AFFIRM; and Opinion Filed February 25, 2015.
Court of Appeals S In The
Fifth District of Texas at Dallas No. 05-13-00711-CV
EHRING ENTERPRISES, INC. F/K/A THALGO COSMETIC USA, INC. AND MARINE IMPACT, INC., Appellants/Cross-Appellees V. RD MANAGEMENT CORPORATION, Appellee/Cross-Appellant
On Appeal from the 44th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-11-04770-b
MEMORANDUM OPINION Before Justices Lang-Miers and Brown 1 Opinion by Justice Brown This appeal involves a dispute between two distributors of French skin-care products.
The distributor for the Western United States, RD Management Corporation, sued the distributor
for the Eastern United States, Ehring Enterprises, Inc., alleging breach of a territorial restriction
in a contract and other causes of action. 2 After a bench trial, the court found in favor of RD on
its contract claim and awarded damages. In two issues on appeal, Ehring Enterprises challenges
the legal and factual sufficiency of the evidence to support the court’s alternative findings that a
contract existed between RD and Ehring Enterprises or that RD was a third-party beneficiary to
1 Justice Michael J. O’Neill was a member of the panel at the time of submission and oral argument. Due to his retirement from the Court on December 31, 2014, he did not participate in the issuance of this opinion. See TEX. R. APP. P. 41.1(b). 2 RD sued appellants Ehring Enterprises and Marine Impact, Inc. The trial court concluded that Ehring Enterprises and Marine Impact were alter egos. We refer to them collectively as Ehring Enterprises. the distribution agreement between Ehring Enterprises and the manufacturer of the products. We
affirm the trial court’s judgment.
Thalgo is a French manufacturer of skin-care products sold and used in spas. In the late
1990s, Guy Ehring began working for a business known as Thalgo USA, which distributed
Thalgo products throughout the entire United States. In 2003, Thalgo divided the United States
into two territories, each with an exclusive distributor. Dar Reiss-Depp was president of
Thalgo’s West Coast distributor RD, based in Texas, and Guy Ehring was president of Thalgo’s
East Coast distributor Ehring Enterprises, based in Florida. Reiss-Depp testified about the work
involved in being a Thalgo distributor, including investing in inventory, setting up a warehouse
and offices, having office staff and salespeople and trainers in the field, attending trade shows,
and advertising and marketing.
RD’s distribution agreement with Thalgo went into effect on April 1, 2003. In the
written agreement, Thalgo designated RD as the sole and exclusive distributor of its products in a
thirty-state territory generally comprised of the Western United States. The agreement
prohibited RD from selling to Nordstrom and Saks Fifth Avenue spas, or to spas nearby, as
distribution to those department store spas was “under the responsibility of another party.” The
agreement stated, “DISTRIBUTOR will not divert and will endeavour to prevent diversion of all
THALGO products destined for sale in the aforementioned TERRITORY to any area outside
said TERRITORY, unless written consent is given by THALGO.” The agreement also specified
that, “THALGO binds itself to sell the PRODUCTS to be distributed in the TERRITORY only to
DISTRIBUTOR and will endeavour to prevent diversion of all the THALGO products destined
for sale in any area outside said territory, to the aforementioned territory.” RD also agreed not to
promote or offer for sale any cosmetic products competitive with Thalgo products. The
–2– distribution agreement was valid until December 31, 2008. It was renewable for another five-
year period if there was mutual consent given in writing by both Thalgo and RD.
RD’s distribution agreement specifically referenced “East Coast Distributor Guy Ehring,”
stating that an amendment regarding legal issues with him was forthcoming. Amendment 1 to
the distribution agreement stated that to protect RD from Guy Ehring’s established patterns of
frivolous lawsuits, if Guy Ehring or Ehring Enterprises engage in legal actions against RD or
Reiss-Depp, RD reserves the right to undertake all actions it deems necessary to protect its
interest and to hold Thalgo liable for the costs of these actions. RD also had the right to
discontinue all operations with Thalgo should any such case not be settled within six months.
