Court Opinion

ID: 29949
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:47:54+00
Date Added: 2024-06-11T08:03:37.960284
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                       FOR THE FIFTH CIRCUIT

                       ____________________

                           No. 01-11482
                       ____________________

     MCKINNEY BB, LP

          Plaintiff - Counter Defendant - Appellee

          v.

     US REALTY ADVISORS, LLC

          Defendant - Counter Claimant - Appellant

     RH SERVICES COMPANY INC

          Intervenor Defendant - Counter Claimant - Appellant

_________________________________________________________________

           Appeal from the United States District Court
                for the Northern District of Texas
                           (00-CV-1762)
_________________________________________________________________
                         January 24, 2003

Before KING, Chief Judge, and JONES and EMILIO M. GARZA, Circuit
Judges.

KING, Chief Judge:*

     Appellants US Realty Advisors, L.L.C. and RH Services

Company, Inc. appeal the district court’s denial of their motion

for partial summary judgment and the grant of summary judgment to

Appellee McKinney BB, L.P.   Because the district court did not

     *
        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that this opinion should not be published and is not precedent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.
err in determining that Texas law governs this case and that

Appellants were not entitled to relief, we affirm.

                      I. Factual Background

     This appeal stems from a dispute over the terms and

conditions of a contract for the performance of real estate

brokerage services.   US Realty Advisors (“US Realty”) is a New

York limited liability company with its principal place of

business in Manhattan.   It is a registered investment advisor

focused on real estate, business trusts, and securities.    US

Realty offers sophisticated real estate advisory services to

public pension funds, corporations, financial institutions, and

private developers and investors on a nationwide basis.    RH

Services Company, Inc. (“RH Services”) is an affiliate that

exists solely for the benefit of US Realty and is a New York-

licensed real estate brokerage entity.   It has no employees of

its own, as all individuals performing real estate brokerage

services for RH Services are US Realty employees.    Unlike RH

Services, US Realty is not a licensed real estate broker in any

state.

     The property at issue in this case, the Blockbuster

Distribution Center (“Blockbuster Property”) located in McKinney,

Texas and owned by McKinney BB, L.P. (“McKinney”), offered a

business opportunity for US Realty because it necessarily

                                 2
involved a single tenant net lease transaction.2   A former US

Realty employee introduced officials from US Realty to those from

McKinney, and contractual negotiations between the parties

subsequently ensued.   The entirety of US Realty’s activity with

respect to the negotiations was performed in its New York office;

at no time did any employee travel to Texas for the purpose of

participating in the negotiations.    McKinney’s agent, Keystone

Strategies Inc. (“Keystone”), negotiated with US Realty from its

office in Dallas, Texas.

     At the end of negotiations, on September 13, 1999, McKinney

retained by contract the services of US Realty and RH Services to

market and structure the sale of the Blockbuster Property.    No US

Realty employees traveled to Texas for the purpose of executing

the retainer agreement, which the parties eventually labeled (and

we will call) the Advisor Contract.    An executive vice president

signed the Advisor Contract in New York and forwarded it to

Keystone, who thereafter executed the Advisor Contract in Texas

and sent an executed copy back to New York.

     The Advisor Contract appointed US Realty to be the

“exclusive disposition advisor with respect to the Property.”

Under the agreement, US Realty would prepare a business analysis

of McKinney’s interests, have an exclusive right to sell the

     2
        Single tenant net leasing is a niche in real estate
transactions in which US Realty has a level of expertise. US
Realty participates in $1 billion worth of such transactions
annually.

                                 3
Blockbuster Property on terms acceptable to McKinney, and

generally act as McKinney’s disposition advisor.    The agreement

provided for US Realty’s right, under certain conditions, to a

fee of 1% of the purchase price if the Advisor Contract was

terminated and the Blockbuster Property was nevertheless sold to

a purchaser produced by US Realty.   Moreover, the Advisor

Contract outlined varied services for US Reality to perform and

noted that any and all real estate brokerage functions would be

performed by RH Services.

