Opinion
Civil Action No. SA-02-CV-1209-XR.
September 17, 2004
ORDER
On this day the Court considered cross motions for summary judgment on the claims and counterclaims that the parties have filed for declaratory relief and various other state law causes of action. Plaintiffs have filed claims for declaratory judgment as to the validity of Development and License Agreements between the parties. Defendants have filed counterclaims for declaratory judgment as to the validity of the same agreements, as well as counterclaims for breach of the implied covenant of good faith and fair dealing, tortious interference with contract and prospective contractual relationships, breach of contract, violations of the Texas Deceptive Trade Practices Act, and injunctive relief. The Court will GRANT in part and DENY in part Plaintifs' Motion for Summary Judgment (docket no. 61) and GRANT in part and DENY in part Defendants' Motion for Summary Judgment (docket no. 58). The Court will reserve judgment on part of the motions and hear oral argument with regard to the continued validity of the 1994 Development Agreement (Plaintiffs' Count I and Defendants' Counterclaim Counts Six and Seven) and the scope of the License Agreement (Defendants' Counterclaim Counts Two and Eight).
I. Factual and Procedural Background
A. PartiesPlaintiffs in this suit are Texas Taco Cabana, L.P., a Texas corporation, and T.C. Management, Inc. ("TCM"), a Delaware corporation. Together, and under their corporate parent, Carrols Corporation, one of the Counter-Defendants in this suit, Plaintiffs run a chain of patio cafe restaurants in Texas known as Taco Cabana. Plaintiffs own the rights, title and interest in the trade name, trademark, and service mark "Taco Cabana."
Carrols Corp., while a member of this case solely as a third-party defendant, will be included in the generic term "Plaintiffs" throughout this Order with regard to Defendants' counterclaim for the sake of clarity, as they are identified with Texas Taco Cabana and TMS.
Defendants are Taco Cabana of New Mexico, Inc. ("TCNM"), a New Mexico corporation, and T.M.S. Enterprises Limited Partnership ("TMS"), a New Mexico Limited Partnership. TCNM is the general partner of TMS. According to Defendants, TMS was created to function as the operational arm of TCNM with the purpose of sharing profits between the partners in the development of Taco Cabana restaurants in New Mexico. TCNM is a subsidiary of Taco Cabana of El Paso, Inc. ("TCEP"), a former franchisee of Taco Cabana restaurants in El Paso, Texas. Melvin Sloan is the President and Chief Executive Office of both TCNM and TCEP. Sloan, along with his wife, is also the co-trustee of the trust that is the principal shareholder of TCEP.
B. 1988 Development Agreement
On May 5, 1988, TCNM entered into a Development Agreement with Taco Cabana International, Inc., the predecessor to TCM, for the development and operation of a minimum of three Taco Cabana franchises in the Albuquerque and Santa Fe, New Mexico restaurant markets ("1988 Development Agreement"). This development agreement required TCNM to develop a minimum of three restaurants in strict accordance with the development schedule. TCNM was to build the first two restaurants in Albuquerque and the third in Santa Fe, with all three restaurants to be opened or under construction by July 15, 1991.
The 1988 Development Agreement states that "[t]ime is of the essence." Development rights were to end immediately if any financial default was not cured within 10 days or any non-financial default was not cured within 30 days. The agreement also includes a waiver agreement stating that waiver of rights at one time does not prevent the subsequent right to require strict compliance with any and all requirements under the agreement. Defendants admit that TCNM did not develop any restaurants under the 1988 Development Agreement.
