IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 01-11482 ____________________
MCKINNEY BB, LP
Plaintiff - Counter Defendant - Appellee
v.
US REALTY ADVISORS, LLC
Defendant - Counter Claimant - Appellant
RH SERVICES COMPANY INC
Intervenor Defendant - Counter Claimant - Appellant
_________________________________________________________________
Appeal from the United States District Court for the Northern District of Texas (00-CV-1762) _________________________________________________________________ January 24, 2003
Before KING, Chief Judge, and JONES and EMILIO M. GARZA, Circuit Judges.
KING, Chief Judge:*
Appellants US Realty Advisors, L.L.C. and RH Services
Company, Inc. appeal the district court’s denial of their motion
for partial summary judgment and the grant of summary judgment to
Appellee McKinney BB, L.P. Because the district court did not
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. err in determining that Texas law governs this case and that
Appellants were not entitled to relief, we affirm.
I. Factual Background
This appeal stems from a dispute over the terms and
conditions of a contract for the performance of real estate
brokerage services. US Realty Advisors (“US Realty”) is a New
York limited liability company with its principal place of
business in Manhattan. It is a registered investment advisor
focused on real estate, business trusts, and securities. US
Realty offers sophisticated real estate advisory services to
public pension funds, corporations, financial institutions, and
private developers and investors on a nationwide basis. RH
Services Company, Inc. (“RH Services”) is an affiliate that
exists solely for the benefit of US Realty and is a New York-
licensed real estate brokerage entity. It has no employees of
its own, as all individuals performing real estate brokerage
services for RH Services are US Realty employees. Unlike RH
Services, US Realty is not a licensed real estate broker in any
state.
The property at issue in this case, the Blockbuster
Distribution Center (“Blockbuster Property”) located in McKinney,
Texas and owned by McKinney BB, L.P. (“McKinney”), offered a
business opportunity for US Realty because it necessarily
2 involved a single tenant net lease transaction.2 A former US
Realty employee introduced officials from US Realty to those from
McKinney, and contractual negotiations between the parties
subsequently ensued. The entirety of US Realty’s activity with
respect to the negotiations was performed in its New York office;
at no time did any employee travel to Texas for the purpose of
participating in the negotiations. McKinney’s agent, Keystone
Strategies Inc. (“Keystone”), negotiated with US Realty from its
office in Dallas, Texas.
At the end of negotiations, on September 13, 1999, McKinney
retained by contract the services of US Realty and RH Services to
market and structure the sale of the Blockbuster Property. No US
Realty employees traveled to Texas for the purpose of executing
the retainer agreement, which the parties eventually labeled (and
we will call) the Advisor Contract. An executive vice president
signed the Advisor Contract in New York and forwarded it to
Keystone, who thereafter executed the Advisor Contract in Texas
and sent an executed copy back to New York.
The Advisor Contract appointed US Realty to be the
“exclusive disposition advisor with respect to the Property.”
Under the agreement, US Realty would prepare a business analysis
of McKinney’s interests, have an exclusive right to sell the
2 Single tenant net leasing is a niche in real estate transactions in which US Realty has a level of expertise. US Realty participates in $1 billion worth of such transactions annually.
3 Blockbuster Property on terms acceptable to McKinney, and
generally act as McKinney’s disposition advisor. The agreement
provided for US Realty’s right, under certain conditions, to a
fee of 1% of the purchase price if the Advisor Contract was
terminated and the Blockbuster Property was nevertheless sold to
a purchaser produced by US Realty. Moreover, the Advisor
Contract outlined varied services for US Reality to perform and
noted that any and all real estate brokerage functions would be
performed by RH Services.
The Advisor Contract also established several conditions to
US Realty and RH Services’ receipt of a commission. First, the
sale of the Blockbuster Property had to transpire within 180 days
following the expiration of the Advisor Contract. Second, the
Advisor Contract required that within ten days of its expiration,
US Realty had to notify McKinney in writing of any prospective
purchaser of the Blockbuster Property with whom it had
substantial contact. This condition was inserted with the
intention that Keystone and McKinney would know by a date certain
whether there was a prospective purchaser who might purchase the
Blockbuster Property within 180 days after the expiration of the
Advisor Contract.