     The Advisor Contract also established several conditions to

US Realty and RH Services’ receipt of a commission.    First, the

sale of the Blockbuster Property had to transpire within 180 days

following the expiration of the Advisor Contract.   Second, the

Advisor Contract required that within ten days of its expiration,

US Realty had to notify McKinney in writing of any prospective

purchaser of the Blockbuster Property with whom it had

substantial contact.   This condition was inserted with the

intention that Keystone and McKinney would know by a date certain

whether there was a prospective purchaser who might purchase the

Blockbuster Property within 180 days after the expiration of the

Advisor Contract.

     Originally, the Advisor Contract was scheduled to terminate

on November 9, 1999.   It was extended on four occasions, each

time in writing and each time at the request of US Realty.     The

last written extension expired on December 21, 1999.   Thus,

                                 4
pursuant to the express terms of the Advisor Contract, including

all extensions, if US Realty expected to be compensated under the

terms of the Advisor Contract, it had to meet the ten day written

notice condition by January 2, 2000 and the closing of the sale

to one of the prospective purchasers had to occur on or before

June 18, 2000 (which was 180 days after the expiration of the

Advisors Contract).

     During the term of the Advisor Contract, US Realty and RH

Services sent out twenty-seven confidentiality agreements to

potential purchasers.   They secured four bona fide offers for the

Blockbuster Property, including the offer from Peak Holdings,

which ultimately purchased the Blockbuster Property for

$38,500,500.   During this period of time, US Realty employees

never traveled to Texas (or any other state) while providing

services.   Moreover, there was no conduct or activity on the part

of US Realty employees outside the State of New York.

     As of the expiration date of the final written extension of

the Advisor Contract, US Realty and RH Services had secured a

confidentiality agreement from B.T. Raike, Peak Holdings’s

broker, secured a $37 million offer from Lexington Corporate

Properties Trust, and delivered a status report that revealed the

activity and interest in the Blockbuster Property created by US

Realty and RH Services.   Yet, the Blockbuster Property still had

not been sold and McKinney never extended the Advisor Contract

beyond the expiration date of the final extension.   At this

                                 5
point, US Realty and RH Services departed from the written

agreement by continuing to market the Blockbuster Property and

broker deals with prospective purchasers.

     Peak Holdings forwarded its initial offer directly to

McKinney on January 28, 2000, and McKinney counteroffered.     On

February 25, 2000, Peak Holdings acknowledged McKinney’s

counteroffer and made a final offer.   Peak Holdings and McKinney

eventually entered into a contract for the sale of the

Blockbuster Property on May 4, 2000.   McKinney agreed to

indemnify Peak Holdings as to any claim by any broker or finder

with which it dealt.   Although Peak Holdings signed the letter of

intent, the final purchaser of the property was BV Realty

Partners, a Texas limited partnership.   BV Realty Partners closed

on the Blockbuster Property on July 28, 2000.3

                       II. Procedural History

     Prior to the closing on the Blockbuster Property, US Realty

demanded from McKinney a commission for services rendered.     Upon

receiving the payment demand from US Realty, McKinney initiated

the underlying action in Texas state court, seeking a declaration

that it did not owe compensation to US Realty under the Advisor

Contract.   McKinney advanced four arguments to establish US

     3
        Despite its efforts, US Realty fell short in meeting the
two deadlines provided in the Advisor Contract, as it did not
provide McKinney with a list of prospective purchasers by January
2, 2000 and, as of June 18, 2000, it had not facilitated a
closing with a prospective purchaser that it had both contacted
and identified.

                                  6
Realty’s inability to recover: (1) US Realty was precluded from

entitlement to fees by operation of the Texas Real Estate License

Act (“RELA”) because neither US Realty nor RH Services was a

licensed broker in Texas; (2) US Realty did not fulfill a

condition precedent to the recovery of a commission, i.e., that

the sale of the Blockbuster Property had to be consummated within

180 days after the expiration of the Advisor Contract (since the

Advisor Contract was never extended orally or in writing beyond

December 21, 1999); (3) any oral extension or modification of the

written agreement was unenforceable under the Statute of Frauds

provisions of the Texas RELA; and (4) in any event, US Realty

breached its obligations under the Advisor Contract by, inter

alia, failing to prepare and revise financial reports and cash

flow analyses.