C. 1994 Agreements
On July 1, 1994, TCNM and TCM entered into a second development agreement ("1994 Development Agreement"). This agreement grants to TCNM the right to develop and operate a minimum of three restaurants at locations to be determined within the State of New Mexico, exclusive of Dona Ana County. TCNM was required to open the third restaurant within 36 months after execution of the agreement. TCNM was given the right to extend its exclusive development period to another three restaurants if it met the development schedule for the first three restaurants. TCNM was required to obtain a License Agreement for each restaurant subsequent to the first restaurant at the time it was prepared to begin developing such restaurant. Beginning after the completion of the third restaurant, or the sixth restaurant if TCNM chose to exercise its rights to extend the exclusive period, TCNM was to retain the non-exclusive right to open additional licensed restaurants and the right of first refusal with regard to such sites as TCM proposed to operate or grant to a third party the right to operate a separate restaurant.
The 1994 Development Agreement states that "[t]ime is of the essence." Development rights were to end immediately if any financial default was not cured within 10 days or any non-financial default was not cured within 30 days. The development agreement was to terminate without opportunity to cure if TCNM intentionally misused or made any material unauthorized use of the Taco Cabana proprietary marks or any other identifying characteristic of the Taco Cabana System in such a manner as to reflect materially and unfavorably upon the Taco Cabana System. However, the development agreement, contrary to Plaintiffs' assertions, does not terminate without opportunity to cure if TCNM failed for any reason to comply with the development schedule. In fact, the agreement states that if TCNM fails to maintain the pace of restaurant development under the development schedule, the agreement shall terminate with opportunity to cure within 30 days after notice. The agreement also states that termination of development rights shall not terminate any License Agreement for the operation of licensed restaurants unless such event of default also by its terms serves as an event of default under the License Agreement. The agreement also includes a waiver agreement stating that waiver of rights at one time does not prevent the subsequent right to require strict compliance with any and all requirements under the agreement.
The 1994 Development Agreement references the 1988 Development Agreement and states that the "former Development Agreement . . . has terminated and [TCNM] has no further rights with respect thereto. All rights of [TCNM] to develop Taco Cabana stores in New Mexico are set forth in this Taco Cabana Restaurant Development Agreement."
Also on July 1, 1994, TCM and TCNM executed a License Agreement. This agreement granted TCNM the right to operate a Taco Cabana restaurant and provided that TCM would not operate or license any third party to operate a restaurant within a radius of two miles of the site of the licensed business. The granting clause of the License Agreement confusingly places the "location" of the site of the licensed business as: "4810 Hondo Pass, El Paso, Texas ____________________ Albuquerque, New Mexico, and more particularly described on Exhibit B hereto." "Exhibit B" is not attached to the License Agreement. The agreement also is labeled "Hondo Pass License Agreement" at the bottom of each page.
The License Agreement terminates without opportunity to cure under certain circumstances. These include if TCNM intentionally misuses or makes any material unauthorized use of the Taco Cabana Proprietary Marks or any other identifying characteristic of the Taco Cabana System in such manner as to reflect materially and unfavorably upon the Taco Cabana System and if TCNM makes any material misrepresentation relating to the acquisition of the licensed business.
D. Post-1994 Events
TCNM opened two restaurants in the Albuquerque, New Mexico area within 12 months of execution of the 1994 agreements. No additional license agreement was ever executed between the parties. Defendants apparently concede that the 1994 License Agreement is intended to cover these two restaurants. In November of 1996, Sloan was diagnosed with a brain tumor. Defendants assert, and Plaintiffs do not contradict, that Sloan was told by Plaintiffs to concentrate on his health, rather than development. Sloan did not return to work until January of 1998. After this, Sloan set up TMS with the manager of the New Mexico restaurants, Ed Rodriguez. No new development was begun at this time.
