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Ashlar Financial Services, Corp. v. Sterling Finance Co.

United States District Court, N.D. Texas, Dallas Division
Feb 8, 2002
Civil Action No. 3:00 cv 2814-AH (N.D. Tex. Feb. 8, 2002)

Opinion

Civil Action No. 3:00 cv 2814-AH

February 8, 2002


MEMORANDUM OPINION AND ORDER


On this date came on to be considered Defendants' Motion to Dismiss and Motion for Summary Judgment ("Defendants' Motion"), filed December 14, 2001, Plaintiff's Response to Defendants' Motion to Dismiss and Motion for Summary Judgment, filed on January 7, 2002, and Defendants' Reply thereto, filed January 22, 2002. Also before the court are (1) Defendants' Brief in Support, (2) Appendix to Defendants' Brief in Support, (3) Plaintiffs Brief in Opposition, (4) Attachments to Plaintiff's Brief in Opposition, and (5) Appendix to Defendants' Reply in Support.

Factual Background

Plaintiff Ashlar Financial Services Corp., a Louisiana corporation with its principal place of business in Dallas, County Texas, (hereinafter referred to as "Ashlar") filed suit against thirteen corporate entities which have varying degrees of connection to the subject matter of this litigation. Plaintiff's primary claim is for breach of contract, based on a "Sales Representative Agreement Confidentiality and Non-Competition Agreement" (hereinafter referred to as the "Sales Agreement") with Defendant Sterling Finance Co., Inc. Defendant Sterling Finance Co. subsequently changed its name to MCNP-1. See Pl.'s First Am. Pet. at Defs.' Notice of Removal Attach. C-2. The Sales Agreement required Sterling Finance Co. to pay Plaintiff Ashlar commissions on the origination of automobile receivable contracts that Plaintiff solicited from automobile dealerships for Defendant Sterling Finance Co. See Id; Pl.'s Resp. at 2. As compensation for Plaintiff's services, Defendant Sterling Finance Co. agreed to pay Plaintiff a specific amount of commissions, set by formula, for each automobile loan funded by Defendant Sterling Finance Co. Id. Plaintiff claims that Defendant Sterling Finance Co. has not been paying these commissions, allegedly worth millions of dollars.

Sterling Trust Co., a former defendant, was dismissed from the suit with prejudice on September 12, 2001, leaving twelve named defendants. Although there are eleven corporate entities which are identified as Defendants — in addition to Sterling Finance Co. — as explained below several of these Defendants' names are those which formerly existed, either as predecessors-in-interest or which have been given new corporate names.

In addition to suing Sterling Finance Co., with whom the contract was entered into, Plaintiff is also suing several other corporate entities, allegedly, from the same corporate family, the head of which is Defendant Matrix Bancorp, a Colorado or New Mexico corporation, formerly (Defendant) Matrix Capital Corp. Defendant Matrix Bancorp is the ultimate holding company of Defendant Matrix Capital Bank, a federally chartered bank incorporated in either Colorado or New Mexico. See Pl.'s First Am. Pet. at Defs.' Notice for Removal Attach. C-2. Defendant Sterling Finance Co. was and may still be a wholly-owned subsidiary of Defendant Matrix Capital Bank, as well as a third level subsidiary of Defendant Matrix Bancorp. Defendant Matrix Bancorp is also the ultimate holding company of the following subsidiaries: Defendant United Special Services, Inc., a Colorado corporation, now known as Matrix Asset Management Corp., and Defendant United Financial, Inc., a Colorado corporation, now known as Matrix Capital Markets, Inc. Plaintiff has also brought suit against Defendants' Sterling Financial Group, Inc., a Colorado corporation, and Matrix Integrated Services, Inc., a New Mexico corporation.

Defendants contend that these corporations are wholly-owned subsidiaries of Defendant Matrix Bancorp and are, accordingly, only related to Defendant Sterling Finance Co., now known as Defendant MCNP-1, by reason of parentage. See Defs. Notice of Removal ¶ 4D.