     US Realty removed the case to federal district court and

asserted counterclaims for breach of contract and unjust

enrichment.   McKinney thereafter moved for summary judgment,

contending that Texas law governed the controversy and the Texas

RELA operated to preclude remuneration under both Texas and New

York law.

     RH Services intervened in the action as a defendant, and

together with US Realty, cross-moved for partial summary

judgment, maintaining that they had established their entitlement

to quantum meruit recovery under New York law.   They claimed New

York law should apply because: (1) any fair application of the

                                 7
Texas choice of law rules points to New York as the state with

the most significant interest in this controversy; (2)

application of the procedural law of Texas, which includes the

Statute of Frauds provision of the Texas RELA, would make the

Advisor Contract’s oral extension unenforceable and thus enable

recovery under quasi-contract theory; and (3) application of the

Texas Statute of Frauds does not preclude consideration of New

York substantive law, which recognizes a cause of action for

unjust enrichment when a licensed broker’s performance of an

unenforceable written agreement results in a clear benefit to the

other contracting party.

     The district court granted McKinney’s Motion for Summary

Judgment and denied US Realty and RH Services’ Motion for Partial

Summary Judgment.   The court found that the Texas Statute of

Frauds applied and barred US Realty and RH Services’ unjust

enrichment counterclaim.   In denying the cross-motion for partial

summary judgment, the court reasoned that even if it applied New

York’s Statute of Frauds, relief would remain unavailable to US

Realty and RH Services because the proffered evidence showed that

US Realty, although unlicensed, provided brokerage services in

the subject transaction, an act prohibited under New York law.

The court further found that § 535.1 of the Texas Administrative

Code precluded US Realty and RH Services’ counterclaim because US

Realty did not hold a Texas real estate license.

                                 8
     US Realty and RH Services appeal, seeking review of the

district court’s grant of summary judgment to McKinney and the

denial of their partial summary judgment motion, including the

district court’s choice of law determination, interpretation of

New York law, and application of the Texas Statute of Frauds and

Administrative Code.

                        III. Standard of Review

     This court reviews the grant or denial of a summary judgment

motion de novo, using the same criteria used by the district

court in the first instance.     Pruitt v. Levi Strauss & Co., 932

F.2d 458, 461 (5th Cir. 1991), abrogated on other grounds by

Floors Unlimited, Inc. v. Fieldcrest Cannon, Inc., 55 F.3d 181,

185 (5th Cir. 1995).    We review the evidence and any inferences

to be drawn therefrom in the light most favorable to the non-

moving party.   Id.    The district court’s grant of summary

judgment is proper if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with

affidavits, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.     Id.

                IV. Choice of Law; Unjust Enrichment

     The determinative issue in this case is whether New York or

Texas law governs the Advisor Contract.    Once this choice of law

determination is made, then an assessment of the relief available

to US Realty and RH Services can be made.    At the onset of this

                                   9
discussion, it is imperative to note that because we reach the

conclusion that US Realty and RH Services were not entitled to

compensation under unjust enrichment theory, it becomes

unnecessary to determine whether US Realty and RH Services should

additionally be denied compensation for failing to obtain a Texas

real estate license.     Given this result, we leave to another

court the task of parsing the words and phrases of the Texas

administrative statute on real estate licensing.

A.   Analysis of the Choice of Law

     A federal court sitting in diversity must apply the choice

of law rules of the state in which it sits, e.g., Access Telecom,

Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 704-05 (5th Cir.

1999).   We thus consider the choice of law rules of Texas.    Texas

courts follow the Restatement (Second) of Conflict of Laws in

choice of law determinations involving contractual disputes.