Originally, the Advisor Contract was scheduled to terminate
on November 9, 1999. It was extended on four occasions, each
time in writing and each time at the request of US Realty. The
last written extension expired on December 21, 1999. Thus,
4 pursuant to the express terms of the Advisor Contract, including
all extensions, if US Realty expected to be compensated under the
terms of the Advisor Contract, it had to meet the ten day written
notice condition by January 2, 2000 and the closing of the sale
to one of the prospective purchasers had to occur on or before
June 18, 2000 (which was 180 days after the expiration of the
Advisors Contract).
During the term of the Advisor Contract, US Realty and RH
Services sent out twenty-seven confidentiality agreements to
potential purchasers. They secured four bona fide offers for the
Blockbuster Property, including the offer from Peak Holdings,
which ultimately purchased the Blockbuster Property for
$38,500,500. During this period of time, US Realty employees
never traveled to Texas (or any other state) while providing
services. Moreover, there was no conduct or activity on the part
of US Realty employees outside the State of New York.
As of the expiration date of the final written extension of
the Advisor Contract, US Realty and RH Services had secured a
confidentiality agreement from B.T. Raike, Peak Holdings’s
broker, secured a $37 million offer from Lexington Corporate
Properties Trust, and delivered a status report that revealed the
activity and interest in the Blockbuster Property created by US
Realty and RH Services. Yet, the Blockbuster Property still had
not been sold and McKinney never extended the Advisor Contract
beyond the expiration date of the final extension. At this
5 point, US Realty and RH Services departed from the written
agreement by continuing to market the Blockbuster Property and
broker deals with prospective purchasers.
Peak Holdings forwarded its initial offer directly to
McKinney on January 28, 2000, and McKinney counteroffered. On
February 25, 2000, Peak Holdings acknowledged McKinney’s
counteroffer and made a final offer. Peak Holdings and McKinney
eventually entered into a contract for the sale of the
Blockbuster Property on May 4, 2000. McKinney agreed to
indemnify Peak Holdings as to any claim by any broker or finder
with which it dealt. Although Peak Holdings signed the letter of
intent, the final purchaser of the property was BV Realty
Partners, a Texas limited partnership. BV Realty Partners closed
on the Blockbuster Property on July 28, 2000.3
II. Procedural History
Prior to the closing on the Blockbuster Property, US Realty
demanded from McKinney a commission for services rendered. Upon
receiving the payment demand from US Realty, McKinney initiated
the underlying action in Texas state court, seeking a declaration
that it did not owe compensation to US Realty under the Advisor
Contract. McKinney advanced four arguments to establish US
3 Despite its efforts, US Realty fell short in meeting the two deadlines provided in the Advisor Contract, as it did not provide McKinney with a list of prospective purchasers by January 2, 2000 and, as of June 18, 2000, it had not facilitated a closing with a prospective purchaser that it had both contacted and identified.
6 Realty’s inability to recover: (1) US Realty was precluded from
entitlement to fees by operation of the Texas Real Estate License
Act (“RELA”) because neither US Realty nor RH Services was a
licensed broker in Texas; (2) US Realty did not fulfill a
condition precedent to the recovery of a commission, i.e., that
the sale of the Blockbuster Property had to be consummated within
180 days after the expiration of the Advisor Contract (since the
Advisor Contract was never extended orally or in writing beyond
December 21, 1999); (3) any oral extension or modification of the
written agreement was unenforceable under the Statute of Frauds
provisions of the Texas RELA; and (4) in any event, US Realty
breached its obligations under the Advisor Contract by, inter
alia, failing to prepare and revise financial reports and cash
flow analyses.
US Realty removed the case to federal district court and
asserted counterclaims for breach of contract and unjust
enrichment. McKinney thereafter moved for summary judgment,
contending that Texas law governed the controversy and the Texas
RELA operated to preclude remuneration under both Texas and New
York law.
RH Services intervened in the action as a defendant, and
together with US Realty, cross-moved for partial summary
judgment, maintaining that they had established their entitlement
to quantum meruit recovery under New York law. They claimed New
York law should apply because: (1) any fair application of the
7 Texas choice of law rules points to New York as the state with
the most significant interest in this controversy; (2)
application of the procedural law of Texas, which includes the
Statute of Frauds provision of the Texas RELA, would make the
Advisor Contract’s oral extension unenforceable and thus enable
recovery under quasi-contract theory; and (3) application of the
Texas Statute of Frauds does not preclude consideration of New
York substantive law, which recognizes a cause of action for
unjust enrichment when a licensed broker’s performance of an
unenforceable written agreement results in a clear benefit to the
other contracting party.