In 1999 until mid-2000, Sloan and Plaintiffs apparently began entering into discussions as to continued development of the New Mexico market. The Chief Financial Officer of TCM sent Sloan a letter on June 12, 2000 stating that the company was as "excited as ever to have [Sloan] consider building another restaurant in the Albuquerque market." At approximately the same time, TCM sent a development agreement amendment to Sloan. This amendment was eventually signed August 17, 2000 ("2000 Amendment") and is the focus of much of the confusion of this case. Despite the fact that the 1994 Development Agreement specifically states that the 1988 Development Agreement was terminated, the 2000 Amendment states that it is "an extension and amendment to that certain Taco Cabana Restaurants Development Agreement dated May 5, 1988." The amendment states that it is between Texas Taco Cabana, Inc. and TMS and was signed by Sloan as Chief Executive Officer of TCNM, General Partner of TMS. It purports to amend the 1988 Development Agreement and extend the terms of that agreement through November 1, 2001 and grants to TMS the right to develop one additional restaurant within the Development Area (which was noted as all of New Mexico, exclusive of Dona Anna County, in the 1988 Development Agreement).
Despite the apparent extension of development rights until November 1, 2001, no new development was begun or discussed until about October 2001. The apparent reason for this delay was the pending divorce of Ed Rodriguez and Sloan's desire to not have the profits of the third restaurant tied up in divorce proceedings. Defendants admit that Sloan did not share this issue with Plaintiffs.
In October of 2001, after Rodriguez's divorce neared finalization, Sloan contacted Plaintiffs to discuss plans for the third restaurant. Brad Smith, Vice President of Real Estate, told Sloan that he would look into the issue, but no further answer was forthcoming. On March 5, 2002, Sloan emailed the General Counsel of Texas Taco Cabana, Becky Rainey, stating, "The 2nd Amendment to our Franchise agreement expired in Nov. Could we get a couple of years extension on it?" On March 8, 2002, the General Counsel of Carrols Corporation, Joseph Zirkman, informed Sloan that it was Plaintiffs' position that Defendants had no further development rights, as the 2000 Amendment had expired. Zirkman then wrote Sloan again on April 29, 2002, noting that Plaintiffs "previously had rights for additional development in the [Albuquerque] market, which were extended for a number of years but never acted upon." Zirkman further stated that "Taco Cabana [was] in the process of critically assessing its concept outside of its core markets in Texas. Until [they] completed that process, [they did] not intend to permit any further franchise development." Once that process was completed, Zirkman stated that Plaintiffs "would be happy to sit down with [Sloan] and discuss additional development in the New Mexico market." Plaintiffs subsequently informed Defendants of their intention to examine developing Albuquerque themselves. Sloan sent two letters seeking clarification of Plaintiffs' contentions that Defendants were in default under the development agreements, neither of which were answered. One of these letters stated that Sloan would consider a failure to respond as a concession that Defendants were not in default. Sloan also sent letters under "Taco Cabana" letterhead to various real estate brokers in Albuquerque, asserting Defendants' intention to protect their alleged exclusive development rights within the City of Albuquerque.
Texas Taco Cabana and TCM filed this declaratory judgment action December 23, 2002. Plaintiffs seek a declaration that Defendants do not have the right to develop Taco Cabana Restaurants in New Mexico. They base this claim on the assertion that all development agreements and development rights have expired according to their terms. Plaintiffs also seek a declaration that Defendants are in breach of the License Agreement and that Defendants can no longer continue to operate the existing two Taco Cabana restaurants located in Albuquerque.
Defendants filed a counterclaim against Texas Taco Cabana and TCM, as well as Carrols Corporation as a third-party defendant, for declaratory judgment and other state law claims. Defendants seek a declaration as to the validity of the 1994 Development Agreement and the License Agreement. They also seek damages for various state law claims, including a breach of the implied covenant of good faith and fair dealing, tortious interference with existing and prospective contractual relationship, breach of contract, and the Texas Deceptive Trade Practices Act. They also seek injunctive relief prohibiting development by Plaintiffs within all of New Mexico, or in the alternative, a two mile radius around the City of Albuquerque. According to all relevant agreements, Texas law applies.
