Expansion Plus Inc. v. Brown-Forman Corp.

132 F.3d 1083, 1998 WL 7202
CourtCourt of Appeals for the Fifth Circuit
DecidedJanuary 12, 1998
Docket97-20167
StatusPublished
Cited by2 cases

This text of 132 F.3d 1083 (Expansion Plus Inc. v. Brown-Forman Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Expansion Plus Inc. v. Brown-Forman Corp., 132 F.3d 1083, 1998 WL 7202 (5th Cir. 1998).

Opinion

HIGGINBOTHAM, Circuit Judge:

This ease requires us to determine the obligations of the parties not to disclose information about the subject matter of their agreement. Based on our examination of the parties’ negotiations and the documents evidencing their agreement, we hold that at the relevant time, Brown-Forman did not owe EPI a duty not to disclose. The judgment of the district court is AFFIRMED.

I

Expansion Plus, Inc., developed a credit card “data capture” and “paper processing” program. After implementing the Program on a small scale, EPI sought a national expansion. EPI contacted Brown-Forman about working together to promote the Program. The two companies conducted negotiations during which EPI disclosed confidential information to Brown-Forman. Both parties recognized the confidential nature of the information disclosed. These initial negotiations led to a Master Agreement, executed in 1987. The Master Agreement contained a non-disclosure provision under which Brown-Forman agreed not to disclose any information relating to the Program and to advise its employees of the nondisclosure obligation it owed EPI. See R. 148, Tab 4. This provision expressly stated that the obligation not to disclose was to remain in effect until three years after the termination or expiration of the agreement for any reason whatsoever. Id.

*1085 In 1988, the parties executed a new contract. Under the 1988 Agreement, EPI transferred and assigned to Brown-Forman “all of its rights, title and interest in and to the Program” and Brown-Forman agreed “to accept the right to control, implement, and promote the Program.” R. 148, Tab 11. The 1988 Agreement expressly stated that it was for a term of five years. It also contained an integration clause stating “[t]his agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes any prior agreements and representations relating to such subject matter that are not set forth herein.” Id. The 1988 Agreement did not contain any non-disclosure provisions. EPI received up front a $225,000 consulting fee and approximately $1.8 million over the term of the contract from its percentage of the transaction fees that Brown-Forman received from the Program. Id.

In September 1998, the 1988 Agreement expired by its own terms and Brown-For-man sold the Program to NaBanco Merchant Services Corporation, First Financial Bank, and National Baneard Corporation for more than $31 million. At .the time of .the sale, EPI was a shell company with few assets. More than six months after the sale to NaBanco, EPI wrote Brown-Forman contending for the first time that the 1988 Agreement was a marketing and consulting contract; that it did not transfer ownership of the Program from EPI to Brown-For-man. After receiving this letter, Brown-Forman filed suit in the Western District of Kentucky seeking a declaration of the parties’ rights under the 1988 Agreement. EPI then filed suit in a Texas state court alleging that by the sale to NaBanco, Brown-Forman converted EPI’s property, misappropriated its trade secrets, breached their confidential relationship, and tortiously interfered with EPI’s contracts. EPI abjured any claim for breach of contract. Brown-Forman removed EPI’s case to the United States District Court for the Southern District of Texas. Ultimately, the Kentucky and Texas suits were consolidated.

EPI moved for partial summary judgment seeking a declaration that the 1988 Agreement transferred to Brown-Forman only a limitéd interest for a limited duration. Brown-Forman filed a cross motion for summary judgment on all of EPI’s claims. A magistrate judge recommended granting Brown-Forman’s motion. The district court accepted the recommendation in part, entering an order denying EPI’s motion for partial summary judgment, granting summary judgment for Brown-Forman on EPI’s tor-tious interference of contract and conversion claims and deferring its ruling on EPI’s breach of confidential relationship and misappropriation of trade secrets claims until the magistrate made additional findings in response to EPI’s objections to the magistrate’s recommendation.

After considering EPI’s new arguments, the magistrate again recommended granting summary judgment in favor of Brown-For-man on EPI’s remaining claims. After a de novo review, the district court adopted the magistrate’s memoranda and recommendations and granted summary judgment against EPI on its breach of confidential relationship and misappropriation of trade secrets claims. EPI appeals the dismissal of its conversion, breach of confidential relationship, and misappropriation of trade secrets claims. This court has jurisdiction under 28 U.S.C. § 1291.

II

Though the parties and the trial court have devoted much attention to whether EPI’s claims sound in contract or tort, we need not enter this fray. At oral argument, EPI conceded, and properly so, that for any of its claims to prevail, Brown-Forman must have owed it a duty not to disclose confidential information at the time Brown-Forman soíd the Program to NaBanco. We turn first to this issue.

The district court ruled that EPI failed to present evidence of a duty of Brown-Forman not to disclose information about the Program at the time of sale. We review this ruling de novo. Norman v. Apache Corp., 19 F.3d 1017, 1023 (5th Cir.1994).

A confidential relationship may arise “ ‘where one person trusts in and relies upon *1086 another, whether the relation is a moral, social, domestic, or merely personal one.’ ” Crim Truck & Tractor v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex.1992) (quoting Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 261 (1951)). Trusting another or enjoying a cordial relationship of long duration is not enough to establish a confidential relationship. Id. at 594-95. In order to determine the nature of the relationship between EPI and Brown-Forman at the time of sale, we look to the contracts they executed in the course of their dealings with each other. See Norman, 19 F.3d at 1023-24.

Their agreements convince us that at the time of the sale to NaBanco, Brown-Forman had no duty not to disclose information about the Program. The 1988 Agreement manifested their entire agreement and terminated the 1987 Master Agreement. The absence of a nondisclosure provision in the 1988 Agreement is significant. In 1987, the parties bargained for confidentiality to last for three years after their agreement was terminated for any reason. The 1988 Agreement addressed nothing on this score. Assuming the 1988 Agreement did not abrogate the nondisclosure provision of the 1987 Agreement, the best case for EPI, the nondisclosure obligation remained in effect only until 1991, three years after its termination. In 1993, Brown-Forman was free to sell the Program as it did not owe EPI any duty of confidentiality at that time.

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132 F.3d 1083, 1998 WL 7202, Counsel Stack Legal Research, https://law.counselstack.com/opinion/expansion-plus-inc-v-brown-forman-corp-ca5-1998.