The district court granted McKinney’s Motion for Summary
Judgment and denied US Realty and RH Services’ Motion for Partial
Summary Judgment. The court found that the Texas Statute of
Frauds applied and barred US Realty and RH Services’ unjust
enrichment counterclaim. In denying the cross-motion for partial
summary judgment, the court reasoned that even if it applied New
York’s Statute of Frauds, relief would remain unavailable to US
Realty and RH Services because the proffered evidence showed that
US Realty, although unlicensed, provided brokerage services in
the subject transaction, an act prohibited under New York law.
The court further found that § 535.1 of the Texas Administrative
Code precluded US Realty and RH Services’ counterclaim because US
Realty did not hold a Texas real estate license.
8 US Realty and RH Services appeal, seeking review of the
district court’s grant of summary judgment to McKinney and the
denial of their partial summary judgment motion, including the
district court’s choice of law determination, interpretation of
New York law, and application of the Texas Statute of Frauds and
Administrative Code.
III. Standard of Review
This court reviews the grant or denial of a summary judgment
motion de novo, using the same criteria used by the district
court in the first instance. Pruitt v. Levi Strauss & Co., 932
F.2d 458, 461 (5th Cir. 1991), abrogated on other grounds by
Floors Unlimited, Inc. v. Fieldcrest Cannon, Inc., 55 F.3d 181,
185 (5th Cir. 1995). We review the evidence and any inferences
to be drawn therefrom in the light most favorable to the non-
moving party. Id. The district court’s grant of summary
judgment is proper if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with
affidavits, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law. Id.
IV. Choice of Law; Unjust Enrichment
The determinative issue in this case is whether New York or
Texas law governs the Advisor Contract. Once this choice of law
determination is made, then an assessment of the relief available
to US Realty and RH Services can be made. At the onset of this
9 discussion, it is imperative to note that because we reach the
conclusion that US Realty and RH Services were not entitled to
compensation under unjust enrichment theory, it becomes
unnecessary to determine whether US Realty and RH Services should
additionally be denied compensation for failing to obtain a Texas
real estate license. Given this result, we leave to another
court the task of parsing the words and phrases of the Texas
administrative statute on real estate licensing.
A. Analysis of the Choice of Law
A federal court sitting in diversity must apply the choice
of law rules of the state in which it sits, e.g., Access Telecom,
Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 704-05 (5th Cir.
1999). We thus consider the choice of law rules of Texas. Texas
courts follow the Restatement (Second) of Conflict of Laws in
choice of law determinations involving contractual disputes.
E.g., Minnesota Mining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d
733, 735 (Tex. 1997).4 Moreover, the Texas Supreme Court, in
4 US Realty and RH Services raise several threshold questions that, under Texas law, must be answered prior to analyzing the choice of law under the Restatement. First, if the case involves questions of remedy and procedure, State of Cal., Dep’t of Mental Hygine v. Corpus, 309 S.W.2d 227, 230 (Tex. 1958), or a Texas statute points to the application of Texas law, Busse v. Pac. Cattle Feeding Fund, 896 S.W.2d 807, 814 (Tex. App.–Texarkana 1995, writ denied), then Texas law applies and a determination under the Restatement’s “most significant relationship” criteria is unnecessary. Unjust enrichment is not a remedy but is an alternative theory of recovery governed by the substantive law of contracts, see generally Knebel v. Cap. Nat’l Bank of Austin, 505 S.W.2d 628, 632 (Tex. Civ. App. 1974), rev’d on other grounds, 518 S.W.2d 795 (Tex. 1974) (“When our courts
10 interpreting the Restatement, has directed courts to consider
which state had the “most significant relationship” to the
particular substantive issue, Duncan v. Cessna Aircraft Co., 665
S.W.2d 414, 421 (Tex. 1984). The particular substantive issue in
this case is whether the Advisor Contract precludes RH Services
and US Realty from recovering for the real estate brokerage
services performed by them. The existence of the Advisor
Contract is essential to the choice of law issue before this
court; US Realty and RH Services contend that New York law would
enable them to recover despite the existence of the Advisor
Contract, while McKinney contrarily avers that the presence of
the Advisor Contract precludes recovery.