II. Standard of Review
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the burden of showing that there is no genuine issue as to a material fact and that the moving party is entitled to judgment as a matter of law. Willis v. Roche Biomedical Lab., Inc., 61 F.3d 313, 315 (5th Cir. 1995). Once the movant carries its initial burden, the burden shifts to the nonmovant to show that summary judgment is inappropriate. Fields v. City of S. Houston, 922 F.2d 1183, 1187 (5th Cir. 1991). All justifiable inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In making this determination, the court will review the evidence in the record and disregard the evidence favorable to the moving party that the jury is not required to believe. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 135 (2000). In order for a court to conclude that there are no genuine issues of material fact, the court must be satisfied that no reasonable trier of fact could have found for the nonmovant, or, in other words, that the evidence favoring the nonmovant is insufficient to enable a reasonable jury to return a verdict for the nonmovant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n. 4 (1986). If the record, viewed in this light, could not lead a rational trier of fact to find for the party opposing the motion, summary judgment is proper.
III. Analysis
Despite both the contentions of both parties that this is an "easy" case, the parties', and their attorneys', increasingly (and annoyingly) hostile attitudes towards each other, as well as the voluminous motions and attachments in this case (numbering well into the thousands of pages), evidence that this case is anything but. Essentially, both parties ask for a declaration as to the continuing validity of the 1994 Development Agreement and the License Agreement. Mingled with the validity of these agreements, which state guidelines for default and termination on their face, are the various dealings between the parties during this time-period, as well as the 2000 Amendment that purports to amend the 1988 Development Agreement, an agreement that had clearly terminated as of 1994.
Some examples of the charged rhetoric used by each party include: "[I]nstead of facts, [Plaintiffs] trot out a laundry list of mischaracterizations, accusations, and invectives that are unseemly and inappropriate." Defendants' MSJ at 2. "Taco Cabana and Carrols, with their armies of lawyers, want this Court to believe that Mr. Sloan `engaged in a campaign of deception to keep the market to himself and to injure the Taco Cabana system.' The accusation of a `campaign' is ludicrous." Defendants' MSJ at 12. "M r. Sloan therefore has admitted that his core defense is a self-indulgent daydream. . . ." Plaintiffs' MSJ at 12. "M r. Sloan argues that the reference to TMS as the `Developer' in the 2000 Second Amendment is a `mistake' and that the document should have referred to TCNM as the developer. Even if the Court were to accept this eye-rolling justification for ignoring the express designation of TMS as the `Developer,' Franchisees would still lose." Plaintiffs' Response at 7-8 (emphasis added). Counsel for both parties are admonished for their use of unprofessional and hostile language in their motions and briefing and are accordingly ordered to refrain from resorting to the use of such language in future filings with the Court. Further filings consistent with the parties' previous tone, to include the use of such adjectives as "ludicrious," "eye-rolling," and the like, will be treated as a violation of this Order and will subject the responsible attorney to the imposition of sanctions. See Langer v. Monarch Life Ins. Co., 966 F.2d 786, 811-12 (3rd Cir. 1992) (upholding district court's reprimand where judge intended to put an end to "recriminating motions" and "angry answers" and return to the actual merits of the case). Sanctions may include monetary fines as well as the publication of any sanction order to every associate and partner in the attorneys' respective law firms. See, e.g., Huettig Schromm, Inc. v. Land scape Contractors Council of Northern California, 582 F. Supp. 1519, 1522-23 (N .D. Cal. 1984), aff'd 790 F.2d 1421 (9th Cir. 1986); Donaldson v. Clark, 819 F.2d 1551 (11th Cir. 1987) (en banc) ("[S]anctions may include . . . requiring the errant attorney to circulate the court's opinion finding him in violation of Rule 11 to every member of his firm . . . or issuing a published or unpublished reprimand").
A. Validity Of The 1994 Development Agreement
Defendants contend that the 1994 Development Agreement is still valid because the 2000 Amendment, which they admit has expired, does not mention the 1994 Development Agreement but only the 1988 Development Agreement. They assert that Plaintiffs were required to set a new date for completion of development under the 1994 Development Agreement when they agreed to extend Defendants' development schedule during Sloan's illness. According to Defendants' argument, because Plaintiffs gave no new default date, the 1994 Development Agreement continues to be in effect, apparently into perpetuity.
