Court Opinion

ID: 8484062
Source: CourtListenerOpinion
Date Created: 2022-11-16 01:00:51.918989+00
Date Added: 2024-06-11T16:49:50.713971
License: Public Domain

Case: 21-20310      Document: 00516546108           Page: 1     Date Filed: 11/15/2022

              United States Court of Appeals
                   for the Fifth Circuit
                                                                          United States Court of Appeals
                                                                                   Fifth Circuit

                                                                                 FILED
                                                                         November 15, 2022
                                    No. 21-20310                            Lyle W. Cayce
                                                                                 Clerk

   T & C Devine, LTD.; Judith Westbrook McGuffee,

                                                              Plaintiffs—Appellants,

                                        versus

   Stericycle, Incorporated,

                                                              Defendant—Appellee.

                   Appeal from the United States District Court
                       for the Southern District of Texas
                            USDC No. 4:19-CV-3124

   Before Higginbotham, Southwick, and Higginson, Circuit
   Judges.
   Stephen A. Higginson, Circuit Judge:*
          In 2012, T & C Devine, Ltd. entered into a five-year amended
   agreement with Stericycle, Inc. to license Devine’s medical-waste disposal
   technology in Texas. 1 Devine argues that Stericycle breached the

          *
            Pursuant to 5th Circuit Rule 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   opinion should not be published and is not precedent except under the limited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 Circuit Rule 47.5.4.
          1
            Thomas Devine licensed medical technology to Med-Shred from 2003 to 2009.
   In 2009, Stericycle merged with Med-Shred’s parent company and assumed Med-Shred’s
Case: 21-20310          Document: 00516546108              Page: 2   Date Filed: 11/15/2022

                                           No. 21-20310

   agreement’s terms because Stericycle failed to provide data on the
   technology’s costs and expenses. Devine claims it was unable to license its
   equipment to other parties because it lacked that data. Stericycle responds,
   inter alia, that (1) it did not breach the terms of the agreement; (2) if it did
   breach the terms of the agreement, it is not liable for Devine’s consequential
   damages because those damages were not foreseeable; and (3) Devine waived
   its rights to enforce the allegedly breached terms.
          On summary judgment, the district court agreed with Stericycle’s
   second and third arguments and dismissed Devine’s suit. 2 Devine timely
   appealed, and we have jurisdiction under 28 U.S.C. § 1291. “We review a
   grant of summary judgment de novo under the same standard applied by the
   district court.” City of Shoreacres v. Waterworth, 420 F.3d 440, 445 (5th Cir.
   2005). “We may affirm the district court’s grant of summary judgment on
   any ground supported by the record and presented to the district court.”
   Amerisure Mut. Ins. Co. v. Arch Specialty Ins. Co., 784 F.3d 270, 273 (5th Cir.
   2015). We AFFIRM on the ground that Devine’s consequential damages
   were not foreseeable.
          Texas law requires that consequential damages be foreseeable at the
   time of contracting. Signature Indus. Servs., LLC v. Int’l Paper Co., 638
   S.W.3d 179, 184 (Tex. 2022); accord Basic Cap. Mgmt., Inc. v. Dynex Com.,
   Inc., 348 S.W.3d 894, 901 (Tex. 2011) (“Foreseeability is a fundamental
   prerequisite to the recovery of consequential damages for breach of
   contract.”). “A loss that is not the probable consequence of the breach, from
   the breaching party’s perspective at the time of contracting, is not

   obligations under its licensing agreement with Devine. In 2012, Devine formed T & C
   Devine, Ltd. and executed the amended agreement which is the basis for this litigation.
          2
              The district court did not reach the first argument.