E.g., Minnesota Mining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d

733, 735 (Tex. 1997).4    Moreover, the Texas Supreme Court, in

     4
        US Realty and RH Services raise several threshold
questions that, under Texas law, must be answered prior to
analyzing the choice of law under the Restatement. First, if the
case involves questions of remedy and procedure, State of Cal.,
Dep’t of Mental Hygine v. Corpus, 309 S.W.2d 227, 230 (Tex.
1958), or a Texas statute points to the application of Texas law,
Busse v. Pac. Cattle Feeding Fund, 896 S.W.2d 807, 814 (Tex.
App.–Texarkana 1995, writ denied), then Texas law applies and a
determination under the Restatement’s “most significant
relationship” criteria is unnecessary. Unjust enrichment is not
a remedy but is an alternative theory of recovery governed by the
substantive law of contracts, see generally Knebel v. Cap. Nat’l
Bank of Austin, 505 S.W.2d 628, 632 (Tex. Civ. App. 1974), rev’d
on other grounds, 518 S.W.2d 795 (Tex. 1974) (“When our courts

                                  10
interpreting the Restatement, has directed courts to consider

which state had the “most significant relationship” to the

particular substantive issue, Duncan v. Cessna Aircraft Co., 665

S.W.2d 414, 421 (Tex. 1984).    The particular substantive issue in

this case is whether the Advisor Contract precludes RH Services

and US Realty from recovering for the real estate brokerage

services performed by them.    The existence of the Advisor

Contract is essential to the choice of law issue before this

court; US Realty and RH Services contend that New York law would

enable them to recover despite the existence of the Advisor

Contract, while McKinney contrarily avers that the presence of

the Advisor Contract precludes recovery.

     Because Texas law requires us to consider which state’s law

has the most significant relationship to the particular

substantive law under consideration, the Restatement provision

that most directly implicates the legal issues arising from this

case must be evaluated, along with the Restatement’s more general

default rules.   Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d

202, 205, 206 n.2 (Tex. 2000).5    A real estate brokerage contract

today refer to a claim ‘on quantum meruit’ reference is not being
made to procedural rules but to the substantive rules of decision
which govern disposition of the merits of the claim.”). There is
no existing statute directing that Texas law applies to this
claim. An analysis of choice of law under the Restatement is
appropriate.
     5
        As Hughes Wood Products illustrates, the Restatement
sets out specific rules in various sections that can always be
superceded by the guidelines in § 6. The sections of the

                                  11
is principally a contract for employment, not a sale or other

contract conveying an interest in land.     Richland Dev. Co., Inc.,

v. Staples, 295 F.2d 122, 125 (5th Cir. 1961).     In interpreting

Texas conflicts law, this court has observed that “[i]n cases

involving contracts for the rendition of services, the Texas

Supreme Court has particularly relied on section 196 of the

Restatement” when the contract lacks a choice of law provision.

Pruitt, 55 F.3d at 185.   Thus, in a case involving a contract for

the provision of real estate brokerage services, it is clear that

we must incorporate § 196 into our analysis.6

Restatement of Conflict of Laws are intended to be cross-
applicable, a point that can be understood by reading the text of
the sections themselves, as well as the commentary to the
sections. An approach that disregards one rule for the other
would be excessively formalistic and would ignore the lesson of
Hughes Wood Products that the Restatement should be read and
interpreted as an organic whole where the focal point is which
state has the most significant relationship. It is for this
reason that in our analysis of the case, we evaluate the facts
not only under § 196, but under §§ 6 and 188 as well.
     6
        McKinney argues that § 196 is implicated only when the
contract expressly provides for the performance of personal
services in a single forum. McKinney is only half-correct in
this regard; the Comment to § 196 also states the section is also
invoked when it “can be inferred either from the contract’s terms
or from the nature of the services involved or from other
circumstances.” RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 196 cmt. a.
Even though another state may have a more significant
relationship to the parties under § 6, § 196 is nevertheless
applicable because an inference may still be made that the
brokerage services called for by the Advisor Contract were to be
rendered by US Realty and RH Services in New York. Further
supporting our consideration of § 196 is the Comment’s statement
that the section applies to contracts with professional service
providers such as brokers. Id. It is apparent that McKinney’s
reading of § 196 is far too restrictive.