However, it is not entirely clear how these entities fit into the corporate family structure headed by Defendant Matrix Bancorp. Defendants contend that neither Defendant Sterling Financial Group, Inc. nor Defendant Matrix Integrated Services, Inc. share any connection or relation to the Matrix Bancorp corporate family, except forbearing similar corporate names. Moreover, Defendants contend that the New Mexico Secretary of State has no record of a corporate entity named Matrix Integrated Services, Inc. See Defs.' Resp. to Pl's Motion to Remand Ex. 4. There is, however, a record of a corporate entity named Matrix Integrated Solutions, L.L.C., formed in September of 2000. Id.

Plaintiff has also sued several other parties which may be either predecessors-in-interest or successors-in-interest to Sterling Finance Co. Vanguard Insurance Services, also known as Defendant Larimer Street Corporation, a Colorado corporation, became Defendant Sterling Finance Co. either in January or June of 1996. Subsequent to entering the Sales Agreement with Plaintiff Ashlar in October of 1996, Defendant Sterling Finance Co. was purportedly sold to Defendant Evergreen Group, Inc., a Colorado corporation, in late December 1996. Defendant Evergreen Group, Inc., assumed the name Defendant Sterling Finance Co., and also operated under the trade name of Defendant Larimer Consumer Funding. In January of 1997, Defendant Sterling Finance Co. underwent a change in name, becoming Defendant MCNP-1, a New Mexico corporation.

Defendants have proffered uncontroverted evidence that Vanguard Insurance Services a/k/a Larimer Street Corp. was dissolved in November 1998. See Defs.' Notice of Removal ¶ 2.

Defendants have proffered uncontroverted evidence that Evergreen Group was dissolved in 1999. See Defs.' Notice of Removal ¶ 2; see also Defs.' Resp. to Pl's Motion to Remand Ex. 2.

Defendants claim that MCNP-1 has not accepted any loans since late 1996, and has not conducted any business since December 31, 1997. See Defs.' Notice of Removal ¶ 4B. Plaintiff disputes this.

Plaintiff alleges that the named Defendants are all alter egos of one another, and "have acted in concert to deprive Plaintiff of its rightful compensation" under the Sales Agreement. See Pl.'s First Am. Pet at Defs.' Notice of Removal Attach. C-2. Plaintiff further alleges that Defendants (collectively), "have conspired to defraud and to tortiously interfere with the rights of the Plaintiff" Id. The complaint does not specifically identify which Defendants have played any role, if at all, in this civil conspiracy, but simply states that "[e]ach of the Defendant entities, in varying degrees, have common officers, directors, addresses, phone numbers, and employees. The result of the interrelationships, name changes, and stock and asset transfers between and among the Defendants has resulted in the unlawful deprivation of Plaintiffs commissions." Id.

Plaintiffs filed both its original and first amended complaint in state court, and Defendants removed the case to this court on December 29, 2000.

In the motion now before the court, Defendants have moved to dismiss each of the claims in Plaintiffs First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), as well as to dismiss Plaintiff's cause of action for fraud under Rule 9(b). Defendants have also moved for summary judgment on each of the aforementioned claims. The parties submitted thorough briefs in support of their respective positions, and the motion is ripe for decision.

Standard of Review

Motion to Dismiss

FED. R. Civ. P. 12(b)(6) allows for dismissal of a complaint if the plaintiff fails "to state a claim upon which relief may be granted." A motion to dismiss is "viewed with disfavor and is rarely granted." Leleux v. United States, 178 F.3d 750, 754 (5th Cir. 1999). Dismissal is appropriate only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Holmes v. Texas A M Univ., 145 F.3d 681, 683 (5th Cir. 1998) (citations omitted).

In deciding whether dismissal is warranted, the court accepts as true the nonconclusory allegations in a plaintiffs complaint. Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999). A motion to dismiss for failure to plead fraud with the particularity required by Rule 9(b) is treated as a motion to dismiss for failure to state a claim under Rule 12(b)(6). United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 (5th Cir. 1997). However, there is one significant difference between the two types of motions. While courts routinely dismiss causes of action without leave to replead when they grant motions to dismiss for failure to state a claim, there is a general consensus that plaintiffs should be provided with an opportunity to amend their complaint to meet Rule 9(b)'s requirements before ordering dismissal. See Hart v. Bayer Corp., 199 F.3d 239, 248 n. 6 (5th Cir. 2000). To dismiss a complaint outright for failure to comply with Rule 9 (b) "would be at odds with the liberal approach to pleading of the [R]ules [of Civil Procedure] as a whole, and could lead to injustice." Wright Miller, FEDERAL PRACTICE PROCEDURE § 1297.