Ehring Enterprises had a similar written distribution agreement with Thalgo, also
effective April 1, 2003, to be the exclusive distributor of Thalgo products in twenty states in the
Eastern United States, as well as the District of Columbia, the Bahamas, and the U.S. Virgin
Islands. 3 Ehring Enterprises’s distribution agreement allowed it to provide Thalgo products to
Nordstrom and Saks Fifth Avenue spas nationwide. Ehring Enterprises’s distribution agreement
contained provisions identical to those found in RD’s agreement, and quoted above, regarding
exclusivity. Also, the article describing Ehring Enterprises’s territory contained the following
provision: “Exception to this rule may be negotiated between the other Distributor(s) and Ehring
Enterprises and arbitrated by THALGO in order to safeguard the interest of the growth of
THALGO in the United States.” In addition to this mention of other distributors, Ehring
Enterprises’s agreement contained an amendment which referenced RD by name. The
amendment provided that neither Guy Ehring nor his company will engage in legal actions
against RD or Reiss-Depp without giving prior notice to Thalgo or first discussing it with Thalgo
3 Both Ehring Enterprises’s and RD’s distribution agreements contained an exception allowing a specific third Thalgo distributor, who catered mainly to Asian communities, to service its existing accounts.
–3– so that an amicable settlement can be reached. Ehring Enterprises’s distribution agreement was
for a term of three years and was automatically renewed on April 1, 2006, for another three-year
period ending March 31, 2009.
In a letter dated September 23, 2008, Thalgo’s president, Jean-Claude Sirop, informed
RD that its distribution agreement was not going to be automatically renewed when it expired at
the end of December. Sirop wished “to renew [the] partnership on a new contractual basis,
starting on January 1st 2009, on the basis of terms, conditions and objectives which will be
discussed and agreed upon during [Reiss-Depp’s] forthcoming visit” to France. Michel Gras,
also with Thalgo, simultaneously sent Reiss-Depp an email telling her not to be “upset or
discomposed” and stating that Sirop wished to formalize “all our Agreements and enforce the
relevant clauses, for the sake of order. . . . When you are in France, we will discuss, as stated in
the Agreement, the new yearly objectives. . . .”
In late March 2009, Sirop sent Ehring Enterprises a letter notifying it that its distribution
agreement would terminate as planned on March 31, 2009. Sirop informed Ehring Enterprises
that he wished “to continue our long-term collaboration under a configuration not necessarily
identical to the existing one.” He went on to state, “While this new configuration is prepared,
with your close involvement, we will pursue the existing Contractual Agreement, all clauses
remaining unchanged, for a perio[d] of 1 Year (12 months), starting April 1st 2009 and ending
March 31st 2010.”
In December 2008 or January 2009, Reiss-Depp went to France to meet with Thalgo
representatives. She testified that RD and Thalgo were going to discuss a new business structure
in the future, but in the meantime, she was told to keep doing what RD had been doing, “selling
and developing the territories.” When Reiss-Depp returned from France, RD conducted business
as usual as a Thalgo distributor. It ordered goods from Thalgo and paid for them, and Thalgo
–4– shipped the goods. According to Reiss-Depp, the parties continued to operate as before with RD
and Ehring Enterprises distributing Thalgo products in their respective territories. She testified
that all three parties had an agreement to abide by the same territories. Guy Ehring testified at
trial that once the term of the distribution agreements ended, anyone could sell Thalgo anywhere
they wanted. In his deposition, however, he testified that while the parties were discussing a new
business entity, Ehring Enterprises continued to distribute Thalgo in the Eastern United States.
Ehring further stated the territorial line did not stop until RD ran out of products.