Development rights under the 1994 Development Agreement have plainly expired according to their terms. Defendants were required to open a third restaurant within 36 months of execution of the agreement, which would have been in July 1997. Assuming that Plaintiffs gave their consent to a waiver of the development schedule during Sloan's illness, which encompassed late 1996 to the end of 1997, it is reasonable to assume that Plaintiffs intended Defendants to resume development once Sloan returned to work, which occurred at the beginning of 1998. Defendants did not attempt to resume development until sometime in 1999. At this time, the parties began negotiating the 2000 Amendment, which extended development rights to November 2001.
Defendants state that the 2000 Amendment was executed by TMS as successor to TCEP and that TCNM was not a party to the Amendment, even though it was a party to the document the Amendment is purporting to amend. While this results in a situation that is more than a little confusing, Defendants cannot defeat Plaintiffs' claims with this contention. TCNM is the general partner of TMS and is therefore liable for any and all obligations of TMS. TEX. REV. CIV. STAT. ANN. art. 6132a-1, § 4.03(b).
Whether the 2000 Amendment was intended by the parties to extinguish the 1994 Development Agreement or not, the unmistakable fact is that development rights under the 1994 Development Agreement have expired. Defendants surely cannot argue that once Plaintiffs waived strict compliance with the development schedule during Sloan's illness it was either bound to give a precise date for future development or it had waived its right to enforce some type of timetable for all time. This is, however, the crux of Defendants' argument. Plaintiffs contend that the extension of time under the 2000 Amendment evidences the date by which they expected development of the third restaurant to be completed, thereby setting the date that Defendants claim is required. Without deciding the requirements of parties to contracts in a situation as that faced by the parties, the Court is convinced that Plaintiffs would not have intended their waiver to last for all time. In fact, Plaintiffs clearly meant for their waiver to last only so long as Sloan was unable to work due to his illness, which lasted only through 1997.
The Court finds that development rights under the 1994 Development Agreement have expired under its plain terms. Assuming Defendants were given a waiver as to strict compliance with the development schedule, Defendants were then given a reasonable time, rather than an indefinite time, to complete development of the third restaurant in the development area. See A.L. Carter Lumber Co. v. Saide, 168 S.W.2d 629 (Tex. 1943) (holding that once strict compliance with the terms of a contract is waived by a party, that party can assert its right to strict compliance in the future by notifying the other party of its intent to do so and by allowing a reasonable time for compliance); cf. Beago v. Ceres, 619 S.W.2d 293 (Tex.Civ.App.-Houston [1st Dist.] 1981, no writ) (holding that a separation agreement between ex-spouses was to last for a reasonable time, in spite of the claim that it was of permanent duration). Defendants did not meet this requirement and cannot thereby rely on the 1994 Development Agreement to grant them exclusive development rights in New Mexico.
Defendants also argue that even if their development rights have terminated under the 1994 Development Agreement, they continue to have a right of first refusal under the agreement. They base this claim on the clause that grants TCNM a right of first refusal with regard to any site within the development area that Plaintiffs intend to develop on their own or with someone else, once TCNM's exclusive rights have expired. Plaintiffs argue that the agreement makes a distinction between expiration of the development rights and expiration of the agreement itself. Plaintiffs argue that Defendants' rights have not expired, they have terminated. The contrary language of the agreement makes it impossible for the Court to decide this issue at the moment. Defendants' exclusive development rights have plainly not "expired" under the agreement. This occurs only after the third restaurant has been opened, which never happened. As noted above, Defendants' exclusive development rights have "terminated." However, it is unclear whether the agreement itself has "terminated." There remains an issue as to whether sufficient notice of default under the 1994 Development Agreement was given; and what effect a lack of sufficient notice would have on the agreement. It is difficult to see what rights Defendants would have under the agreement if their development rights have been terminated but the development agreement itself remains intact. Therefore, the Court will hear oral argument on this issue.