Because Texas law requires us to consider which state’s law
has the most significant relationship to the particular
substantive law under consideration, the Restatement provision
that most directly implicates the legal issues arising from this
case must be evaluated, along with the Restatement’s more general
default rules. Hughes Wood Prods., Inc. v. Wagner, 18 S.W.3d
202, 205, 206 n.2 (Tex. 2000).5 A real estate brokerage contract
today refer to a claim ‘on quantum meruit’ reference is not being made to procedural rules but to the substantive rules of decision which govern disposition of the merits of the claim.”). There is no existing statute directing that Texas law applies to this claim. An analysis of choice of law under the Restatement is appropriate. 5 As Hughes Wood Products illustrates, the Restatement sets out specific rules in various sections that can always be superceded by the guidelines in § 6. The sections of the
11 is principally a contract for employment, not a sale or other
contract conveying an interest in land. Richland Dev. Co., Inc.,
v. Staples, 295 F.2d 122, 125 (5th Cir. 1961). In interpreting
Texas conflicts law, this court has observed that “[i]n cases
involving contracts for the rendition of services, the Texas
Supreme Court has particularly relied on section 196 of the
Restatement” when the contract lacks a choice of law provision.
Pruitt, 55 F.3d at 185. Thus, in a case involving a contract for
the provision of real estate brokerage services, it is clear that
we must incorporate § 196 into our analysis.6
Restatement of Conflict of Laws are intended to be cross- applicable, a point that can be understood by reading the text of the sections themselves, as well as the commentary to the sections. An approach that disregards one rule for the other would be excessively formalistic and would ignore the lesson of Hughes Wood Products that the Restatement should be read and interpreted as an organic whole where the focal point is which state has the most significant relationship. It is for this reason that in our analysis of the case, we evaluate the facts not only under § 196, but under §§ 6 and 188 as well. 6 McKinney argues that § 196 is implicated only when the contract expressly provides for the performance of personal services in a single forum. McKinney is only half-correct in this regard; the Comment to § 196 also states the section is also invoked when it “can be inferred either from the contract’s terms or from the nature of the services involved or from other circumstances.” RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 196 cmt. a. Even though another state may have a more significant relationship to the parties under § 6, § 196 is nevertheless applicable because an inference may still be made that the brokerage services called for by the Advisor Contract were to be rendered by US Realty and RH Services in New York. Further supporting our consideration of § 196 is the Comment’s statement that the section applies to contracts with professional service providers such as brokers. Id. It is apparent that McKinney’s reading of § 196 is far too restrictive.
12 1. Applicable Restatement Sections7
Although § 196 suggests that the place of performance
generally will be conclusive in determining the applicable law
when evaluating service contracts without a choice of law
provision, e.g., DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 679
(Tex. 1990), this presumption can be overcome if another state
has the most significant relationship using the factors set out
in § 6. See, e.g., Pruitt, 932 F.2d at 461.8 Thus, New York
law, as New York is the state of the performance of the contract,
will govern in this case unless Texas has the most significant
relationship to the transaction and the parties. In this case,
we conclude, after evaluating the § 6 interests and the § 188
contacts, that Texas has the most significant relationship
because all services performed under the Advisor Contract were
7 In their counterclaim, US Realty and RH Services did not seek a remedy of restitution and have not argued that § 221 of the Restatement or this court’s decision in Caton v. Leach Corp., 896 F.2d 939 (5th Cir. 1990), governs this case. 8 The text of § 196 reads:
The validity of a contract for the rendition of services and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the contract requires that the services, or a major portion of the services, be rendered, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in section 6 to the transaction and the parties, in which event the local law of the other state will be applied.
Id. § 196 (emphasis added).
13 targeted in some way, shape, or form toward the Blockbuster
Property in Texas.
In deciding which state has the most significant
relationship, the § 6 factors should be evaluated using the
contacts listed in § 188 of the Restatement. See Maxus
Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 57 (Tex.
1991). According to § 6, to decide what state has the most
significant relationship to the transaction and the parties, the
court should consider:
(a) the needs of the interstate and international systems; (b) the relevant policies of the forum; (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue; (d) protection of justified expectations; (e) the basic policies underlying the particular field of law; (f) certainty, predictability, and uniformity of result; (g) ease in the determination and the application of the law to be applied.
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(2) (1971). Section 188
states that, in the absence of an effective choice of law by the
parties, a number of contacts should be taken into account in
applying the principles of § 6. These § 188 factors include:
(a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.
Id. § 188(2). It is with these factors in mind that we begin our
evaluation of the specific facts of this case.