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                                     No. 21-20310

   foreseeable.” Signature Indus. Servs., 638 S.W.3d at 186 (quotation omitted);
   accord id. (“[C]onsequential damages are not recoverable unless the parties
   contemplated at the time they made the contract that such damages would
   be a probable result of the breach.” (quoting Stuart v. Bayless, 964 S.W.2d
   920, 921 (Tex. 1998)).
          At the crux of this litigation is a provision of the 2012 agreement titled
   ANNUAL REPORT, which reads,
          Licensee [Stericycle] agrees to deliver to Licensors [Devine]
          annually, within ninety (90) days following the end of
          Licensee’s fiscal year, a report covering the previous fiscal
          year’s operation of Processors and the use of the Technology
          by Licensee Group (the “Annual Report”). . . . All information
          obtained by licensors in any Annual Report, any audit or in any
          other manner shall be retained in the highest degree of
          confidentiality.
   Devine argues, and Stericycle denies, that the Annual Reports were required
   to include cost and expense information related to the operation and use of
   the licensed technology. But we will assume arguendo that Stericycle was
   required to include cost and expense information in the Annual Reports, and
   it is undisputed that Stericycle never provided any Annual Reports.
          Even still, Stericycle could not have foreseen Devine’s damages,
   allegedly caused by Devine’s inability to use the cost and expense data to
   solicit potential licensees, because the 2012 agreement prohibited Devine
   from using the cost and expense data for such purposes without Stericycle’s
   consent. The Annual Report provision states, “All information obtained by
   [Devine] in any Annual Report . . . shall be retained in the highest degree of
   confidentiality.” The agreement later states, “Neither party may disclose the
   other party’s Confidential Information to any third party without the other

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   party’s prior written approval.” Accordingly, Devine’s damages were not a
   probable consequence of the breach from Stericycle’s perspective at the time
   of contracting because it was not foreseeable that failing to provide
   confidential cost and expense data would deprive Devine of the opportunity
   to share that information with potential licensees.
          Devine offers three arguments in rebuttal. First, Devine relies on the
   first sentence of the following provision:
          CONFIDENTIAL INFORMATION. [1] The receiving party
          may use the disclosing party’s Confidential Information as
          such use is necessary and appropriate in connection with the
          receiving party’s business and operations or in the
          performance of the receiving party’s obligations under this
          Agreement but in no other manner. [2] Any use by the
          receiving party of the disclosing party’s Confidential
          Information other than as aforesaid shall require the written
          consent of the disclosing party. [3] Neither party may disclose
          the other party’s Confidential Information to any third party
          without the other party’s prior written approval . . . .
   Devine argues its desired use of the cost and expense data would be
   “necessary and appropriate” in connection with its business and operations,
   which include licensing its technology. Such use is therefore permissible
   according to the first sentence. But Devine’s reading cannot account for the
   third sentence of this provision, which makes clear that disclosure of
   confidential information to third parties does not fall under the permissive
   umbrella of the first. In its reply brief, Devine suggests that the first and third
   sentences are “conflicting provisions” that create an ambiguity that must be
   resolved by a jury. But that is implausible. The third sentence merely clarifies

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                                    No. 21-20310

   that the “business and operations” at issue in the first sentence do not
   include marketing to third parties.
          Second, Devine notes that the 2012 amended license agreement
   provides, “All capitalized terms contained herein shall have the meaning set
   forth in the [2005] License Agreement unless otherwise stated herein.” It
   argues in turn that the definition of Confidential Information in the 2005
   License Agreement does not make room for the cost and expense data at issue
   here. We need not engage this argument or reproduce the long and capacious
   definition contained in the 2005 agreement, however, because the 2012
   agreement’s definitional provision allows for modification (“unless
   otherwise stated herein”), and the Annual Reports provision is explicit that
   all information in the Annual Reports “shall be retained in the highest degree
   of confidentiality.” We cannot accept that this information is something less
   than “Confidential Information.”
          Finally, Devine argues that it put Stericycle on notice of its intention
   to relicense the technology because the 2012 agreement allowed Devine to
   market the technology outside of Texas. But even if Stericycle were on notice
   of Devine’s intent to relicense the technology, it does not follow that
   Stericycle was on notice of Devine’s intent to use confidential cost and
   expense information in the Annual Reports to do so.
          We conclude that the district court was correct to dismiss Devine’s
   suit because its consequential damages were not foreseeable.
          AFFIRMED.

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