B. Validity Of The License Agreement
1. The Language of the Agreement
Despite Defendants' contention that the plain language of the License Agreement unambiguously gives them the exclusive right to operate restaurants in the entirety of the City of Albuquerque, the language of the License Agreement is anything but clear or unambiguous. In fact, the plain language of the agreement gives Defendants the right to operate a single restaurant within a two mile radius around the location of "_________________ Albuquerque, New Mexico." Plaintiff argues that the line before the name of the city is meant to evidence one location within Albuquerque; a location that apparently had not yet been fixed. They claim that this was not meant to encompass the whole of the City of Albuquerque.
It is true, as Defendants argue, that ambiguities should be construed against the drafter. Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d 734, 737 (Tex. 1990). However, the Court is unable to find that a genuine issue of material fact is lacking as to the parties' intent with regard to the terms of the License Agreement. Throughout the agreement, there are references to "the Restaurant." These references are always singular. Plaintiffs apparently concede, however, that the License Agreement is meant to cover the first two restaurants built in the Albuquerque area. The 1994 Development Agreement states that each restaurant subsequent to the first is to be covered by a separate license agreement. It may be that the agreement is meant to cover the entire City of Albuquerque. It may also be that the agreement is meant to cover only the first two restaurants.
The only thing clear about the language of the License Agreement, and its relation to the rest of the agreement, as well as the course of dealings between the parties as to the operation of restaurants, is that the Court cannot grant summary judgment for either party as to the validity of the License Agreement. There exist genuine issues of material fact as to the meaning and intent of the parties with regard to each party's rights under the agreement. Therefore the motions for summary judgment as to Count Two of Defendants' Second Amended Counterclaim are DENIED.
Defendants assert that Plaintiffs and TCEP previously operated three restaurants in El Paso under a single license agreement.
2. Default Under the License Agreement
Plaintiffs claim that Defendants are in violation of the License Agreement and ask the Court for a declaration that the License Agreement has terminated. They claim at least three violations of the License Agreement: (1) improper and/or partial transfer of rights; (2) willful interference with development of the Taco Cabana System; and (3) unauthorized use of proprietary marks. Plaintiffs, though, have failed to offer any proof as to the validity of any of these claims.
Plaintiffs also claim a violation of the License Agreement in their Second Amended Complaint based on an allegation that Defendants have failed to adhere to all agreements between the parties. Plaintiffs have not addressed this issue in their motion. Plaintiffs have failed to bring forward any evidence on this issue, however, and the Court finds that this claim is meritless.
Plaintiffs claim that Defendants represented that substantially all assets were being transferred from TCNM to TMS when Plaintiffs approved the transfer. The Assignment and Assumption Agreement provided to Plaintiffs by Defendants states that TMS "assumes all liabilities and obligations of [TCNM] as operator of Taco Cabana Restaurants." (emphasis added) In actuality, TMS did take over the operations of the Taco Cabana restaurants owned by TCNM. TCNM remained the general partner of TMS and Sloan remained the person who Plaintiffs dealt with in regard to both TCNM and TMS. There were no misrepresentations as to improper or partial transfers made by Defendant.
Plaintiffs claim that Defendants have willfully interfered with the development of the Taco Cabana system by attempting to block development of new restaurants in the City of Albuquerque by Plaintiffs. Defendants have contacted local real estate brokers and other local individuals and businesses involved with Plaintiffs' plans to continue development in Albuquerque. Defendants have done nothing more than note to these parties that it intends to enforce its rights under agreements it feels remain in existence. Attempting to assert its rights, even where those rights are subsequently found to have been terminated, does not constitute interference. See Victoria Bank Trust Co. v. Brady, 811 S.W.2d 931, 939-40 (Tex. 1991).
