Court Opinion

ID: 13834
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:30:21+00
Date Added: 2024-06-11T16:46:33.146075
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                      FOR THE FIFTH CIRCUIT

                            No. 97-20167

EXPANSION PLUS INCORPORATED,
                                           Plaintiff-Appellant,

                              versus
BROWN-FORMAN CORPORATION;
NABANCO MERCHANT SERVICES CORPORATION;
FIRST FINANCIAL BANK;
NATIONAL BANCARD CORPORATION’S;
RANDOLPH HUTTO;
LOUISE F ADAMS;
THOMAS J HOLMES, JR.;
HOMES FAMILY LIMITED PARTNERSHIP,
                                           Defendants-Appellees.

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BROWN FORMAN CORPORATION,
                                           Plaintiff-Appellee,

                               versus

EXPANSION PLUS INCORPORATED; ET AL
                                           Defendants,

EXPANSION PLUS INCORPORATED,
                                           Defendant-Appellant.

          Appeal from the United States District Court
               For the Southern District of Texas

                        January 12, 1998

Before HIGGINBOTHAM and STEWART, Circuit Judges, and WALTER*,
District Judge.

HIGGINBOTHAM, Circuit Judge:

    *
      District Judge of the Western District of Louisiana, sitting
by designation.
     This case requires us to determine the obligations of the

parties not to disclose information about the subject matter of

their   agreement.   Based   on   our   examination   of    the   parties’

negotiations and the documents evidencing their agreement, we hold

that at the relevant time, Brown-Forman did not owe EPI a duty not

to disclose.   The judgment of the district court is AFFIRMED.

                                   I

     Expansion Plus, Inc., developed a credit card “data capture”

and “paper processing” program.    After implementing the Program on

a small scale, EPI sought a national expansion.            EPI contacted

Brown-Forman about working together to promote the Program.           The

two companies conducted negotiations during which EPI disclosed

confidential information to Brown-Forman.     Both parties recognized

the confidential nature of the information disclosed.               These

initial negotiations led to a Master Agreement, executed in 1987.

The Master Agreement contained a non-disclosure provision under

which Brown-Forman agreed not to disclose any information relating

to the Program and to advise its employees of the nondisclosure

obligation it owed EPI.       See R. 148, Tab 4. This provision

expressly stated that the obligation not to disclose was to remain

in effect until three years after the termination or expiration of

the agreement for any reason whatsoever.      Id.

     In 1988, the parties executed a new contract.         Under the 1988

Agreement, EPI transferred and assigned to Brown-Forman “all of its

rights, title and interest in and to the Program” and Brown-Forman

                                   2
agreed “to accept the right to control, implement, and promote the

Program.”   R. 148, Tab 11.   The 1988 Agreement expressly stated

that it was for a term of five years.        It also contained an

integration clause stating “[t]his agreement contains the entire

agreement of the parties relating to the subject matter hereof and

supersedes any prior agreements and representations relating to

such subject matter that are not set forth herein.”   Id.    The 1988

Agreement did not contain any non-disclosure provisions.          EPI

received up front a $225,000 consulting fee and approximately $1.8

million over the term of the contract from its percentage of the

transaction fees that Brown-Forman received from the Program.     Id.

     In September 1993, the 1988 Agreement expired by its own terms

and Brown-Forman sold the Program to NaBanco Merchant Services

Corporation, First Financial Bank, and National Bancard Corporation

for more than $31 million.    At the time of the sale, EPI was a

shell company with few assets.   More than six months after the sale

to NaBanco, EPI wrote Brown-Forman contending for the first time

that the 1988 Agreement was a marketing and consulting contract;

that it did not transfer ownership of the Program from EPI to

Brown-Forman. After receiving this letter, Brown-Forman filed suit

in the Western District of Kentucky seeking a declaration of the

parties’ rights under the 1988 Agreement.    EPI then filed suit in

a Texas state court alleging that by the sale to NaBanco, Brown-

Forman converted EPI’s property, misappropriated its trade secrets,

breached their confidential relationship, and tortiously interfered

with EPI’s contracts.    EPI abjured any claim for          breach of

                                  3
contract.    Brown-Forman removed EPI’s case to the United States

District Court for the Southern District of Texas. Ultimately, the

Kentucky and Texas suits were consolidated.

     EPI moved for partial summary judgment seeking a declaration

that the 1988 Agreement transferred to Brown-Forman only a limited

interest for a limited duration. Brown-Forman filed a cross motion

for summary judgment on all of EPI’s claims.             A magistrate judge

recommended granting Brown-Forman’s motion.              The district court

accepted the recommendation in part, entering an order denying

EPI’s   motion    for   partial   summary    judgment,      granting   summary

judgment    for   Brown-Forman    on    EPI’s   tortious    interference    of

contract and conversion claims and deferring its ruling on EPI’s

breach of confidential relationship and misappropriation of trade

secrets claims until the magistrate made additional findings in

response to EPI’s objections to the magistrate’s recommendation.