There was evidence that over the years both RD and Ehring Enterprises sought to enforce
the territorial restrictions in their respective distribution agreements. Reiss-Depp testified that
about six months after she signed her contract with Thalgo, she learned that Ehring Enterprises
had sent information packs to prospective Thalgo clients in her territory. Reiss-Depp contacted
Thalgo in France, and Thalgo assured her Ehring Enterprises would stop. In 2004, while Reiss-
Depp was at a trade show, representatives from the Ritz Carlton told her that Ehring Enterprises
had solicited its business for a new Ritz spa in California. Again, Reiss-Depp contacted Michel
Gras with Thalgo in France. Gras told her he would have a conversation with Ehring Enterprises
to inform them they needed to stop coming into RD’s territory. RD’s lawyer sent Ehring
Enterprises a letter about the situation as well. Ehring Enterprises stopped talking to the Ritz
Carlton, and RD opened an account with the Ritz Carlton and did business with them for several
years. Likewise, RD also received at least three complaints from Ehring Enterprises that RD had
infringed on its territory by conducting business with spas that, although in RD’s territory, were
too close to a Nordstrom or Saks. 4 One of these complaints came in the spring of 2009, after the
initial period of RD’s distribution agreement ended. RD stopped selling to these spas as a result.
4 The two distribution agreements differed in their descriptions of what was considered too close to a Nordstrom or Saks spa. RD’s distribution agreement prohibited it from selling to Nordstrom or Saks and from opening “a salon or spa that would be located in a mall where a
–5– The territorial violation that forms the basis for this suit is Ehring Enterprises’s sales to
the T Spa at the Tulalip Resort in Washington State. Reiss-Depp was at a trade show in
September 2009 when a competitor showed her pictures of Thalgo products at the T Spa. Reiss-
Depp called the spa director who informed her the spa was getting Thalgo products from the
Florida office. Reiss-Depp contacted Gras in France to advise him of the situation. On Gras’s
advice, Reiss-Depp sent Guy Ehring an email informing him that it had come to her attention
that Ehring Enterprises had been supplying Thalgo products to the Tulalip Resort in RD’s
territory. Reiss-Depp asked for an immediate explanation of the situation, but got no response.
Gras confirmed that Ehring Enterprises had supplied an account located in RD’s territory and
wrote that “[t]his way of doing, without you being informed, is unacceptable” and “territories
have to be duly respected by both sides.” Gras stated that RD was entitled to have Ehring
Enterprises close that account. RD’s lawyers later sent a notice of intent to sue asking Ehring
Enterprises to cease and desist conducting business outside its territory.
In January 2010, Gras wrote to Reiss-Depp to propose a joint venture between her, Guy
Ehring, and Thalgo in which she would have a 25% ownership. Guy Ehring would be the joint
venture’s managing director, and he and his partners would own 50% of the joint venture.
Thalgo would own the remaining 25%. In the summer of 2010, Reiss-Depp wrote a letter of
resignation to Thalgo, stating that the proposed reorganization for the United States did not fit
with her vision for RD. In the fall of 2010, RD returned its remaining inventory to Thalgo.
RD eventually sued Ehring Enterprises for breach of contract, alleging Ehring Enterprises
violated the territorial restriction by supplying Thalgo products to the T Spa. 5 In its operative
Saks or Nordstrom Spa is already operating.” Ehring Enterprises’s distribution agreement provided that Thalgo and its distributors agree not to market or distribute its products within a five-block radius of a Nordstrom or Saks spa that is already carrying Thalgo products. 5 RD pleaded other causes of action against Ehring Enterprises, including tortious interference, conversion, unjust enrichment, aiding and abetting, and constructive trust. The trial court’s judgment states that those claims were “not established under the facts of this case.” RD also sued Thalgo, and RD and Thalgo settled before trial.
–6– pleading, RD alleged two alternative theories regarding the basis for Ehring Enterprises’s
contractual obligation to it: 1) RD, Ehring Enterprises, and Thalgo were parties to a three-way
implied agreement RD referred to as the “Status Quo Agreement,” which included the agreement
that Ehring Enterprises would sell Thalgo only in the Eastern United States; and 2) RD was a
third-party beneficiary of the distribution agreement between Ehring Enterprises and Thalgo.