14 2. Relevant contacts
The Texas Supreme Court has clarified the exact steps of our
analytic process. In ascertaining the most significant
relationship, we first identify those state contacts that should
be considered. Duncan, 665 S.W.2d at 421. Once the contacts are
identified, the question of which state’s law to apply is a
question of law. Id. Through consideration of the qualitative
nature of the identified contacts, i.e., how the contacts
implicate the broad state policy interests underlying the unjust
enrichment claim, we can then select the applicable law. See id.
The contacts in this case are readily identifiable and
relatively undisputed. Texas is the place of contracting
(McKinney accepted US Realty’s contract offer while in Texas);9
the place of the subject of the Advisor Contract (property
located in Texas); McKinney’s domicile; and a place of the
negotiation of the terms of the Advisor Contract. New York is
the place of the Advisor Contract’s performance, a place of
negotiation, and the domicile of US Realty and RH Services. One
of these contacts, the place of negotiation, is of minimal
consequence in this analysis because the place where the parties
negotiate is “of less importance when there is no one single
9 Generally, the a contract is considered complete at “the place where the last act necessary to complete the contract is done, namely where the offer is accepted.” Lockwood Corp. v. Black, 501 F. Supp. 261, 264 (N.D. Tex. 1980), aff’d, 669 F.2d 324 (5th Cir. 1982).
15 place of negotiation and agreement, as for example, when the
parties do not meet but rather conduct their negotiations from
separate states,” RESTATEMENT § 188 cmt. a, which is what occurred
in the instant case; effectively, the place of negotiation
contacts cancel each other out. By sheer number, those contacts
that do remain favor application of Texas law.
However, ending the inquiry at this point would be premature
because the most significant relationship test hinges on the
qualitative nature of the particular contacts with a state rather
than the mere number of occasions. We thus turn to the factors
laid out in the Restatement to help us reach the correct legal
conclusion.
3. Most Significant Relationship Analysis
Of the § 6 factors, there are only three that are relevant
in the instant case. Those factors that are applicable are the
relevant policies of the forum, i.e., Texas; the relevant
policies and interests of other interested states, i.e., New
York; and the protection of justified expectations.10
10 US Realty and RH Services argue cursorily that the needs of interstate and international system require application of New York law because the application of the Texas RELA to this case would unduly burden interstate commerce. This argument is ultimately unpersuasive because US Realty and RH Services offer no analysis or evidence to support this assertion. More importantly, because we focus our analysis on Texas’s interest in evaluating the unjust enrichment claim, as opposed to the application of the RELA licensing requirements, the effect, if any, of RELA on interstate commerce is outside the scope of our review.
16 a. Relevant Policies and Interests of Texas and New York
Combining the two interest-related factors into one
discussion assists in the inexact science that is judicial
balancing. Weighing in Texas’s favor are the places of the
execution of the contract as well as the subject matter of the
contract. While US Realty and RH Services raise an argument that
there is no legitimate Texas interest in regulating the services
performed by New York brokers in their home state, Texas has an
interest in securing the contract rights of its own residents,
particularly when subject of contract is brokerage services for
property located in Texas. See DeSantis, 793 S.W.2d at 679-680
(finding, in a choice of law determination, that Texas had a
greater interest than Florida in protecting the rights of Texas
residents entering into contracts for employment). Moreover, in
this case, it is reasonable to conclude that Texas has an
economic interest in protecting Texas-domiciled land vendors from
companies serving numerous individual customers in the national
marketplace.
It is undeniable that New York has an interest in this
dispute because the state where performance is to occur under a
contract has an obvious interest in the nature of the performance
and in the party that is to perform. RESTATEMENT § 188 cmt. e.
However, diminishing New York’s interest in the dispute is the
plain fact that US Realty and RH Services market their services
17 nationwide. US Realty advertises itself as a sophisticated
company providing an array of services with a multitude of
business contacts outside New York State. While New York
provides the location of the headquarters of the company, and
thus the place of performance for the each and every one of US
Realty and RH Services’ contracts, the state garners a negligible
interest in all other facets of the dispute because the focus of
US Realty’s business strategy extends outside New York.