Plaintiffs also claim that Defendants are in default for alleged unauthorized use of the Taco Cabana marks. They claim that Defendants have violated this provision of the License Agreement by using the Taco Cabana mark in their letterhead with respect to correspondence with parties in which Defendants asserted that they had exclusive development rights. The License Agreement grants permission to Defendants to use the Taco Cabana marks in connection with the operation of their restaurant. The letters at issue were in connection with the operation of the restaurants.
The Court finds that Defendants are not in default with regard to the License Agreement and therefore DENIES Plaintiffs' Motion for Summary Judgment and GRANTS Defendants' Motion for Summary Judgment as to Count II of Plaintiffs' Second Amended Complaint and denies any injunctive relief sought by Plaintiff as to the operation of the two existing Taco Cabana restaurants in the City of Albuquerque. However, as noted above, the scope of the License Agreement is still at issue. Specifically, whether the License Agreement is intended to cover one restaurant, two restaurants, or all restaurants within the City of Albuquerque.
C. Defendants' State Law Claims
Defendants have alleged various state law claims. They have failed to offer any evidence with relation to these claims. 1. Breach of Covenant of Good Faith and Fair Dealing
Defendants have failed to allege these counts as grounds for summary judgment. Plaintiffs have moved for summary judgment on these grounds, however, and Defendants have responded to Plaintiffs' argument.
Defendants allege a breach of the covenant of good faith and fair dealing. Absent a special relationship, there is no common law duty between parties to act in good faith. See El Paso Natural Gas Co. v. Minco Oil Gas, 8 S.W.3d 309, 311-12 (Tex. 1999). Typically, there is no special relationship between a franchisor and a franchisee. Crim Truck Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 596 (Tex. 1992). However, such a duty may arise if one person trusts and relies on another. See id. at 594.
Defendants base their claim on the alleged promise to Sloan that a delay in development due to health issues would not have repercussions. Defendants have failed to come forward with evidence that there was ever any promise that a delay of over four years would not have repercussions. As noted above, Defendants had a reasonable time, not an infinite time, to begin development once Sloan returned to work. Instead, they delayed until 2002, four years after Sloan returned to work, a period longer than they were originally granted to develop three restaurants. In the meantime, the parties had agreed to an extension as to development rights under an amendment to a development agreement that had previously been terminated. Defendants have not offered evidence of a promise sufficient to allow them to fall within the "special relationship" that is required. Plaintiffs' Motion for Summary Judgment is GRANTED on this counterclaim. 2. Tortious Interference with Contract
Defendants claim that Plaintiffs have tortiously interfered with Defendants' contracts with suppliers, employees, and other parties. Defendants have failed to offer any evidence under this Count of their counterclaim. Defendants claim that Plaintiffs made contact with real estate brokers to locate properties for development in the City of Albuquerque and have made contact with Defendants' suppliers and employees. The elements of tortious interference with contracts are: (1) the existence of a contract subject to interference; (2) the occurrence of an act of interference that is willful and intentional; (3) that act was the proximate cause of plaintiffs' damages; and (4) actual damages. Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002). Even if a plaintiff establishes all elements of tortious interference, a defendant may prevail by showing the affirmative defense of justification or privilege. Id. at 207. Justification is based on the exercise of one's own rights or a good faith claim to a colorable legal right, even if that legal right is mistaken. Tex. Beef Cattle Co. v. Green, 921 S.W.2d 203, 211 (Tex. 1996). Here, Plaintiffs were justified in making contacts within the Albuquerque market with plans to begin development of their own. Defendants' development rights have clearly terminated under all the development agreements and Plaintiffs have a good faith claim to a colorable legal right to development within the market. Similarly, there is no evidence of tortious interference with prospective contracts. Accordingly, Plaintiffs' Motion for Summary Judgment is GRANTED on Defendants' counterclaim for tortious interference.