                                 12
     1.    Applicable Restatement Sections7

     Although § 196 suggests that the place of performance

generally will be conclusive in determining the applicable law

when evaluating service contracts without a choice of law

provision, e.g., DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 679

(Tex. 1990), this presumption can be overcome if another state

has the most significant relationship using the factors set out

in § 6.   See, e.g., Pruitt, 932 F.2d at 461.8   Thus, New York

law, as New York is the state of the performance of the contract,

will govern in this case unless Texas has the most significant

relationship to the transaction and the parties.    In this case,

we conclude, after evaluating the § 6 interests and the § 188

contacts, that Texas has the most significant relationship

because all services performed under the Advisor Contract were

     7
        In their counterclaim, US Realty and RH Services did not
seek a remedy of restitution and have not argued that § 221 of
the Restatement or this court’s decision in Caton v. Leach Corp.,
896 F.2d 939 (5th Cir. 1990), governs this case.
     8
          The text of § 196 reads:

     The validity of a contract for the rendition of services
     and the rights created thereby are determined, in the
     absence of an effective choice of law by the parties, by
     the local law of the state where the contract requires
     that the services, or a major portion of the services, be
     rendered, unless, with respect to the particular issue,
     some other state has a more significant relationship
     under the principles stated in section 6 to the
     transaction and the parties, in which event the local law
     of the other state will be applied.

Id. § 196 (emphasis added).

                                 13
targeted in some way, shape, or form toward the Blockbuster

Property in Texas.

     In deciding which state has the most significant

relationship, the § 6 factors should be evaluated using the

contacts listed in § 188 of the Restatement.                See Maxus

Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 57 (Tex.

1991).   According to § 6, to decide what state has the most

significant relationship to the transaction and the parties, the

court should consider:

     (a) the needs of the interstate and international systems;
     (b) the relevant policies of the forum;
     (c) the relevant policies of other interested states and the
     relative interests of those states in the determination of
     the particular issue;
     (d) protection of justified expectations;
     (e) the basic policies underlying the particular field of
     law;
     (f) certainty, predictability, and uniformity of result;
     (g) ease in the determination and the application of the law
     to be applied.

RESTATEMENT (SECOND)   OF   CONFLICT   OF   LAWS § 6(2) (1971).   Section 188

states that, in the absence of an effective choice of law by the

parties, a number of contacts should be taken into account in

applying the principles of § 6.                These § 188 factors include:

     (a) the place of contracting;
     (b) the place of negotiation of the contract;
     (c) the place of performance;
     (d) the location of the subject matter of the contract; and
     (e) the domicile, residence, nationality, place of
     incorporation and place of business of the parties.

Id. § 188(2).    It is with these factors in mind that we begin our

evaluation of the specific facts of this case.

                                             14
     2.   Relevant contacts

     The Texas Supreme Court has clarified the exact steps of our

analytic process.    In ascertaining the most significant

relationship, we first identify those state contacts that should

be considered.     Duncan, 665 S.W.2d at 421.   Once the contacts are

identified, the question of which state’s law to apply is a

question of law.     Id.   Through consideration of the qualitative

nature of the identified contacts, i.e., how the contacts

implicate the broad state policy interests underlying the unjust

enrichment claim, we can then select the applicable law.       See id.

     The contacts in this case are readily identifiable and

relatively undisputed.     Texas is the place of contracting

(McKinney accepted US Realty’s contract offer while in Texas);9

the place of the subject of the Advisor Contract (property

located in Texas); McKinney’s domicile; and a place of the

negotiation of the terms of the Advisor Contract.     New York is

the place of the Advisor Contract’s performance, a place of

negotiation, and the domicile of US Realty and RH Services.      One

of these contacts, the place of negotiation, is of minimal

consequence in this analysis because the place where the parties

negotiate is “of less importance when there is no one single

     9
        Generally, the a contract is considered complete at “the
place where the last act necessary to complete the contract is
done, namely where the offer is accepted.” Lockwood Corp. v.
Black, 501 F. Supp. 261, 264 (N.D. Tex. 1980), aff’d, 669 F.2d
324 (5th Cir. 1982).

