Court Opinion

ID: 4322395
Source: CourtListenerOpinion
Date Created: 2018-10-18 18:00:28.157784+00
Date Added: 2024-06-11T14:46:09.457613
License: Public Domain

Case: 17-20555      Document: 00514687369         Page: 1    Date Filed: 10/18/2018

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                      United States Court of Appeals
                                                                               Fifth Circuit
                                      No. 17-20555                           FILED
                                                                      October 18, 2018

DAVID M. SELLERS,                                                       Lyle W. Cayce
                                                                             Clerk
              Plaintiff - Appellant

v.

MINERALS TECHNOLOGIES, INCORPORATED; CETCO ENERGY
SERVICES COMPANY, L.L.C.,

              Defendants - Appellees

                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:15-CV-2657

Before STEWART, Chief Judge, JONES, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
       Plaintiff-Appellant David Sellers (“Sellers”) appeals in part the district
court’s dismissal of his breach of contract claim against Mineral Technologies,
Inc. (“MTI”) and CETCO Energy Services Company, L.L.C. (“CETCO” and
collectively with MTI, “Defendants”) on summary judgment. For the reasons
stated herein, we reverse the district court’s decision in part and remand to the

       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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                                     No. 17-20555
district court for a determination of the contractual amount due to Sellers and
entry of judgment in favor of Sellers in such amount.
                                   INTRODUCTION
      In January of 2010, Sellers was hired as CETCO’s “Vice President of
Business Development—Produced Water Equipment.”                     The terms of his
employment were set forth in an “Amended Executive Employment
Agreement” 1 (“the Agreement”). The Agreement provided for a potential long-
term incentive (“LTI”) payment to Sellers of 5% of the net margin of sales made
under his supervision.
      In or around May 2014, MTI bought CETCO from its parent company,
Amcol International. Following the purchase, MTI asked CETCO President
Mike Johnson to downsize CETCO. According to Johnson, because Sellers had
advised that he did not intend to extend his employment with CETCO beyond
January 18, 2015—the end-date of the Agreement—Sellers was placed on a list
of employees to let go. Sellers’s employment was terminated thereafter. It is
undisputed that his termination was without cause.
      On September 9, 2015, Sellers filed this suit in the district court of
Montgomery County, Texas, alleging that Defendants breached the Agreement
by failing to pay him six months of COBRA 2 benefit premiums, commissions
that he earned for 2014 and 2016, and $428,681.71 of LTI benefits due under
the terms of the Agreement. Sellers also asserted that Defendants’ failure to
pay the sums allegedly due, combined with other actions, amounts to fraud or

      1  The amended version of Sellers’s employment agreement with CETCO was executed
approximately a year after he was hired. It did not change the terms of his original
employment agreement in any significant respect but did change the name of the line of
business supervised by Sellers from “Produced Water Equipment” to “New Build Capital
Process Equipment.”
       2 “COBRA,” as used herein, refers to the Consolidated Omnibus Budget Reconciliation

Act.
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constructive fraud, breach of fiduciary duty, and conversion.                   Defendants
subsequently removed the case to the United States District Court for the
Southern District of Texas, Houston Division. Pursuant to an order of the
district court requiring Defendants to pay Sellers the undisputed amounts
owed to him, Defendants tendered to Sellers $30,112 for the remaining 2014
commissions due and $38,192 for the 2015 commissions due on January 7, 2016
and January 26, 2016 respectively.
       On May 13, 2016, Defendants filed a motion for summary judgment
seeking dismissal of all of Sellers’s claims.            Sellers’s response included a
“Counter-Motion for Partial Summary Judgment as to Liability.” On August
3, 2017, the district court issued its “Opinion on Summary Judgment,” in which
it found that: 1) Sellers is not entitled to any LTI benefits since the pertinent
terms of the Agreement contain an unambiguous, unmet condition precedent
that Sellers be employed by CETCO on January 18, 2015 to receive such
benefits; and 2) Sellers is not entitled to any COBRA benefit premiums since
the Agreement expressly provides that CETCO would pay for such benefits for
six months after termination only if he signed a release of all claims in a form
acceptable to CETCO, which he did not do. Without specifically addressing
any of Sellers’s other claims, the opinion concludes by stating: “David M.
Sellers will take nothing from Cetco Energy Services Company, LLC.” On the
same date, the district court also issued a judgment to this effect. Sellers
appeals, addressing only the issue of denial of LTI benefits. 3