When both states have clear interests in the contractual
dispute, the qualitative nature of the contacts with the state
become increasingly important. We find no cogent reason why New
York would have a greater interest than Texas in this contractual
dispute; if anything, the interests in this regard are evenly
balanced and due to US Realty’s national focus, are tipped
slightly in favor of Texas.
b. Protection of Justified Expectations
The protection of justified expectation of the parties at
the time of contracting is of considerable importance in the
field of contracts. See id. § 188 cmt. b. Moreover, the need
for protecting expectations impacts another § 6 factor: ensuring
certainty, predictability, and uniformity of result. Id.
Because we find that both parties had some expectation that Texas
law would apply, this influential factor tips the scale in favor
of the application of Texas law.
18 A handful of facts support this finding. Both US Realty and
RH Services were keenly aware that McKinney was a Texas resident
and that the Blockbuster Property was located in Texas. US
Realty, which by its own account, is a multi-national,
sophisticated investment-advising entity, elected not to put a
choice of law provision in the Advisor Contract that it drafted.
In effect, US Realty and RH Services knowingly left open the
possibility that Texas law would apply in any dispute arising out
of the contractual relationship.
Further clarifying the expectations of the parties is the
Restatement itself. The Comment to Restatement § 188 supports a
presumption relating to the expectations of parties in the
context of contracts concerning land. It states:
When the contract deals with a specific physical thing, such as land..., the location of the thing is significant. The state where the thing ... is located will have a natural interest in transactions affecting it. Also the parties will regard the location of the thing ... as important. Indeed, when the thing ... is the principal subject of the contract, it can often be assumed that the parties, to the extent that they thought about the matter at all, would expect that the local law of the state where the thing ... was located would be applied to determine many of the issues arising under the contract.
Id. § 188 cmt. e. In this case, it can be rightly assumed that
the parties expected to some extent that Texas law would apply
because all services performed under the Advisor Contract were
targeted in some way, shape, or form, toward the Blockbuster
Property in Texas. Given the nature of real estate brokerage
service contracts, the Blockbuster Property was clearly the
19 subject matter of the Advisor Contract. On balance, this factor
favors the application of Texas law.
US Realty and RH Services argue that Advisor Contract’s
disclosure of New York-licensed RH Services as the brokerage
service provider, as well as US Realty’s lack of offices outside
New York, were sufficient to create McKinney’s expectation that
New York law would apply. It is US Realty who should have
expected the likelihood that Texas law would apply, especially
when drafting a contract – for a Texas customer wishing to sell
land located in Texas – and leaving out a clear choice of law
provision. Customer McKinney would justifiably expect Texas law
to apply because the real estate that was the object of the
transaction was located in Texas, New York was expected to have
minimal impact on a nationwide marketing transaction, and the
Advisor Contract omitted a provision stating which law governed.
Given the Restatement’s presumption as to the expectations of
parties entering into contracts with land as the subject matter,
we conclude that the expectation that Texas law would apply be
placed on US Realty.
4. Which State Law Governs
Therefore, applying the guiding principles of the “most
significant relationship test,” we reach the conclusion that the
factors weigh most heavily in favor of applying Texas substantive
20 law to evaluate US Realty and RH Services’ rights to compensation
for services rendered.11
B. The Unjust Enrichment Claims
Applying Texas substantive law, we now turn to the merits of
US Realty and RH Services’s claims of unjust enrichment.12 US
Realty and RH Services claim that they are entitled to relief
because McKinney was unjustly enriched by the services rendered
during the term of the written contract. It is well-established
11 While on its face, this outcome would appear to be harsh for national real estate brokerage firms and other related business entities, it must be emphasized that the Restatement’s balancing analysis is highly fact dependent and thereby could result in differing choices of law in other scenarios. A party wishing to avoid application of another state’s laws to its business could simply include a choice of law provision in its contracts. In Texas, contractual choice of law provisions are ordinarily enforced if the chosen forum has only a substantial relationship to the parties and the transaction. See Access Telecom, Inc. v. MCI Telecomms., Corp., 197 F.3d 694, 705 (5th Cir. 1999) (citing DeSantis, 793 S.W.2d at 677-78). 12 There is a question as to whether the Texas RELA precludes US Realty and RH Services from seeking damages under the theory of unjust enrichment. US Realty and RH Services rely on Fifth Circuit precedent for their assertion that the Texas RELA Statute of Frauds does not bar their claim for unjust enrichment. Morris v. LTV Corp., 725 F.2d 1024 (5th Cir. 1984) (finding that the Statue of Frauds provision of the Texas RELA invokes the procedural law). They contend that Morris stands for the proposition that even in the face of a written agreement rendered unenforceable by the Texas RELA, a court sitting in diversity may apply the law of a foreign state and recognize a claim for unjust enrichment. US Realty and RH Services are correct that the Statute of Frauds does not preclude our ability to examine the unjust enrichment claim on the merits; however, we will not address the issue of whether the Texas RELA’s Statute of Frauds provides a procedural bar to US Realty and RH Services’s unjust enrichment claims because we decide the case on contractual grounds alone.