                                   15
place of negotiation and agreement, as for example, when the

parties do not meet but rather conduct their negotiations from

separate states,” RESTATEMENT § 188 cmt. a, which is what occurred

in the instant case; effectively, the place of negotiation

contacts cancel each other out.    By sheer number, those contacts

that do remain favor application of Texas law.

     However, ending the inquiry at this point would be premature

because the most significant relationship test hinges on the

qualitative nature of the particular contacts with a state rather

than the mere number of occasions.     We thus turn to the factors

laid out in the Restatement to help us reach the correct legal

conclusion.

     3.   Most Significant Relationship Analysis

     Of the § 6 factors, there are only three that are relevant

in the instant case.   Those factors that are applicable are the

relevant policies of the forum, i.e., Texas; the relevant

policies and interests of other interested states, i.e., New

York; and the protection of justified expectations.10

     10
        US Realty and RH Services argue cursorily that the needs
of interstate and international system require application of New
York law because the application of the Texas RELA to this case
would unduly burden interstate commerce. This argument is
ultimately unpersuasive because US Realty and RH Services offer
no analysis or evidence to support this assertion. More
importantly, because we focus our analysis on Texas’s interest in
evaluating the unjust enrichment claim, as opposed to the
application of the RELA licensing requirements, the effect, if
any, of RELA on interstate commerce is outside the scope of our
review.

                                  16
            a.   Relevant Policies and Interests of
                 Texas and New York

     Combining the two interest-related factors into one

discussion assists in the inexact science that is judicial

balancing.    Weighing in Texas’s favor are the places of the

execution of the contract as well as the subject matter of the

contract.    While US Realty and RH Services raise an argument that

there is no legitimate Texas interest in regulating the services

performed by New York brokers in their home state, Texas has an

interest in securing the contract rights of its own residents,

particularly when subject of contract is brokerage services for

property located in Texas.    See DeSantis, 793 S.W.2d at 679-680

(finding, in a choice of law determination, that Texas had a

greater interest than Florida in protecting the rights of Texas

residents entering into contracts for employment).     Moreover, in

this case, it is reasonable to conclude that Texas has an

economic interest in protecting Texas-domiciled land vendors from

companies serving numerous individual customers in the national

marketplace.

     It is undeniable that New York has an interest in this

dispute because the state where performance is to occur under a

contract has an obvious interest in the nature of the performance

and in the party that is to perform.    RESTATEMENT § 188 cmt. e.

However, diminishing New York’s interest in the dispute is the

plain fact that US Realty and RH Services market their services

                                 17
nationwide.     US Realty advertises itself as a sophisticated

company providing an array of services with a multitude of

business contacts outside New York State.       While New York

provides the location of the headquarters of the company, and

thus the place of performance for the each and every one of US

Realty and RH Services’ contracts, the state garners a negligible

interest in all other facets of the dispute because the focus of

US Realty’s business strategy extends outside New York.

     When both states have clear interests in the contractual

dispute, the qualitative nature of the contacts with the state

become increasingly important.     We find no cogent reason why New

York would have a greater interest than Texas in this contractual

dispute;   if anything, the interests in this regard are evenly

balanced and due to US Realty’s national focus, are tipped

slightly in favor of Texas.

           b.     Protection of Justified Expectations

     The protection of justified expectation of the parties at

the time of contracting is of considerable importance in the

field of contracts.     See id. § 188 cmt. b.    Moreover, the need

for protecting expectations impacts another § 6 factor: ensuring

certainty, predictability, and uniformity of result.       Id.

Because we find that both parties had some expectation that Texas

law would apply, this influential factor tips the scale in favor

of the application of Texas law.

                                  18
     A handful of facts support this finding.    Both US Realty and

RH Services were keenly aware that McKinney was a Texas resident

and that the Blockbuster Property was located in Texas.    US

Realty, which by its own account, is a multi-national,

sophisticated investment-advising entity, elected not to put a

choice of law provision in the Advisor Contract that it drafted.

In effect, US Realty and RH Services knowingly left open the

possibility that Texas law would apply in any dispute arising out

of the contractual relationship.