       3 Because Sellers only briefs the issue of denial of LTI benefits, any arguments on his
remaining claims are waived. See FED. R. APP. P. 28(a)(8) (requiring an appellant’s brief to
contain arguments that include the “appellant’s contentions and the reasons for them, with
citations to the authorities and parts of the record on which the appellant relies”); United
States v. Reagan, 596 F.3d 251, 254 (5th Cir. 2010) (finding that the appellant’s failure to
brief an issue constituted waiver of same).
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                                STANDARD OF REVIEW
       “We review a grant of summary judgment de novo, applying the same
standard that the district court applied.” Smith v. Reg’l Transit Auth., 827
F.3d 412, 417 (5th Cir. 2016). Summary judgment is appropriate where there
is “no genuine dispute as to any material fact” and “the movant is entitled to
judgment as a matter of law.” FED. R. CIV. P. 56(a). A material fact is one that
“might affect the outcome of the suit under the governing law.” Leasehold
Expense Recovery, Inc. v. Mothers Work, Inc., 331 F.3d 452, 456 (5th Cir. 2003)
(internal quotation marks and citation omitted).                  A dispute regarding a
material fact is “genuine” if “the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Id. (internal quotation marks and
citation omitted). The court must “view the evidence introduced and all factual
inferences [therefrom] in the light most favorable to the party opposing
summary judgment.” Smith, 827 F.3d at 417 (internal quotation marks and
citation omitted). A party opposing summary judgment may not, however,
“rest on mere conclusory allegations or denials in its pleadings” to avoid an
adverse ruling. Id. (internal quotation marks and citation omitted).
       Additionally, under Texas law, 4 “the interpretation of [a] contract,
including the determination of whether [its provisions are] ambiguous, is a
legal question reviewed [de novo].” WBCMT 2007 C33 OFFICE 9720, L.L.C.
v. NNN Realty Advisors, Inc., 844 F.3d 473, 477 (5th Cir. 2016); see also J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003) (“Deciding whether
a contract is ambiguous is a question of law for the court.”). If a contract’s

       4 There is no dispute in this case that Texas law governs interpretation of the
Agreement. Moreover, this court has recognized that in a diversity case involving the
interpretation of a contract, the substantive law of the forum state or the state agreed upon
by the parties to the contract applies. See McLane Foodservice, Inc. v. Table Rock Rests.,
L.L.C., 736 F.3d 375, 377 (5th Cir. 2013). Here, the parties specified Texas law as the
governing law in the Agreement.
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provisions are determined to be facially ambiguous, however, then the
meaning of the contract, as determined through the intent of the parties, is a
question of fact. See Addicks Servs., Inc. v. GGP-Bridgeland, LP, 596 F.3d 286,
294 (5th Cir. 2010) (“[I]f [a] contract is subject to two or more reasonable
interpretations . . . the contract is ambiguous, creating a fact issue on the
parties’ intent”) (quoting Webster, 128 S.W.3d at 229)). Thus, as the Texas
Supreme Court has recognized, summary judgment is generally inappropriate
for claims concerning an ambiguous contract. See Coker v. Coker, 650 S.W.2d
391, 394 (Tex. 1983).
                                      DISCUSSION
General Rules of Contract Interpretation
      “The primary concern of contract interpretation under Texas law is to
ascertain the true intentions of the parties as expressed in the instrument.”
NNN Realty Advisors, Inc., 844 F.3d at 477-78 (internal quotation marks and
citation omitted). Accordingly, Texas courts “examine the entire contract in an
effort to harmonize and give effect to all provisions so that none is rendered
meaningless.” Id. at 478 (internal quotation marks and citation omitted). A
contract is considered unambiguous “if it can be given a definite or certain legal
meaning.” Id. (internal quotation marks and citation omitted). Whether a
contract is ambiguous must be determined by examining the document itself
and without consideration of parol evidence. 5 See Addicks Servs., Inc., 596