Federal Rule of Civil Procedure 9(b) provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Accordingly, Rule 9(b) requires the Plaintiff to plead all of the elements of common law fraud with particularity, with one exception. The text of Rule 9(b) explicitly states that intent to defraud "may be averred generally." Federal Rule of Civil Procedure 9(b).

Summary Judgment

To prevail on a motion for summary judgment, the moving party has the initial burden of showing that there is no genuine issue of any material fact and that judgment should be entered as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10 (1986). The materiality of facts is determined by substantive law. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. Once the moving party has made an initial showing, the party opposing the motion for summary judgment may not merely rely on his pleadings, but must come forward with competent evidentiary materials that establish a genuine fact issue. Id. at 256-257, 106 S.Ct. at 2514. See Matsushita Elec. Indus. Co., Ltd v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S.Ct. 1348, 1355-56 (1986). The court must resolve any factual controversies in favor of the non-moving party. Richter v. Merchants Fast Motor Lines, Inc., 83 F.3d 96, 98 (5th Cir. 1996). Thus, in reviewing all of the evidence, the court must consider it in a light most favorable to Ashlar, drawing all factual inferences therefrom and making all credibility determinations related therefrom in its favor.

Applicable law

Rule 9(b)

Defendants, relying on FED. R. CIV. P. 9(b) as well as Hart v. Bayer Corp., 199 F.3d 239 (5th Cir. 2000) and Tuchman v. DSC Communications Corp., 14 F.3d 1061 (5th Cir. 1994), argue that Plaintiff has wholly failed to allege, with sufficient specificity, the nature and the requisite factual specificity for its fraud claim.

Fifth Circuit precedent holds that a civil conspiracy to commit a tort that sounds in fraud must be pleaded with particularity. See Castillo v. First City Bancorporation of Texas, Inc., 43 F.3d 953, 960 (5th Cir. 1994).

While the exact pleading requirements of Rule 9(b) are case-specific, there are some essential core requirements that can be distilled from Fifth Circuit precedent. See Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir. 1992). In every case based on fraud, Rule 9(b) requires the plaintiff to allege as to each individual defendant "the nature of the fraud, some details, a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants." Askanase v. Fatjo, 148 F.R.D. 570, 574 (S.D.Tex. 1993); see also Zuckerman v. Foxmeyer Health Corp., 4 F. Supp.2d 618, 622 (N.D.Tex. 1998) ("[T]he plaintiff is obligated to distinguish among those they sue and enlighten each defendant as to his or her part in the alleged fraud" (citations omitted).); In re Urcarco Secs. Litigation, 148 F.R.D. 561, 569 (N.D.Tex. 1993).

Rule 9(b)'s heightened pleading requirement must be interpreted in conjunction with the Federal Rules of Civil Procedure's general emphasis on notice pleading. "In applying Rule 9(b), the Fifth Circuit has noted that the particularity standard of Rule 9(b) must be interpreted in conjunction with Rule 8's requirement that the pleading contain a short and plain statement of the claims. . . Thus, although Rule 9(b) calls for fraud to be pleaded with particularity, the allegations still must be as short, plain, simple, direct, and concise as is reasonable under the circumstances." See Corwin v. Marney, Orton Investments, 788 F.2d 1063, 1068 n. 4 (5th Cir. 1986) quoting 5 C. Wright A. Miller, FEDERAL PRACTICE AND PROCEDURE § 1291 at 389 (1969).

However, "[p]leading fraud with particularity in this circuit requires `time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby.'" Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997). Furthermore, "articulating the elements of fraud with particularity requires a plaintiff to . . . explain why the statements [that were allegedly made] were fraudulent." Id. citing Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993).

The law as applied to the present case is discussed in Part 3 (A), infra, at pgs. 12-13.

1. Breach of Contract

The elements of a breach of contract claim are (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant, and (4) damages to the plaintiff resulting from that breach. Adams v. H H Meat Prods., Inc., 41 S.W.3d 762, 771 (Tex.App.-Corpus Christi 2001, no pet.).