     Further clarifying the expectations of the parties is the

Restatement itself.    The Comment to Restatement § 188 supports a

presumption relating to the expectations of parties in the

context of contracts concerning land.    It states:

     When the contract deals with a specific physical thing, such
     as land..., the location of the thing is significant. The
     state where the thing ... is located will have a natural
     interest in transactions affecting it. Also the parties
     will regard the location of the thing ... as important.
     Indeed, when the thing ... is the principal subject of the
     contract, it can often be assumed that the parties, to the
     extent that they thought about the matter at all, would
     expect that the local law of the state where the thing ...
     was located would be applied to determine many of the issues
     arising under the contract.

Id. § 188 cmt. e.    In this case, it can be rightly assumed that

the parties expected to some extent that Texas law would apply

because all services performed under the Advisor Contract were

targeted in some way, shape, or form, toward the Blockbuster

Property in Texas.    Given the nature of real estate brokerage

service contracts, the Blockbuster Property was clearly the

                                 19
subject matter of the Advisor Contract.   On balance, this factor

favors the application of Texas law.

     US Realty and RH Services argue that Advisor Contract’s

disclosure of New York-licensed RH Services as the brokerage

service provider, as well as US Realty’s lack of offices outside

New York, were sufficient to create McKinney’s expectation that

New York law would apply.   It is US Realty who should have

expected the likelihood that Texas law would apply, especially

when drafting a contract – for a Texas customer wishing to sell

land located in Texas – and leaving out a clear choice of law

provision.   Customer McKinney would justifiably expect Texas law

to apply because the real estate that was the object of the

transaction was located in Texas, New York was expected to have

minimal impact on a nationwide marketing transaction, and the

Advisor Contract omitted a provision stating which law governed.

Given the Restatement’s presumption as to the expectations of

parties entering into contracts with land as the subject matter,

we conclude that the expectation that Texas law would apply be

placed on US Realty.

     4. Which State Law Governs

     Therefore, applying the guiding principles of the “most

significant relationship test,” we reach the conclusion that the

factors weigh most heavily in favor of applying Texas substantive

                                  20
law to evaluate US Realty and RH Services’ rights to compensation

for services rendered.11

B.   The Unjust Enrichment Claims

     Applying Texas substantive law, we now turn to the merits of

US Realty and RH Services’s claims of unjust enrichment.12   US

Realty and RH Services claim that they are entitled to relief

because McKinney was unjustly enriched by the services rendered

during the term of the written contract.   It is well-established

     11
        While on its face, this outcome would appear to be harsh
for national real estate brokerage firms and other related
business entities, it must be emphasized that the Restatement’s
balancing analysis is highly fact dependent and thereby could
result in differing choices of law in other scenarios. A party
wishing to avoid application of another state’s laws to its
business could simply include a choice of law provision in its
contracts. In Texas, contractual choice of law provisions are
ordinarily enforced if the chosen forum has only a substantial
relationship to the parties and the transaction. See Access
Telecom, Inc. v. MCI Telecomms., Corp., 197 F.3d 694, 705 (5th
Cir. 1999) (citing DeSantis, 793 S.W.2d at 677-78).
     12
        There is a question as to whether the Texas RELA
precludes US Realty and RH Services from seeking damages under
the theory of unjust enrichment. US Realty and RH Services rely
on Fifth Circuit precedent for their assertion that the Texas
RELA Statute of Frauds does not bar their claim for unjust
enrichment. Morris v. LTV Corp., 725 F.2d 1024 (5th Cir. 1984)
(finding that the Statue of Frauds provision of the Texas RELA
invokes the procedural law). They contend that Morris stands for
the proposition that even in the face of a written agreement
rendered unenforceable by the Texas RELA, a court sitting in
diversity may apply the law of a foreign state and recognize a
claim for unjust enrichment. US Realty and RH Services are
correct that the Statute of Frauds does not preclude our ability
to examine the unjust enrichment claim on the merits; however, we
will not address the issue of whether the Texas RELA’s Statute of
Frauds provides a procedural bar to US Realty and RH Services’s
unjust enrichment claims because we decide the case on
contractual grounds alone.