      5  Both parties reference exhibits submitted with their summary judgment pleadings
to support assertions they make regarding the intent of the parties and formation of the
Agreement. Sellers, for instance, points to affidavits of CETGO executives Morris Hoagland
and Mike Johnson, who state that under their continuous understanding of the Agreement,
Sellers is due the LTI benefits at issue. Defendants, on the other hand, give significant
attention to excerpts from Sellers’s deposition indicating that he primarily drafted the
Agreement and discussing his understanding of its provisions. Such evidence is not properly
before us for consideration, however, since we are called upon to determine as a matter of
law whether or not the relevant contractual provisions are ambiguous—an endeavor which
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F.2d at 294. Accordingly, differing interpretations offered by the parties are
insufficient to render a contract ambiguous. NNN Realty Advisors, Inc., 844
F.3d at 478. Rather, ambiguity arises where a contract’s “meaning is uncertain
and doubtful or it is reasonably susceptible to more than one meaning.” Kern
v. Sitel Corp., 517 F.3d 306, 309 (5th Cir. 2008) (quoting Coker, 650 S.W.2d at
393).
        Once a contract has been determined to be unambiguous, “the intent of
the parties must be taken from the agreement itself, not from the parties’
present interpretation, and the agreement must be enforced as written.”
Addicks Servs., 596 F.3d at 294 (internal quotation marks and citation
omitted); see also Horn v. State Farm Lloyds, 703 F.3d 735, 740 (5th Cir. 2012)
(noting that “[u]nder Texas law, the parties’ intent is governed by what they
said, not by what they intended to say but did not”) (quoting Fiess v. State Farm
Lloyds, 202 S.W.3d 744, 747 (Tex. 2006)). If a contract is deemed ambiguous,
however, then a court may consider parol evidence to determine the parties’
intent. McLane Foodservice, Inc. v. Table Rock Rests., L.L.C., 736 F.3d 375,
378 (5th Cir. 2013) (citing David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450-
51 (Tex. 2008)).
Interpretation of the Contractual Provisions at Issue
        Sections 3(c), “Long[-]Term Incentive,” and 11(d), “Termination by the
Company Without Cause,” of the Agreement are the primary provisions at
issue and provide as follows:
        3(c) Component – Long[-]Term Incentive. If Employee is still
        employed on January 18, 2015, then after that date but before
        March 15, 2015, Employee shall receive an amount equal to 5% of
        the Net Margin of Sales of the New Build Capital Process
        Equipment business for projects where bookings are placed during

must be completed by looking at the contract alone. See NNN Realty Advisors, Inc., 844 F.3d
at 477-78.
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                                  No. 17-20555
      the period from January 18, 2010 to March 15, 2016. Employee
      will not be eligible for this long[-]term incentive if he resigns or if
      he is terminated for cause prior to January 18, 2015. If Employee’s
      employment terminates prior to January 18, 2015 due to death or
      disability, Employee or his estate will receive an amount equal to
      5% of the Net Margin of Sales of the New Build Capital Process
      Equipment Business from January 18, 2010 to the date of
      Employee’s termination within sixty (60) days following the date
      of termination. This value shall be calculated annually and the
      balance will accrue interest at the rate of 3% per year, payable at
      the time the long-term incentive is paid, if Employee is eligible for
      the long-term incentive.

      11(d) Termination by the Company Without Cause. Employer may
      terminate Employee’s employment without cause by giving
      Employer [sic] thirty (30) days written notice of termination, or in
      its discretion, pay in lieu of notice. Employer shall be obligated to
      pay Employee’s base salary to the date such notice is effective,
      along with any commission and long-term incentive due pursuant
      to Section 3. In addition, if Employee signs a release of all claims
      in a form acceptable to Employer: (1) Employer will continue to
      pay Employee’s base salary (including any applicable increases)
      pursuant to Employer’s regular payroll practices for two years
      after Employee’s employment terminates or until January 17,
      2015, whichever comes first; and (2) Employer will pay the
      premiums for COBRA health insurance coverage for Employee and
      his family for six (6) months after Employee’s employment
      terminates, if Employee is eligible for COBRA coverage and elects
      such coverage.

      The district court concluded that Section 3(c) contains an unambiguous
condition precedent to Sellers’s entitlement to LTI benefits—that he be
employed by CETCO on January 18, 2015. Finding that Sellers’s employment
was terminated on December 19, 2014, the district court held that he did not
qualify for LTI benefits.