     After considering EPI’s new arguments, the magistrate again

recommended granting summary judgment in favor of Brown-Forman on

EPI’s remaining claims. After a de novo review, the district court

adopted the magistrate’s memoranda and recommendations and granted

summary    judgment     against   EPI   on   its   breach   of   confidential

relationship and misappropriation of trade secrets claims.                 EPI

appeals the dismissal of its conversion, breach of confidential

relationship, and misappropriation of trade secrets claims.               This

court has jurisdiction under 28 U.S.C. § 1291.

                                        4
                                       II

      Though the parties and the trial court have devoted much

attention to whether EPI’s claims sound in contract or tort, we

need not enter this fray.           At oral argument, EPI conceded, and

properly so, that for any of its claims to prevail, Brown-Forman

must have owed it a duty not to disclose confidential information

at the time Brown-Forman sold the Program to NaBanco.                   We turn

first to this issue.

      The district court ruled that EPI failed to present evidence

of a duty of Brown-Forman not to disclose information about the

Program at the time of sale.        We review this ruling de novo. Norman

v. Apache Corp., 19 F.3d 1017, 1023 (5th Cir. 1994).

      A confidential relationship may arise “‘where one person

trusts in and relies upon another, whether the relation is a moral,

social, domestic, or merely personal one.’” Crim Truck & Tractor

v.Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992)

(quoting Fitz-Gerald v. Hull, 237 S.W.2d 256, 261 (Tex. 1951)).

Trusting   another   or    enjoying    a    cordial     relationship    of   long

duration is not enough to establish a confidential relationship.

Id.   at   594-95.    In    order     to    determine    the   nature   of   the

relationship between EPI and Brown-Forman at the time of sale, we

look to the contracts they executed in the course of their dealings

with each other.     See Norman, 19 F.3d at 1023-24.

      Their agreements convince us that at the time of the sale to

NaBanco, Brown-Forman had no duty not to disclose information about

the Program.   The 1988 Agreement manifested their entire agreement

                                       5
and terminated the 1987 Master Agreement.                          The absence of a

nondisclosure provision in the 1988 Agreement is significant.                           In

1987, the parties bargained for confidentiality to last for three

years after their agreement was terminated for any reason.                             The

1988 Agreement addressed nothing on this score.                    Assuming the 1988

Agreement did not abrogate the nondisclosure provision of the 1987

Agreement, the best case for EPI, the nondisclosure obligation

remained    in    effect    only       until     1991,   three     years       after   its

termination. In 1993, Brown-Forman was free to sell the Program as

it did not owe EPI any duty of confidentiality at that time.

     EPI’s assertions to the contrary are unpersuasive. EPI places

great weight on the fact that during their negotiations Brown-

Forman   recognized       the     confidential      nature    of    the    information

surrounding the Program.               This observation is of no moment.                We

agree    that    at   one       time    Brown-Forman        owed    EPI    a    duty    of

confidentiality.      The parties defined that duty by their contract

and it expired prior to 1993.               The suggestion that a common law

duty of confidentiality with open-ended limits of duration and

scope was untouched by the written agreements of the parties makes

no sense.        It would cut the heart from the carefully crafted

bargain.

     Similarly,       Brown-Forman’s            treatment    of     the    Program      as

confidential      after     the    1988     Agreement       does    not    affect      our

conclusion.        First,       Brown-Forman       was   arguably     bound       by   the

confidentiality provision in the 1987 Master Agreement.                                That

provision precluded Brown-Forman from disclosing information about

                                            6
the Program until 1991 and required it to advise its employees

about the    confidential     obligation     it   owed    EPI.    Second,      any

representations      Brown-Forman     made   to   third   parties      about   the

confidential nature of the Program did not affect its nondisclosure

obligation. There is no evidence in the record that Brown-Forman’s

performance demonstrated its intent to alter the deal struck in

1988.    Any subjective trust of EPI that Brown-Forman would not

disclose    the    Program   after    1991   is   not    enough   to   create    a

confidential relationship.           Crim Truck & Tractor, 823 S.W.2d at

595.    “The objective intent of the parties controls, and absent an

allegation of ambiguity in the contract’s language, the contract

alone will generally be deemed to express the intent of the

parties.”    Norman, 19 F.3d at 1024.

       EPI’s reliance on this court’s holding in Metallurgical Indus.

Inc., v. Fourteck, Inc., 790 F.2d 1195 (5th Cir. 1986) is misplaced

as well.    In Fourteck, we held that the trial court erred in not

admitting into evidence past agreements between the parties which

were    relevant   to   whether   a   confidential      relationship     existed

between them.      Id. at 1206-07.      Unlike Fourteck, the trial court

here examined the prior agreements between EPI and Brown-Forman to

determine the nature of their relationship. The parties’ bargained

for the terms of a confidential relationship and that bargain

provided that it expired no later than 1991.

       The judgment of the district court is AFFIRMED.

                                        7