law on Dell's Penny Share claims. 32 Dell counters that the terms of the PSA require Rodriguez to return any gains that he recognized on the penny stocks if he violates or breaches any provision of his employment agreement with Dell. Rodriguez did not violate the PSA, argues Dell, until he refused to return past penny share profits following Dell's determination that he had breached his employment agreement and demanded that he disgorge those profits. This disagreement thus turns on whether the PSA was breached (1) by Rodriguez's pre-termination misconduct or (2) by his post-termination refusal to return his penny share profits after Dell demanded the return of those profits. 60 Rodriguez's duty to reimburse Dell for his penny stock gains is triggered by a breach of any provision of his employment agreement. Unlike Dell's claim under the Separation Agreement, its PSA cause of action does not arise from injury to Dell resulting from Rodriguez's post-termination conduct; he merely became liable for the return of his profits when he breached his employment agreement. We hold as a matter of law that it was Rodriguez's breach of the employment agreement itself that violated the PSA, so the statute of limitations began to run on this earlier date. 33 Dell advances two arguments in its defense which we now address.
61 As noted, the general rule in Texas is that contracts are breached, and the statute of limitations begins to run, when facts come into existence that authorize a claimant to seek a judicial remedy. 34 A cause of action arising out of contractual relations between the parties accrues as soon as the contract or agreement is breached. 35 A continuing contract is an agreement where the contemplated performance and payment are divided into several parts or, where the work is continuous and indivisible, the payment for work is made in installments as the work is completed. 36 On a continuing contract, however, the statute of limitations does not commence to run until the contract is terminated or fully performed. 37 Dell urges that the PSA was a continuing contract for which limitations could not begin to run until Dell made the determination that Rodriguez's conduct was in breach of his obligations and elected to terminate his continuing relationship with Dell, thereby triggering the clawback provision. 62 In Texas, parties typically enter into continuing contracts for projects such as construction, during which performance is made in measurable increments and compensated based on the value of work completed in each period, and for which there is a clear end-point. 38 To be sure, not every contract that Texas courts have declared to be a continuing contract fits this definition. 39 Still, Dell has referred us to no authority — and we have found none on our own — supporting the proposition that an employment compensation agreement, payable at fixed intervals, should be treated as a continuing contract. Indeed, Rodriguez points to at least one Texas Court of Appeals case holding that [t]he cause of action for the breach of an employment contract arises immediately upon the breach of the contract and limitations run from that time. 40 63 Dell insists that its claim against Rodriguez is for breach of the PSA, not breach of his employment contract. By its terms, however, the PSA specified the regular issuance of shares to Rodriguez, contingent on his continued employment with Dell. We decline the invitation to be the first court to expand the definition of continuing contract to include such an employment agreement.
64 Dell also contends that the so-called discovery rule defeats any limitations defense that might bar its PSA claim against Rodriguez. Although limitations usually begin to run when facts have come into existence that authorize a claimant to seek a judicial remedy, [t]he discovery rule ..., when applicable, provides that limitations run from the date the plaintiff discovers or should have discovered, in the exercise of reasonable care and diligence, the nature of the injury. 41 We have ruled that under Texas law, [t]he discovery rule affords protection in only limited instances, applying in (1) cases of fraudulent concealment; and (2) when the nature of the injury is inherently undiscoverable and the injury itself is objectively verifiable. 42 65 Even assuming, arguendo, that the discovery rule tolled the statute of limitations until Dell learned of Rodriguez's breach, that occurred no later than March 6, 1998, when Nicholas Taylor (Dell's attorney who drafted the Separation Agreement) received the Valero contract. Taylor testified that, as soon as he read the Valero contract, he knew that it was a false contract because its contents were preposterous and outrageous and so totally unusual as to beg disbelief. Thus, even under the discovery rule, the statute of limitations would have started to run on March 6, 1998, making Dell's suit, filed on March 13, 2002, (more than four years later), time-barred.