Defendants do not dispute the existence of a valid contract nor do they dispute that Ashlar performed its obligations to solicit and procure automobile receivable contracts from new and used car dealers for origination and funding by and through Defendant Matrix Capital Bank. However, they join issue on whether they have breached the contract with Ashlar, in light of a purported assignment of the Sales Agreement's obligations to Defendant Evergreen, as well as the amount of damages, if any, to which Ashlar is entitled.

The Sales Agreement executed by Ashlar and Defendant Sterling Finance Co. contained a provision requiring "prior written approval of the other party" for an assignment of the contract to be effective. Defendants point to a letter purporting to meet the requirements of the Sales Agreement's assignment provision. However, it is dated after the alleged assignment. See Defs.' App. in Support Ex. 3. Accordingly, Ashlar disputes the validity of this assignment.

Because the court finds that genuine issues of fact exist with regard to the third and fourth elements — the existence of a breach and the amount of damages related thereto, respectively — the court is precluded from granting summary judgment to Defendants on Ashlar's breach of contract claim.

2. Alter Ego

As traditionally applied in the parent-subsidiary context, the alter ego doctrine permits the imposition of liability upon the parent company for torts and contractual obligations of its subsidiary, where the parent exercises actual control over the subsidiary and operates it as a mere instrumentality or tool. Under such circumstances, the subsidiary is merely a conduit through which the parent conducts its business. Edwards Co., Inc. v. Monogram Industries, Inc., 700 F.2d 994 (5th Cir. 1983); see Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571 (Tex. 1975).

A variety of factors must be evaluated to determine whether the subsidiary is nothing more than a mere adjunct of the parent. The Fifth Circuit has developed a twelve factor test when analyzing whether a subsidiary is the alter ego of its parent:

(1) the parent and the subsidiary have common stock ownership; (2) the parent and the subsidiary have common directors or officers; (3) the parent and the subsidiary have common business departments; (4) the parent and the subsidiary file consolidated financial statements and tax returns; (5) the parent finances the subsidiary; (6) the parent caused the incorporation of the subsidiary; (7) the subsidiary operates with grossly inadequate capital; (8) the parent pays the salaries and other expenses of the subsidiary; (9) the subsidiary receives no business except that given to it by the parent; (10) the parent uses the subsidiaries property as its own; (11) the daily operations of the two corporations are not kept separate; and (12) the subsidiary does not observe the basic corporate formalities.
See Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 208-209 (5th Cir. 1996) citing United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691-92 (5th Cir. 1985) (internal citations omitted), cert. denied, 475 U.S. 1014, 106 S.Ct. 1194, 89 L.Ed.2d 309 (1986).

See Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 209 n. 4 (5th Cir. 1996) (After the 1989 amendment to the Business Corporation Act, wherein the Texas legislature removed "failure to observe corporate formalities" from the list of factors used in proving alter ego theories, the Fifth Circuit no longer considers the twelfth factor in diversity cases applying Texas substantive law.)

However, the resolution of an alter ego issue must be based on a consideration of "the totality of the circumstances." Jon-T Chemicals, Inc., 768 F.2d at 694.

With respect to Ashlar's contention that the named Defendants are alter egos of one another, it has presented some evidence that the Defendants (1) have common officers and directors, D. Mark Spencer and Paul Soto, and (2) that Matrix Capital Bank made representations that it was providing substantial financial backing to Defendant Sterling. However, it has failed to produce any evidence on the additional factors listed above: (1) common stock ownership, (2) common business departments, (3) the filing of joint tax returns, (4) how the corporations receive their business, (5) whether the corporations share property, and (6) the daily operations of the corporations which Ashlar claims are alter egos.

In fact, the uncontroverted evidence that Defendants have submitted on this issue indicates that the various corporate entities neither operate with grossly inadequate capital nor do they pay one another's salaries and expenses. Accordingly, Defendants' motion for summary judgment, with respect to Ashlar's alter ego claim, is granted as to the following named Defendants: Defendant Matrix Bancorp, formerly Defendant Matrix Capital Corp., Defendant United Special Services, Inc., now known as Defendant Matrix Asset Management Corp., Defendant United Financial, Inc., now known as Defendant Matrix Capital Markets, Inc., Defendant Sterling Financial Group, Inc., and Defendant Matrix Integrated Services, Inc. Furthermore, these named Defendants are hereby dismissed from the instant suit in light of their lack of connectivity to this litigation beyond Ashlar's allegation of alter ego.