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      Does the Agreement Contain an Unambiguous Condition
      Precedent?
      A condition precedent is “an act or event that must take place before
performance of a contractual obligation is due.” Ceydco Corp. v. PetroQuest
Energy, L.L.C., 497 F.3d 485, 488 (5th Cir. 2007) (citing Hohenberg Bros. Co.
v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976)). Because of their
“harshness in operation,” conditions precedent are generally not favored under
Texas law and should not be recognized if “another reasonable reading of the
contract is possible” or the condition “would impose an absurd or impossible
result.” Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945,
948 (Tex. 1990). To make performance of a contractual obligation specifically
conditional, generally a term “such as ‘if,’ ‘provided,’ ‘on the condition that,’ or
some similar phrase of conditional language” must be included in the contract.
Ceydco Corp., 497 F.3d at 488 (quoting Criswell, 792 S.W.2d at 948). The
absence of such a term is considered indicative of the parties’ intent that a
covenant be made, rather than a condition imposed. Criswell, 792 S.W.2d at
948; Matter of Pirani v. Baharia, et al., 824 F.3d 483, 497 (5th Cir. 2016).
      Section 11(d) of the contract concerning termination without cause
allows Plaintiff any LTI due “pursuant to Section 3.” Section 3(c) concerning
LTI, in turn, starts with the clear statement that “[i]f Employee is still
employed on January 18, 2015, then after that date but before March 15, 2015,
Employee shall receive an amount equal to 5% of the Net Margin of Sales of
the New Build Capital Process Equipment business for projects where
bookings [have been placed].” This clause contains the “if-then” conditional
language recognized under Texas jurisprudence as necessary for creating a
condition precedent, and it is difficult to interpret such language as doing
otherwise. See Ceydco Corp., 497 F.3d at 488.

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      Sellers urges us to read Section 3(c) as unambiguously allowing him LTI
benefits since it fails to specifically address eligibility for such benefits in the
case of termination without cause, while specifically recognizing (1)
termination of LTI benefit eligibility in the case of resignation or termination
for cause before January 18, 2015 and (2) eligibility for LTI benefits to the date
of termination in the case of termination due to death or disability. Such a
construction, however, would require us to either ignore the unequivocal
condition in the first sentence of Section 3(c) that Sellers be employed on
January 18, 2015 to receive LTI benefits or to imply an exception to that
general condition that creates an unexpressed covenant. We decline to do
either. First, under Texas law courts should avoid interpreting contracts in
ways that render provisions meaningless. See NNN Realty Advisors, Inc., 844
F.3d at 478; U.S. Metals, Inc. v. Liberty Mut. Grp., 490 S.W.3d 20, 23-24 (Tex.
2015). Second, Texas jurisprudence instructs that implied covenants are rare
and should be recognized only where the expressed terms of the contract
indicate that the implied covenant “was so clearly within the contemplation of
the parties that they deemed it unnecessary to express it”—a circumstance not
present here. See Universal Health Servs., Inc. v. Renaissance Women’s Grp.,
P.A., 121 S.W.3d 742, 747-48 (Tex. 2003) (internal quotation marks and
citation omitted).
      Considering the foregoing, we agree with the district court that Section
3(c) unambiguously creates a condition precedent that required Sellers to be
employed on January 18, 2015 to qualify for LTI benefits. Thus, for Sellers to
be entitled to such benefits, the condition must either have been satisfied or
qualify for having its fulfillment excused. We diverge from the district court
on this point and find that the condition was satisfied, or alternatively, that
under the facts of this case, it is appropriate to excuse fulfillment of the
condition.
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       Was the Condition Precedent Satisfied?
       Whether the unambiguous condition precedent that Sellers be employed
on January 18, 2015 was met hinges on the determination of the effective date
of Sellers’s termination from CETCO, which is governed by Section 11(d) of the
Agreement—“Termination by the Company Without Cause.” Section 11(d)
provides in pertinent part as follows: “Employer may terminate Employee’s
employment without cause by giving Employer [sic] thirty (30) days written
notice of termination, or in its discretion, pay in lieu of notice. Employer shall
be obligated to pay Employee’s base salary to the date such notice is effective,
along with any commission and long-term incentive due pursuant to Section
3.” Both parties concede that Sellers did not receive thirty days written notice
of termination under Section 11(d). Thus, pursuant to the plain language of
the section, to effectively terminate Sellers without cause, Defendants were
required to pay him an additional 30 days’ worth of salary. 6
       It is undisputed that at or around the end of Sellers’s employment with
Defendants, he was tendered $14,205—a month’s salary—in accordance with
Section 11(d). In his response to Defendants’ motion for summary judgment
and in his affidavit attached thereto, Sellers indicates that he received the
$14,205 payment on January 15, 2015. Defendants do not contradict this.