3. Texas Deceptive Trade Practices Act
Defendants claim that Plaintiffs have committed unfair and unconscionable acts in violation of the Texas Deceptive Trade Practices Act ("DTPA"). TEX. BUS. COM. CODE § 17.50. The specific acts they allege include refusing to cooperate in development under the 2000 Amendment, falsely claiming that the 1994 Development Agreement did not exist, refusing to acknowledge Defendants' continuing development rights, and defaulting and threatening to terminate the 1994 License Agreement. A disagreement over the interpretation of a contract is not actionable under the DTPA. Crim Truck Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 596 (Tex. 1992); Enter-Laredo Assoc. v. Hachar's, Inc., 839 S.W.2d 822, 828-29 (Tex.App.-San Antonio 1992, writ denied). Accordingly, Plaintiffs are not liable under the DTPA for refusing to cooperate in development and in arguing that Plaintiffs were in default under the 1994 Development Agreement and the License Agreement. These are strictly contractual interpretation issues.
Defendants' claim that Plaintiffs acted unconscionably by falsely claiming the 1994 Development Agreement did not exist similarly fails. False statements of fact regarding a party's rights under an agreement are sufficient to support a violation of the DTPA. Leal v. Furniture Barns, Inc., 571 S.W.2d 864, 865 (Tex. 1978). An act is "unconscionable" "which, to a consumer's detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree." TEX. BUS. COM. CODE § 17.45(5). Defendants have offered no evidence that Plaintiffs actually denied the existence of the 1994 Development Agreement other than the initial Complaint filed in this case. Plaintiffs subsequently amended the Complaint and have since acknowledged the existence of the agreement. In addition, Plaintiffs have alleged no damages that could have arisen from the limited denial of the existence of the 1994 Development Agreement. Plaintiffs' Motion for Summary Judgment is therefore GRANTED on Defendants' DTPA counterclaim.
3. Breach of Contract and Injunctive Relief
Defendants seek a declaration that they are not in default under either the 1994 Development Agreement or the License Agreement. As noted above, the Court finds that Defendants are not in default under the License Agreement. The Court cannot, however, grant summary judgment as to default under the 1994 Development Agreement and will hear oral argument from counsel consistent with the issues raised above.
Defendants also seek declaratory and injunctive relief with regard to Plaintiffs' attempts to develop within the entirety of the State of New Mexico, exclusive of Dona Anna County, or alternatively limited to a two mile radius around the City of Albuquerque. As noted above, factual issues remain as to the scope of the License Agreement and the continued validity of the 1994 Development Agreement. Summary judgment will not be granted on this issue.
IV. Conclusion
The Court grants partial summary judgment for Plaintiffs on Defendants' Second Amended Counterclaim Counts Three (breach of implied covenant), Four (tortious interference), and Five (DTPA), and denies summary judgment for Plaintiff on Plaintiffs' Second Amended Complaint Count II (default of the License Agreement). The Court grants partial summary judgment for Defendant on Plaintiffs' Second Amended Complaint Count II and denies summary judgment on Defendants' Second Amended Counterclaim Counts Three, Four, and Five. The Court reserves judgment on the remaining counts and will hear oral argument from counsel as to the continued validity of the 1994 Development Agreement and the scope of the License Agreement.
The remaining counts include Plaintiffs' Count I (validity of the 1994 Development Agreement) and Defendants' Counterclaim Counts One (validity of the 1994 Development Agreement), Two (validity and scope of License Agreement), Six, Seven, and Eight (declarations of non-default with regard to the 1994 Development Agreement and injunctive relief to enforce Defendants' rights under both the 1994 Development Agreement and the License Agreement).
The Court notes that the parties have been ordered to mediation, to be completed by October 15, 2004. The Court will not hear oral argument on the issues in this case until mediation has completed. The parties are to promptly advise the Court of the result of the mediation and their desire to continue with oral arguments on the above issues once mediation has concluded.