3. Conspiracy

In the instant case, Plaintiff contends that the Defendants have conspired to commit fraud and to tortiously interfere with the Sales Agreement — the contract between Plaintiff and Defendant Sterling Finance Co. The court will address each of these issues in turn.

In order to establish an actionable civil conspiracy, a Plaintiff must prove the following elements: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result. Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). Here, the alleged unlawful overt acts are fraud and tortious interference with the contract.

Defendants contend that there is no cognizable cause of action for a parent company to conspire with it's subsidiary to tortiously interfere with a contract. Defendants rely on Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), for the proposition that the identical economic interests of a parent corporation and its wholly-owned subsidiary render them legally incapable of conspiring with one another.

In Copperweld Corp. v. Independence Tube Corp., the United States Supreme Court held that, for purposes of the Sherman (Antitrust) Act, it is not possible for a wholly-owned subsidiary to conspire with its parent, since their interests were necessarily identical. Id.

However, two Texas courts of appeals subsequently held that Copperweld was restricted to the antitrust context and was not applicable to common law conspiracies. Atlantic Richfield Co. v. Long Trusts, 860 S.W.2d 439, 446 (Tex.App.-Texarkana 1993, no writ) citing Metropolitan Life Ins. Co. v. La Mansion Hotels, 762 S.W.2d 646, 651-52 (Tex.App.-San Antonio 1988, writ dism'd as moot).

Accordingly, the court declines to grant Defendants' motion to dismiss under 12(b) finding that a cause of action for conspiracy to commit fraud and to tortiously interfere with the Sales Agreement may be brought against the following named Defendants: Defendant Matrix Capital Bank, Defendant Sterling Finance Co., now known as MCNP-1 Corp., as well as Defendant Evergreen Group, Inc., d/b/a Sterling Finance Co. and d/b/a Lamar Consumer Funding, and Defendant Larimer Street Corp. (hereinafter collectively referred to as the "Remaining Defendants"), to the extent that each is still in existence.

A. Fraud

To recover under a cause of action for fraud the Plaintiff must show the following: (1) a material misrepresentation was made; (2) the misrepresentation was made recklessly or with knowledge of its falsity; (3) the misrepresentation was made in anticipation of reliance upon it; and (4) actual reliance occurred which resulted in damages to the plaintiff Michael v. Dyke, 41 S.W.3d 746, 752-53 (Tex.App.-Corpus Christi 2001, no pet.) citing Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983).

The Remaining Defendants argue that Plaintiff has failed to adequately plead the first two elements discussed, supra. They contend that even with a liberal reading of the pleadings, no allegation, with sufficient specificity, can be found with respect to either the making of a material misrepresentation by any of the Remaining Defendants or that such a misrepresentation was made recklessly or with knowledge of its falsity. The court is inclined to agree with the each of the Remaining Defendants with the exception of Defendant Matrix Capital Bank.

In Plaintiff's First Amended Petition, it alleges that "on or around May 20, 1996, Defendant Matrix Capital Bank formally announced and represented that it had acquired a controlling interest in Defendant Sterling." Id. at 7. Moreover, Plaintiff alleged that "the formal release touted the strength of Defendant Sterling as a company," and that Plaintiff was enticed and induced into entering the Sales Agreement by representations that "Defendant Matrix Capital Bank was providing financial backing to Defendant Sterling in an amount exceeding $500,000,000.00." Id.

Because the court finds the allegation of fraud with respect to Defendant Matrix Capital Bank, complies with the pleading requirements of Rule 9(b), Matrix Capital Bank's motion to dismiss on such grounds is without merit. Moreover, there are genuine questions of fact with respect to this cause of action which foreclose the granting of summary judgment. As to the remaining Defendants it is unnecessary to consider their Rule 9(b) argument, in light of the fact that they cannot be held liable under Plaintiff's alter ego theory. See pgs. 9-10, supra.