The trial court rendered judgment in favor of RD on its breach of contract claim. The
court ordered that RD shall recover actual damages of $108,630.42 from Ehring Enterprises, plus
pre- and postjudgment interest, attorney’s fees, and costs. Upon Ehring Enterprises’s request,
the trial court made findings of fact and conclusions of law. The court’s extensive findings of
fact included the following: 1) the parties’ express statements, conduct toward one another and
Thalgo, and their course of performance and dealing gave rise to an implied-in-fact contract
(“Status Quo Agreement”), which applied after the termination dates of both distribution
agreements, and the terms of this agreement included a continuation of the territorial division; 2)
alternatively, even if Ehring Enterprises was not a party to a Status Quo Agreement between
Thalgo and RD, there was an express written agreement to extend the terms of Ehring
Enterprises’s distribution agreement including the territorial restrictions; 3) alternatively, Ehring
Enterprises had an implied agreement with Thalgo to be its distributor in the Eastern United
States; 4) RD invested time and resources into developing business in the Western territory, and
the territorial restrictions in the parties’ written distribution agreements, extended agreements,
and Status Quo Agreement were intended to benefit and protect the other distribution; 5) there
was a creditor third-party beneficiary status conferred on RD by the territorial restrictions in
Ehring Enterprises’s distribution agreement; and 6) Ehring Enterprises distributed Thalgo
products to the T Spa from 2008 to 2012.
–7– The court made the following conclusions of law: 1) Ehring Enterprises commenced
sales to the T Spa before the initial terms of its distribution agreement had been terminated or
extended; 2) the distribution agreements were effectively extended as a matter of law; 3) Ehring
Enterprises violated the terms of the distribution agreement by making sales into RD’s territory
that were not to a Nordstrom or Saks. The court concluded alternatively that the Status Quo
Agreement reflected an implied-in-fact contract between RD, Ehring Enterprises, and Thalgo,
and that Ehring Enterprises breached the Status Quo Agreement with respect to the territorial
restrictions.
In two issues on appeal, Ehring Enterprises challenges the legal and factual sufficiency of
the evidence to support the court’s alternative findings that RD was a third-party beneficiary to
the distribution agreement between Ehring Enterprises and Thalgo, or that RD, Ehring
Enterprises, and Thalgo formed a three-party Status Quo Agreement which Ehring Enterprises
breached.
In an appeal from a bench trial, the trial court’s findings of fact have the same weight as a
jury verdict. Principal Life Ins. Co. v. Revalen Dev., LLC, 358 S.W.3d 451, 454 (Tex. App.—
Dallas 2012, pet. denied). Therefore, we review a trial court’s finding under the same
sufficiency standards we use when determining if sufficient evidence exists to support an answer
to a jury question. Id. A legal sufficiency challenge to the findings of fact fails if there is more
than a scintilla of evidence to support the findings. Holt Atherton Indus., Inc. v. Heine, 835
S.W.2d 80, 84 (Tex. 1992). In reviewing a factual sufficiency challenge, we consider and weigh
all of the evidence in support of and contrary to the finding and will set aside the verdict only if it
is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.
Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).
–8– We begin by considering Ehring Enterprises’s argument that the evidence is insufficient
to support the court’s finding that RD was a third-party beneficiary to the distribution agreement
between Ehring Enterprises and Thalgo. Ehring Enterprises first argues that, after its distribution
agreement expired, the only contract that could have existed was an implied-in-fact agreement,
and Texas law prohibits third-party beneficiaries by implication. Ehring Enterprises further
contends that the territorial restriction in its distribution agreement was not intended to benefit
RD and was intended only to benefit Ehring Enterprises and Thalgo, the mutual benefits being
that Thalgo granted Ehring Enterprises an exclusive territory and Ehring Enterprises would
refrain from competing with Thalgo.
A third party may recover on a contract made between other parties only if the parties
intended to secure a benefit to that third party, and only if the contracting parties entered into the
contract directly for the third party’s benefit. Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002)
(citing MCI Telecomms. Corp. v. Texas Util. Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999)). A
third party does not have a right to enforce a contract if it received only an incidental benefit. Id.
at 589. However, a third-party beneficiary does not have to show that the signatories executed
the contract solely to benefit it as a non-contracting party. Id. at 591. A court will not create a
third-party beneficiary contract by implication. Id. Rather, an agreement must clearly and fully
express an intent to confer a direct benefit to the third party. Id. To determine the parties’ intent,
courts must examine the entire agreement and give effect to all the contract’s provisions so that
none are rendered meaningless. Id. To qualify as a third-party beneficiary, a party must show
that it is either a donee or creditor beneficiary of the contract. Id. An agreement benefits a
creditor beneficiary if, under the agreement, “that performance will come to him in satisfaction
of a legal duty owed to him by the promisee.” Id. (quoting MCI, 995 S.W.2d at 651). This duty
–9– may be an indebtedness, a contractual obligation, or another legally enforceable commitment
owed to the third party. Id.
