Court Opinion

ID: 4304538
Source: CourtListenerOpinion
Date Created: 2018-08-16 18:00:26.585624+00
Date Added: 2024-06-11T09:36:31.909889
License: Public Domain

Case: 17-20527      Document: 00514602869         Page: 1    Date Filed: 08/16/2018

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT

                                                                    United States Court of Appeals

                                      No. 17-20527
                                                                             Fifth Circuit

                                                                           FILED
                                                                     August 16, 2018

ASSOCIATED MACHINE TOOL TECHNOLOGIES,                                 Lyle W. Cayce
                                                                           Clerk
              Plaintiff - Appellant

v.

DOOSAN INFRACORE AMERICA, INCORPORATED; ELLISON
TECHNOLOGIES, INCORPORATED,

              Defendants - Appellees

                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:15-CV-2755

Before KING, SOUTHWICK, and HO, Circuit Judges.
PER CURIAM:*
       In dismissing the plaintiff’s claims, the district court held that the Texas
Dealers Act does not apply retroactively to the parties’ contractual agreement.
The decision raises a determinative question of state law that has not been
fully answered by Texas courts.           We conclude that we should certify the
question to the Texas Supreme Court.

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 17-20527      Document: 00514602869        Page: 2    Date Filed: 08/16/2018

                                    No. 17-20527
               FACTUAL AND PROCEDURAL BACKGROUND
      Associated Machine Tool Technologies (“AmTTech”) is a machine tool
dealer in Texas and is “primarily engaged in the business of selling and
servicing machine tools to end users of the equipment.” Doosan Infracore of
America, Incorporated, manufactures machine tools and distributes them to
various dealers throughout the United States.             AmTTech was previously
Doosan’s dealer in Texas and sold Doosan’s metal cutting equipment.
AmTTech and Doosan’s business relationship started in 1991. Since then, they
have had several contracts. The most recent agreement, which is the subject
of this litigation, was executed in February 2009.             As relevant here, the
contract’s termination provision states:
      Either party may terminate this [contract], at any time for any
      reason whatsoever, by giving the other party at least 30 days prior
      written notice sent electronically or by any delivery service
      company. Termination of this [contract] by either party does not
      release [Doosan] or vi[ce] versa from any financial obligation.
The contract was open-ended in that it did not specify a fixed duration.
      On August 21, 2015, Doosan sent a letter to inform AmTTech that it
decided to terminate their agreement effective October 20, 2015. In the letter,
Doosan stated that a modification of its business model “through a realignment
and consolidation of its distributor territories and network” had prompted its
decision. Though Doosan did not state who AmTTech’s replacement would be,
AmTTech learned that Doosan had reassigned its distribution rights in Texas
to Ellison Technologies, Incorporated.         On September 10, AmTTech sued
Doosan and Ellison in Texas state court. 1 AmTTech sued Doosan for breach of
contract, civil conspiracy, violations of the Texas Deceptive Trade Practices Act

      1 AmTTech originally also sued other Doosan entities as well as Mitsui & Co., Ltd.,
and Mitsui & Co., (USA), Inc. Later, AmTTech’s claims against these additional defendants
were dismissed by joint stipulation.
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    Case: 17-20527    Document: 00514602869     Page: 3   Date Filed: 08/16/2018

                                 No. 17-20527
(“DTPA”), and violations of the Texas Fair Practices of Equipment
Manufacturers, Distributors, Wholesalers, and Dealers Act (“Texas Dealers
Act” or “Act”) for unlawful termination without good cause and a substantial
change of the dealer agreement. AmTTech brought claims for civil conspiracy
and tortious interference with an existing contract against Ellison.
      After timely removing this action to federal court, Doosan answered and
counterclaimed, seeking a declaratory judgment that its notice to terminate
was enforceable and that the Texas Dealers Act did not apply to the contract.
AmTTech then sought a preliminary injunction to prevent the termination of
the contract, which the district court denied. The district court concluded that
the Texas Dealers Act did not apply retroactively to the contract.
      Subsequently, AmTTech filed a motion for certification and entry of final
judgment as to the claims related to the Texas Dealers Act, which the district
court also denied. The next month, Doosan and Ellison moved for judgment on
the pleadings. In April 2017, the district court granted the defendants’ motions
but noted that Doosan’s counterclaim was still pending. The parties filed a
joint stipulation of dismissal as to the counterclaim, which the district court
accepted and then upon request entered a final judgment. AmTTech timely
appealed.

