Castillo Information Technology Services, LLC v. Dyonyx, L.P.

554 S.W.3d 41
Court of Appeals of Texas·Decided August 1, 2017·No. 01-16-00649-CV·Published·Cited by 13 cases

Opinion

Opinion issued August 1, 2017

In The

Court of Appeals

For The

First District of Texas

moved for summary judgment, disputing whether the purchase order at issue was for a fixed five-year term or whether it could be terminated upon thirty days’ written notice, as the parties’ underlying consultant agreement provided. The trial court denied Castillo’s summary judgment motion, granted Dyonyx’s summary judgment motion, and dismissed Castillo’s claims with prejudice. In one issue, Castillo contends that the trial court erred in its summary judgment rulings because the purchase order under which Castillo provided its services did not incorporate the thirty-day termination provision contained within the consultant agreement.

We affirm.

Background

Castillo and Dyonyx are both information technology consulting firms located in the Houston area. In July 2014, Dyonyx entered into a contract with the City of Houston to provide various telecommunications services, including the installation of internet circuits and connections between data centers located in Austin and Bryan as well as additional services including system hosting and support.

On July 18, 2014, Dyonyx and Castillo entered into a Consultant Agreement, in which Dyonyx agreed “to retain the services of [Castillo] to assist it in discharging its obligations to its clients and to perform such other services as it may require from time to time.” The Consultant Agreement provided that its term was post-dated to begin on July 8, 2014, and end on July 7, 2019, or five years later. The Consultant

Agreement provided that Dyonyx could terminate the agreement earlier in three situations: (1) Dyonyx could dismiss Castillo for “cause” upon written notice to Castillo; (2) Dyonyx could terminate the contract with or without cause upon thirty days’ written notice to Castillo; or (3) Dyonyx could terminate the contract immediately upon written notice from Dyonyx’s client, if Dyonyx’s client terminated its contract with Dyonyx.

In the Consultant Agreement, Castillo agreed to “develop for the benefit of [Dyonyx] certain services on a project basis” during the contractual term. The Consultant Agreement provided: “The scope of each project or any other projects agreed upon by the parties shall be identified in a Purchase Order (“PO”) and Statement of Work (“SOW”).” Attached to the Consultant Agreement as Exhibit A was a “Statement of Work.” The Statement of Work provided that Dyonyx’s client was the City of Houston Public Works and Engineering Department, that the location of the assignment was Austin and Bryan, and that the services to be performed were telecommunications and connectivity services, with no labor required. The Statement of Work also provided that purchase orders would be issued on an annual basis, with the “base period” running from July 8, 2014, through July 7, 2015, and with “option periods” for each of the next four years, with the final option period ending July 7, 2019. The Statement of Work listed the “Firm Fixed

Price (Ceiling)” as $457,936.20, to be invoiced monthly in an amount of $7,632.27 over a sixty-month period.

On the same day the parties executed the Consultant Agreement, Dyonyx issued a Purchase Order to Castillo for a year’s worth of services under Dyonyx’s contract with the City of Houston, beginning July 8, 2014, and ending July 7, 2015. The Purchase Order stated the following under “Description of Item”:

Firm Fixed Price – Annual Fee for Telecommunications/Connectivity Services for a 1.5GB Ethernet Burstable 1.5 Gig Ethernet Internet Circuit for the Data Foundry Data Center in Austin and Ethernet Line 1 Gig connection between the Data Centers in Data Foundry (Austin)

and Fibertown (Bryan) in support of the CoH Public Works and Engineering Dept. – Electronic Plan Review Project.

This description was identical to a description of Castillo’s services to be provided to Dyonyx that was contained in the Statement of Work. The Purchase Order provided that a month’s worth of services1 cost $7,632.27, for a total of $91,587.24 for the year. The Purchase Order stated, “Total amount of this purchase order sets forth the entire payment required.” Under “Justification,” the Purchase Order stated:

Under the Terms and Conditions of the fully executed Consultant Agreement #00603 between DYONYX and [Castillo]. This is a Firm Fixed Price 5 year contract, but DYONYX will issue annual PO(s)

1 The summary judgment record included an affidavit from Talbot Theiss, Vice President of Strategic Accounts for Dyonyx, who averred that Castillo provided a “service, not a product” to Dyonyx. The Consultant Agreement and purchase order required Castillo to “provide data communication circuit services to [Dyonyx] on a monthly subscription basis. Those data communication services would then be used by [Dyonyx] to provide the City of Houston access to systems that were hosted by [Dyonyx].”

base[d] on the CoH PWE annual PO(s) issued against this project. This P.O. is not-to-exceed $91,587.24 for the period of performance stated above. There are no expenses required on this project.

The Purchase Order was signed by representatives of both Dyonyx and Castillo.

On November 7, 2014, four months after Dyonyx and Castillo entered into the Consultant Agreement and Dyonyx issued the Purchase Order to Castillo, the City of Houston informed Dyonyx that it was terminating the contract that it had with Dyonyx. The notice provided that, upon receipt, Dyonyx was to “discontinue all services in connection with” the performance of the contract and to cancel all existing purchase orders for services that Dyonyx had with vendors such as Castillo. On December 1, 2014, Dyonyx sent a written notice to Castillo informing it of the termination of the Purchase Order, effective December 31, 2014. In this notice, Dyonyx invoked the provision of the Consultant Agreement that allowed it to terminate the agreement with or without cause upon thirty days’ written notice to Castillo.

Castillo subsequently sued Dyonyx for breach of contract and promissory estoppel. Castillo alleged that the Purchase Order issued by Dyonyx provided that the contract was a “Firm Fixed Price 5 year contract,” and as a result, Dyonyx could not rely upon the thirty-day termination provision in the Consultant Agreement to terminate the Purchase Order after only four months. Castillo further alleged that, in reliance upon the Purchase Order, it had “entered into firm, fixed-price 5-year

contracts as necessary with its suppliers in order to meet [its] commitments to Dyonyx under the purchase order.” Castillo alleged that Dyonyx had refused to make the monthly payments of $7,632.27 to Castillo after it terminated the contract, leaving a total of $427,407 owing to Castillo under the contract.

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Castillo Information Technology Services, LLC v. Dyonyx, L.P., 554 S.W.3d 41 (Tex. Ct. App. 2017).

554 S.W.3d 41 (Castillo Information Technology Services, LLC v. Dyonyx, L.P.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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