       6  Perplexingly, the parties fail to discuss the requirements of Section 11(d) in any
meaningful way. Instead, with little to no explanation, each offers various dates as the
effective date of Sellers’s termination from CETCO. Defendants, for their part, simply urge
in a conclusory manner that Sellers was terminated prior to the imperative date of January
18, 2015. Sellers, on the other hand, indicates in his response to Defendants’ motion for
summary judgment and in his own affidavit attached thereto that December 20, 2014 was
the date of his termination. This was the date on which, according to his deposition
testimony, he received a termination package. In his original petition and brief, however,
Sellers states without explanation that he was fired on December 19, 2014. In his brief,
Sellers also states that he was paid “a month’s base salary, making the effective date of
termination January 18, 2015.” Given that the parties specifically contemplated in Section
11(d) of the Agreement how termination without cause would be effectuated, the terms of the
provision dictate the effective date of Sellers’s termination.
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Since under the plain language of Section 11(d), the January 15, 2015 payment
was to cover an additional thirty days’ worth of wages, we find that the effective
date of Sellers’s termination was February 14, 2015. Thus, the condition
precedent requiring Sellers to be employed on January 15, 2015 to receive his
LTI benefits was met. The district court erred in concluding otherwise.
       Even if the condition precedent was not technically met here, however,
we find it appropriate under the circumstances of this case to deem the
condition fulfilled or excuse its fulfillment. Under Texas jurisprudence, if one
party prevents another from performing a condition precedent or renders its
fulfillment impossible, then the condition may be considered fulfilled. 7 Here,
if Defendants effectively terminated Sellers’s employment in December 2014
(as opposed to in February 2015), as they suggest, then they unilaterally
prevented fulfillment of the condition at issue and cannot rely on
nonfulfillment to deny the LTI benefits otherwise contractually due to Sellers.
                                    CONCLUSION
       For the reasons stated herein, we REVERSE the district court’s grant of
summary judgment in favor of Defendants on the LTI portion of Sellers’s
breach of contract claim. We further REMAND to the district court for the
limited purpose of determining the amount of LTI benefits due to Sellers and
entering judgment in favor of Sellers in such amount. 8

       7 See, e.g., Donaldson v. Dig. Gen. Sys., 168 S.W.3d 909, 916 (Tex. Civ. App.—Dallas
2005) (“[I]f one party prevents the other from performing a condition precedent, then the
condition is considered as fulfilled” (internal quotation marks and citation omitted)); D&M
Specialties, Inc. v. Apache Creek Props., L.C., 2014 WL 12493290, at *5 (Tex. W.D. Aug. 21,
2014 (citing Houston Cty. v. Leo L. Landauer & Assocs., Inc., 424 S.W.2d 458, 464 (Tex. Civ.
App.—Tyler 1968)); Clear Lake City Water Auth. v. Friendswood Dev. Co., Ltd., 344 S.W.3d
514, 519 (Tex. Civ. App.—Houston [14th Dist.] 2011) (recognizing that “a party who prevents
or makes impossible the occurrence of a condition precedent upon which its liability under a
contract depends cannot rely on the nonoccurrence to escape liability” (internal quotation
marks and citation omitted)).
       8 Sellers contends that $428,681.71 is the amount due to him in LTI benefits.

Defendants do not specifically contradict this figure in their pleadings or with competent
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summary judgment evidence. However, a letter from Defense counsel to Sellers’s counsel
dated October 26, 2015 that appears in the record indicates that CETCO calculates the
amount of LTI that would be due to Sellers as $426,111.81. Because of this discrepancy and
because Defendants did not and were not required to present competent summary judgment
evidence regarding the amount of LTI benefits due to Sellers should he prevail on his LTI
benefits breach of contract claim, we remand to the district court for the sole purpose of
determining the exact amount of LTI benefits due to Sellers and entering judgment in such
amount. In doing so, it is our hope that the parties can reach an agreement on the specific
amount due.
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