                               21
that Texas law prohibits a party from taking advantage of the

remedy of unjust enrichment where “a valid, express contract

governing the subject matter of the dispute exists.”    E.g.,

Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 454 (5th Cir.

2001) (citing Woodward v. Southwest States, Inc., 384 S.W.2d 675,

675 (Tex. 1964)).   Here, the subject of unjust enrichment claim,

i.e., compensation for services rendered, was covered by the

Advisor Contract; the Advisor Contract specified how, when, and

if a commission would be awarded.    In attacking the applicability

of the Texas rule on unjust enrichment, US Realty and RH Services

assert that because the Texas RELA Statute of Frauds rendered the

entirety of the Advisor Contract unenforceable, no valid contract

exists.   Such an assertion is patently incorrect, as only the

oral extensions can be construed as unenforceable under the

Statute of Frauds; the original written contract was entirely

valid and enforceable.

     Both sides agree with the district court’s finding that the

oral extensions of the Advisor Contract are unenforceable under

the Texas RELA’s Statute of Frauds.   While it is clear that the

existence of the enforceable written contract precludes relief

for US Realty and RH Services, the issue of whether they would be

entitled to compensation for services rendered after the

expiration of the Advisor Contract remains.   This is because,

under Texas law, the Statute of Frauds’s rendering of oral

extensions as unenforceable does not inherently preclude recovery

                                22
in quantum meruit for the reasonable value of services rendered

pursuant to the oral extensions.      See, e.g., Campbell v. Nw.

Nat’l Life Ins. Co., 573 S.W.2d 496, 498 (Tex. 1978).

     In effect, US Realty and RH Services seek compensation for

services that were not required of them by McKinney under the

Advisor Contract.    Texas courts apply unjust enrichment “where

there is a failure to make restitution of benefits received under

the circumstances which give rise to an implied or quasi-

contractual obligation to repay, that is, where a benefit was

wrongly secured or passively received which would be

unconscionable for the receiving party to retain.”      E.g., Mowbray

v. Avery, 76 S.W.3d 663, 679 (Tex. App.–Corpus Christi 2002, no

pet h.) (citations omitted).    The question thus becomes whether

an obligation to repay, whether implied or quasi-contractual,

arises here.

     No such obligation arose between US Realty and McKinney.

After the expiration of the Advisor Contract, US Realty engaged

in several activities, including efforts to market the

Blockbuster Property and secure three additional confidentiality

agreements.    However, after the expiration of the Advisor

Contract, US Realty had no involvement with either Peak Holdings

or its broker.    In fact, Peak Holdings discontinued its efforts

to send offers through US Realty, instead opting to conduct its

sale negotiations with Keystone only.     Further, no US Realty

employee participated in structuring the proposed sale of the

                                 23
Blockbuster Property, and no US Realty employee participated in

or was present during negotiations or the closing.   Any benefit

to McKinney that can be attributed to US Realty and RH Services’

post-expiration services was negligible at best.

     For these reasons, we find lacking US Realty and RH

Services’ claims that they were entitled to recovery under Texas

unjust enrichment principles, either for services performed

during the term of the Advisor Contract or after its

expiration.13

                            Conclusion

     After narrowing our review to US Realty and RH Services’

claim of unjust enrichment, we find that Texas has the most

significant relationship to the particular substantive issue in

this case and thus, Texas law applies.   In the final analysis,

Texas law precludes US Realty and RH Services from receiving

relief under the theory of unjust enrichment.   For the above

reasons, US Realty and RH Services have not raised a genuine

issue of material fact that would allow them to recover under

Texas law.   Therefore, the grant of McKinney’s summary judgment

motion and the denial of US Realty and RH Services’ cross-motion

for partial summary judgment must be affirmed. US Realty and RH

Services shall bear the costs of this appeal.

     13
        Because we find that Texas law governs this case and
that it would prevent US Realty and RH Services from recovering,
there is no need to address an alternative outcome under the law
of the Empire State.

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AFFIRMED.

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