B. Tortious Interference with Contract

A tortious interference with a contract cause of action is established if the plaintiff proves: (1) the existence of a contract subject to interference; (2) a willful and intentional act of interference; (3) the act was a proximate cause of the plaintiffs damages; and (4) actual damage or loss resulted. Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996).

Ashlar's state court pleadings clearly allege a cause of action against Defendant Matrix Capital Bank for tortious interference with the contract between Ashlar and Defendant Sterling Finance Co., now known as (Defendant) MCNP-1. However, Defendants argue that this claim must be dismissed, asserting that Texas state law does not recognize a cause of action based upon a parent corporation's alleged tortious interference with a contract entered into by one of its subsidiaries.

Defendants rely on Deauville Corp. v. Federated Department Stores, Inc., 756 F.2d 1183 (5th Cir. 1985) and Holloway v. Skinner, 898 S.W.2d 793 (Tex. 1995), for the proposition that a parent company cannot be liable for tortiously interfering with its subsidiary's contractual relationships. However, their reliance thereon is misplaced.

In Deauville Corp., the Fifth Circuit, applying Texas law, determined that a parent corporation's and its wholly-owned subsidiary's financial interests were so closely aligned as to eliminate their separate identity when the parent controlled the subsidiary's operation and enjoyed the benefit of any profit. Deauville Corp. v. Federated Department Stores, Inc., 756 F.2d at 1196-97. The court proceeded to hold, as a matter of law, that a parent company is privileged to interfere with a wholly-owned subsidiary's contracts because of a superior financial interest arising out of stock ownership, and, under Texas law, a plaintiff may not recover for tortious interference under those circumstances. Id. citing Black Lake Pipe Line Co. v. Union Construction Co., 538 S.W.2d 80, 90 (Tex. 1976).

The court's opinion implicitly found that the subsidiary in that case was the alter ego of the parent. Id; See also Holloway v. Skinner, 898 S.W.2d at 797.

In Holloway, the Texas Supreme Court held that "[w]hen there is a complete identity of interests [between two entities], there can be no interference [with a contract] as a matter of law." Holloway, 898 S.W.2d at 797. At issue was whether Holloway, the corporation's president, director, and largest shareholder, was liable for tortiously interfering with the corporation's contract with Skinner. Holloway, 898 S.W.2d at 794. The court reasoned that, "to preserve the logically necessary rule that a party cannot tortiously interfere with its own contract," the alleged act of interference must be performed in furtherance of the defendant's personal interests." Id. at 796. The court further reasoned that, in the analogous situation between a parent and its subsidiary, a parent's interest will not always be coterminous with that of its subsidiary and that circumstances may arise where the parent may pursue its interests to the detriment of the subsidiary. Id. at 796.

Ultimately, the court held that Holloway was not liable on "no evidence grounds." Id. at 794.

The San Antonio court of appeals in Valores Corporativos, S.A. de C.V. v. McLane Co., 945 S.W.2d 160 (Tex.App.-San Antonio 1997, writ denied), cited this Holloway principle as a foundation for the rule that in the parent-subsidiary context — a parent corporation is privileged to interfere with its subsidiary's contractual relations "when the contract threatens a present economic interest of its wholly-owned subsidiary," and the parent does not "employ wrongful means or act with an improper purpose." Id. at 168 quoting T.P. Leasing Corp. v. Baker Leasing Corp., 732 S.W.2d 480, 483 (Ark. 1987).

A judge of this court has recently observed that the Texas Supreme Court has not yet definitively settled the issue of whether a parent can tortiously interfere with a contract of its wholly-owned subsidiary. Affiliated Computer Services, Inc. v. Caremark, Inc., 49 F. Supp.2d 882, 884 (N.D. Tex. 1999) citing Valores Corporativos, S.A. de C.V. v. McLane Co., 945 S.W.2d 160, 167-68 (Tex.App.-San Antonio 1997, writ denied). The court then cited and analyzed three opinions rendered by Texas courts of appeals. In H.S.M. Acquisitions, Inc. v. West, 917 S.W.2d 872, 882-83 (Tex.App.-Corpus Christi 1996, writ denied) and in American Medical Int'l v. Giurintano, 821 S.W.2d 331, 336-37 (Tex.App.-Houston [14th Dist.] 1991, no writ), two intermediate appellate courts held that it was legally impossible for a parent to tortiously interfere with the contracts of a wholly-owned subsidiary. In Valores Corporativos, S.A. de C.V. v. McLane Co., 945 S.W.2d at 168, a third appellate court held that while this interference is usually justified and excused by the defense of privilege, "a parent corporation is legally capable of tortiously interfering with its wholly-owned subsidiary's contractual relations." See id. The court in Affiliated Computer Services ultimately concluded that there was a possibility under Texas state law that a parent corporation could tortiously interfere with a subsidiary's contract. 49 F. Supp. 2d at 884.