                                 DISCUSSION
      The issues on this appeal are whether the Texas Dealers Act applies
retroactively to the parties’ agreement and, if so, does it violate the Texas
Constitution. The Act went into effect on September 1, 2011. TEX. BUS. &
COM. CODE § 57.001. The Act applies to “(1) a dealer agreement entered into
or renewed on or after the effective date of this Act; and (2) a dealer agreement
that was entered into before the effective date of this Act, has no expiration
date, and is a continuing contract.” Act of June 17, 2011, ch. 1039, 2011 Tex.
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                                  No. 17-20527
Sess. Law Serv. § 4(a).     The bill that was passed states that “[a] dealer
agreement entered into before the effective date of this Act, other than a dealer
agreement described by [the aforementioned (2)], is governed by the law as it
existed on the date the agreement was entered into, and the former law is
continued in effect for that purpose.” Id. § 4(b).
      The Act also states that “[n]o supplier may terminate a dealer agreement
without good cause.”     TEX. BUS. & COM. CODE § 57.202.         “‘Terminate’ or
‘termination’ means to terminate, cancel, fail to renew, or substantially change
the competitive circumstances of a dealer agreement.”          Id. § 57.002(21).
“‘[G]ood cause’ [generally] means failure by a dealer to comply with
requirements imposed on the dealer by the dealer agreement if the
requirements are not different from those requirements imposed on other
similarly situated dealers.” Id. § 57.203(a). According to the Act, “a supplier
shall provide a dealer with at least 90 days’ written notice of termination.” Id.
§ 57.204(a). That notice “must state all reasons constituting good cause for the
termination” and provide a 60-day cure period. Id. The Act allows for the
grant of “injunctive relief for unlawful termination.” Id. § 57.401(a).
      The relevant state constitutional provision provides: “No bill of
attainder, ex post facto law, retroactive law, or any law impairing the
obligation of contracts, shall be made.” TEX. CONST. art. I, § 16.
      The district court concluded “that the Act cannot apply retroactively” to
the parties’ agreement. The district court held that if the Act applied it would
retroactively affect the parties’ agreement by impairing Doosan’s right to
terminate the contract according to its terms, a right that vested prior to the
enactment of the Act. It also determined that, under Texas caselaw, the
application of the Act was unconstitutional under the retroactive clause of the
Texas Constitution.

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                                  No. 17-20527
      AmTTech denies that the Act is being applied retroactively, arguing that
termination did not occur until 2015, after the Act’s 2011 effective date.
According to AmTTech, a law is applied retroactively if it adds new legal
consequences to events that occurred prior to the date of a law’s enactment.
Here, the argument is that because the contract had no stated expiration date
it was, in effect, a series of 30-day contracts.     Thus, the Act added legal
consequences to the post-enactment event of termination of the latest 30-day
contract, meaning there was no retroactivity.
      Doosan responds that the Act as applied to the parties’ contract has a
retroactive effect by destroying Doosan’s right to terminate the contract at will
and giving AmTTech a property-like tenure that it did not have under the
contract. It further contends that a continuing contract is not a series of
discrete 30-day contracts, and there is no Texas authority for such an
argument. It also asserts that the cases AmTTech cites are inapposite, and no
caselaw suggests that applying a statute to a continuing contract is not
retroactive.
      If the Act as applied is retroactive, the next question is whether the Act
is constitutional. The Texas Supreme Court has held that “the constitutional
prohibition against retroactive laws does not insulate every vested right from
impairment, nor does it give way to every reasonable exercise of the
Legislature’s police power; it protects settled expectations . . . and prevents the
abuses of legislative power.” Robinson v. Crown Cork & Seal Co., 335 S.W.3d
126, 145 (Tex. 2010). The Texas high court identified three factors to consider
when deciding if a retroactive statute is constitutional: (1) “the nature of the
prior right impaired by the statute”; (2) “the extent of the impairment”; and (3)
“the nature and strength of the public interest served by the statute as
evidenced by the Legislature’s factual findings.” Id.

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                                  No. 17-20527
      We conclude that the various arguments presented by the parties to us
on this appeal leave the issue of retroactivity unsettled under Texas law. We
may, and often do, certify an unsettled question of state law to a state’s highest
court when that court has a procedure allowing us to do so. Texas has its rule
in the state constitution: “The supreme court and the court of criminal appeals
have jurisdiction to answer questions of state law certified from a federal
appellate court.” TEX. CONST. art. V, § 3–c(a). The Texas Supreme Court “may
answer questions of law certified to it . . . if the certifying court is presented
with determinative questions of Texas law having no controlling Supreme
Court precedent.” TEX. R. APP. P. 58.1.
      We are exercising discretionary authority when we decide to certify a
question to a state’s highest court. In re Deepwater Horizon, 807 F.3d 689, 698
(5th Cir. 2015). We have at times, but not invariably, applied certain factors
in deciding whether to certify: (1) the existence of sufficient sources of state
law; (2) the degree to which considerations of comity are relevant; and (3)
practical limitations. See Florida ex rel. Shevin v. Exxon Corp., 526 F.2d 266,
275 (5th Cir. 1976). We conclude there is no controlling precedent from the
Texas Supreme Court nor persuasive authority from the state appellate courts
that provides clear guidance on this issue. We consider this issue to involve
significant state interests, and there are no practical difficulties presented by
certifying this question to the Texas Supreme Court.

                           QUESTION CERTIFIED
      We certify the following question to the Texas Supreme Court:
      Whether the termination for good cause provision of the Texas
      Dealers Act violates Article I, Section 16 of the Texas Constitution
      as applied to a contract terminable at will that was executed pre-
      enactment but terminated post-enactment.

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                                 No. 17-20527
      We respectfully request the Texas Supreme Court provide its
determination of this state-law issue, which will be binding on this court. We
have no desire to have the Texas Supreme Court confine its reply to the precise
form or scope of the question certified. As there are other issues raised in this
case for which the answer to the certified question is relevant, this panel
retains cognizance of the appeal in this case pending the response from the
Texas Supreme Court.
      QUESTION CERTIFIED.

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