21 that Texas law prohibits a party from taking advantage of the
remedy of unjust enrichment where “a valid, express contract
governing the subject matter of the dispute exists.” E.g.,
Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 454 (5th Cir.
2001) (citing Woodward v. Southwest States, Inc., 384 S.W.2d 675,
675 (Tex. 1964)). Here, the subject of unjust enrichment claim,
i.e., compensation for services rendered, was covered by the
Advisor Contract; the Advisor Contract specified how, when, and
if a commission would be awarded. In attacking the applicability
of the Texas rule on unjust enrichment, US Realty and RH Services
assert that because the Texas RELA Statute of Frauds rendered the
entirety of the Advisor Contract unenforceable, no valid contract
exists. Such an assertion is patently incorrect, as only the
oral extensions can be construed as unenforceable under the
Statute of Frauds; the original written contract was entirely
valid and enforceable.
Both sides agree with the district court’s finding that the
oral extensions of the Advisor Contract are unenforceable under
the Texas RELA’s Statute of Frauds. While it is clear that the
existence of the enforceable written contract precludes relief
for US Realty and RH Services, the issue of whether they would be
entitled to compensation for services rendered after the
expiration of the Advisor Contract remains. This is because,
under Texas law, the Statute of Frauds’s rendering of oral
extensions as unenforceable does not inherently preclude recovery
22 in quantum meruit for the reasonable value of services rendered
pursuant to the oral extensions. See, e.g., Campbell v. Nw.
Nat’l Life Ins. Co., 573 S.W.2d 496, 498 (Tex. 1978).
In effect, US Realty and RH Services seek compensation for
services that were not required of them by McKinney under the
Advisor Contract. Texas courts apply unjust enrichment “where
there is a failure to make restitution of benefits received under
the circumstances which give rise to an implied or quasi-
contractual obligation to repay, that is, where a benefit was
wrongly secured or passively received which would be
unconscionable for the receiving party to retain.” E.g., Mowbray
v. Avery, 76 S.W.3d 663, 679 (Tex. App.–Corpus Christi 2002, no
pet h.) (citations omitted). The question thus becomes whether
an obligation to repay, whether implied or quasi-contractual,
arises here.
No such obligation arose between US Realty and McKinney.
After the expiration of the Advisor Contract, US Realty engaged
in several activities, including efforts to market the
Blockbuster Property and secure three additional confidentiality
agreements. However, after the expiration of the Advisor
Contract, US Realty had no involvement with either Peak Holdings
or its broker. In fact, Peak Holdings discontinued its efforts
to send offers through US Realty, instead opting to conduct its
sale negotiations with Keystone only. Further, no US Realty
employee participated in structuring the proposed sale of the
23 Blockbuster Property, and no US Realty employee participated in
or was present during negotiations or the closing. Any benefit
to McKinney that can be attributed to US Realty and RH Services’
post-expiration services was negligible at best.
For these reasons, we find lacking US Realty and RH
Services’ claims that they were entitled to recovery under Texas
unjust enrichment principles, either for services performed
during the term of the Advisor Contract or after its
expiration.13
Conclusion
After narrowing our review to US Realty and RH Services’
claim of unjust enrichment, we find that Texas has the most
significant relationship to the particular substantive issue in
this case and thus, Texas law applies. In the final analysis,
Texas law precludes US Realty and RH Services from receiving
relief under the theory of unjust enrichment. For the above
reasons, US Realty and RH Services have not raised a genuine
issue of material fact that would allow them to recover under
Texas law. Therefore, the grant of McKinney’s summary judgment
motion and the denial of US Realty and RH Services’ cross-motion
for partial summary judgment must be affirmed. US Realty and RH
Services shall bear the costs of this appeal.
13 Because we find that Texas law governs this case and that it would prevent US Realty and RH Services from recovering, there is no need to address an alternative outcome under the law of the Empire State.
24 AFFIRMED.