Defendant Matrix Capital Bank has neither raised nor briefed the defense of privilege.

In light of the court's determination that the named Defendants are not alter egos of Defendant Sterling Finance Co., see pgs. 8-10, supra, and the ambiguity which exists under the current state of the substantive law of Texas, Defendant Matrix Capital Bank's motion to dismiss and its motion for summary judgment on Plaintiff's tortious interference claim will be denied.

Defendant Matrix Capital Bank has not demonstrated that it is so closely aligned with its wholly-owned subsidiary Defendant Sterling Finance Co., now known as Defendant MCNP-1, so as to be virtually inseparable. In fact it has alleged that they are all completely separate and distinct entities.

4. DTPA Claim

Plaintiff contends that the Remaining Defendants failure to pay commissions due under the Sales Agreement — a breach of contract — constitutes a violation of the Texas Deceptive Trade Practices — Consumer Protection Act ("DTPA").

In order to have standing to bring an action under the DTPA a plaintiff must be a consumer. Mendoza v. American Nat'l Ins. Co., 932 S.W.2d 605, 608 (Tex.App.-San Antonio 1996, no writ). The issue of consumer status under the DTPA is question of law for the court to decide. Lukasik v. San Antonio Blue Haven Pools, Inc., 21 S.W.3d 394, 401 (Tex.App.-San Antonio 2000, no pet.).

To qualify as a consumer, a plaintiff must meet two requirements: (1) the person must seek or acquire goods or services by purchase or lease, and (2) the goods or services purchased or leased must form the basis of the complaint. See TEX. BUS. COM. CODE ANN. § 17.45(4) (Vernon 2001). Plaintiff has not demonstrated that it sought or acquired any goods or services by either lease or purchase. The mere entering into a contractual relationship with Defendant Sterling Finance Co. constitutes neither a good nor a service. Therefore, Plaintiff's cause of action under the DTPA must be dismissed with prejudice.

Even assuming arguendo that Plaintiff established consumer status, it has long been the law in Texas that mere nonfeasance under a contract creates liability only for breach of contract. Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 13 (Tex. 1996). An allegation of breach of contract, without more, does not constitute a false, misleading, or deceptive action such as would be actionable under the DTPA. Id. at 14.

For the foregoing reasons, the Defendants' motion is GRANTED IN PART as follows:

1. Plaintiff's claims against Defendants Matrix Bancorp, Inc., formerly Matrix Capital Corp., United Financial, Inc., now known as Matrix Capital Markets, Inc., United Special Services, Inc., now known as Matrix Asset Management Corp., Sterling Financial Group, Inc., and Matrix Integrated Services, Inc. are dismissed with prejudice. Common law fraud claims against all other named Defendants, except Matrix Capital Bank, are dismissed.

2. Plaintiff's DTPA claims against all Defendants are dismissed with prejudice.

3. In all other respects Defendants motion is DENIED.


Summaries of

Ashlar Financial Services, Corp. v. Sterling Finance Co.

United States District Court, N.D. Texas, Dallas Division
Feb 8, 2002
Civil Action No. 3:00 cv 2814-AH (N.D. Tex. Feb. 8, 2002)
Case details for

Ashlar Financial Services, Corp. v. Sterling Finance Co.

Case Details

Full title:ASHLAR FINANCIAL SERVICES, CORP. Plaintiff, v. STERLING FINANCE CO., INC.…

Court:United States District Court, N.D. Texas, Dallas Division

Date published: Feb 8, 2002

Citations

Civil Action No. 3:00 cv 2814-AH (N.D. Tex. Feb. 8, 2002)