Here, the trial court found that RD was a creditor third-party beneficiary of Ehring
Enterprises’s distribution agreement because the territorial restriction was intended to protect
RD’s interests in connection with the development, marketing, and sales effort in the Western
United States. The two distribution agreements, effective the same day, were made in
contemplation of each other as Thalgo divided the United States into two exclusive sales
territories. Each distribution agreement mentioned the other distributor by name and
contemplated disputes arising between the two. RD was not a stranger to Ehring Enterprises’s
distribution agreement and vice versa. Although Ehring Enterprises’s agreement also contained
reciprocal benefits for Thalgo and Ehring Enterprises, RD need not show the territorial
restriction was solely for its benefit. We conclude there was evidence Ehring Enterprises and
Thalgo intended for the territorial restriction to benefit RD and that the restriction was a direct,
not incidental, benefit to RD as it protected RD’s territory. See Hellenic Inv., Inc. v. Kroger Co.,
766 S.W.2d 861, 864–65 (Tex. App.—Houston [1st Dist.] 1989, no writ) (Kroger located in
shopping center was third-party beneficiary of restricted use clause in another tenant’s lease).
Under the specific facts of this case, there is more than a scintilla of evidence to support the
court’s third-party beneficiary finding and it is not so contrary to the weight of the evidence as to
be clearly wrong and unjust.
In reaching this conclusion, we reject Ehring Enterprises’s argument that RD could not be
a third-party beneficiary because Ehring Enterprises and Thalgo had an implied contract. We
note that the concepts of implied contracts and creation of a third-party beneficiary by
implication are two distinct concepts. This situation involves neither. Ehring Enterprises’s sales
to the T Spa began during the second three-year term of its express written contract with Thalgo.
–10– The court found the territorial restriction in that agreement expressed the parties’ intent to confer
a direct benefit on RD. The court also found that Sirop’s March 2009 letter expressly extended
the terms of Ehring Enterprises’s distribution agreement and found that all three parties treated
the agreement as extended in their course of performance. As such, the terms of the territorial
restriction were not implied or in doubt. See Cotton v. Deasey, 766 S.W.2d 874, 877 (Tex.
App.—Dallas 1989, writ denied) (extension of term of contract is extension of all its provisions).
Having found the evidence legally and factually sufficient to support the trial court’s finding that
RD was a third-party beneficiary, we overrule Ehring Enterprises’s first issue and need not
consider its second issue regarding the Status Quo Agreement.
In a conditional cross appeal, RD contends the evidence conclusively established its
tortious interference claim. RD’s cross appeal is conditioned on the Court sustaining either of
Ehring Enterprises’s issues. Because we are upholding the trial court’s judgment, we need not
reach RD’s conditional cross appeal.
We affirm the trial court’s judgment.
/Ada Brown/ ADA BROWN JUSTICE
130711F.P05
–11– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT
EHRING ENTERPRISES, INC. F/K/A On Appeal from the 44th Judicial District THALGO COSMETIC USA, INC. AND Court, Dallas County, Texas MARINE IMPACT, INC., Trial Court Cause No. DC-11-04770-b. Appellants/Cross-Appellees Opinion delivered by Justice Brown. Justice Lang-Miers participating. No. 05-13-00711-CV V.
RD MANAGEMENT CORPORATION, Appellee/Cross-Appellant
In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellee RD MANAGEMENT CORPORATION recover its costs of this appeal from appellants EHRING ENTERPRISES, INC. F/K/A THALGO COSMETIC USA, INC. AND MARINE IMPACT, INC.
Judgment entered this 25th day of February, 2015.
–12–