Ureteknologia v. Uretek

CourtCourt of Appeals for the Fifth Circuit
DecidedJanuary 3, 2022
Docket20-20073
StatusUnpublished

This text of Ureteknologia v. Uretek (Ureteknologia v. Uretek) 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
Ureteknologia v. Uretek, (5th Cir. 2022).

Opinion

Case: 20-20073 Document: 00516151701 Page: 1 Date Filed: 01/03/2022

United States Court of Appeals United States Court of Appeals

for the Fifth Circuit Fifth Circuit

FILED January 3, 2022

No. 20-20073 Lyle W. Cayce Clerk

Ureteknologia de Mexico S.A. de C.V.; Urelift S.A. de C.V.,

Plaintiffs—Appellants/Cross-Appellees,

versus

Uretek (USA), Incorporated,

Defendant—Appellee/Cross-Appellant.

Appeal from the United States District Court for the Southern District of Texas USDC No. 4:16-CV-2762

Before Stewart, Haynes, and Graves, Circuit Judges. Per Curiam:* This case concerns a breach of contract dispute between Plaintiff- Appellant Ureteknologia de Mexico S.A. de C.V. (“UdeM”), Plaintiff- Appellant Urelift S.A. de C.V. (“Urelift”), and Defendant-Appellee Uretek (USA), Inc. (“Uretek”). Uretek created a ground-stabilization process and

* Pursuant to 5th Circuit Rule 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Circuit Rule 47.5.4. Case: 20-20073 Document: 00516151701 Page: 2 Date Filed: 01/03/2022

No. 20-20073

sublicensed that process for UdeM’s exclusive use in Mexico (which UdeM subsequently sublicensed to Urelift). Appellants allege that Uretek violated this exclusivity agreement, thereby forcing Urelift to accept lower pay on four ground-stabilization projects and resulting in Urelift’s failure to secure two other projects. After a four-day trial, a jury awarded Appellants liquidated damages, lost profits on the four completed projects, and lost profits on the two unrealized projects. Uretek moved for judgment as a matter of law, which the district court partially granted, holding that UdeM was entitled to liquidated damages but that Urelift was not entitled to lost profits. Accordingly, attorneys’ fees were partially awarded. UdeM and Urelift appealed the district court’s denial of lost profits and failure to grant full attorneys’ fees. Uretek cross-appealed the district court’s grant of liquidated damages and grant of partial attorneys’ fees. For the reasons set forth below, we AFFIRM on all counts. I. Background Uretek is a Houston-based company that developed a patented process—the Uretek Process—for injecting expansive polyurethane foam into the ground. As Appellants explained, the goal of this process is to stabilize the ground against “gradual movements,” which may “go unnoticed until buildings and roads begin to crack, sink, and become unstable.” In 2003, Uretek entered into a Sublicense Agreement with UdeM, a Mexican corporation, whereby Uretek agreed that UdeM could “exclusively market the Uretek processes and products in Mexico.” UdeM sublicensed its exclusive rights to sell Uretek processes and products in Mexico to Urelift. In the years following the Sublicense Agreement, Urelift used the Uretek Process to help secure multiple projects in Mexico. In 2009, Mexico

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City awarded Urelift the Sistema de Transporte Colectivo project (“STC”) on a sole-source basis at a price of MX$735.34 per kilogram of polymer. 1 At trial for the current litigation, Francisco Alvarez—a partner and investor in UdeM and Urelift—distinguished sole-source contracts from competitive bids and testified that the sole-source designation allowed Urelift to sell other jobs for the government “at that price.” Alvarez further testified that competitive bids forced Urelift to reduce its prices. However, Alvarez was neither tendered nor accepted as an expert witness. UdeM and Urelift tendered no expert on Mexican law to explain the implications of the sole- source designation. In 2010, the Barron family (whose trust owned Uretek) formed Structural Plastics, Inc. (“SPI”) to market Uretek production materials outside of the United States. SPI is owned by Mindy Barron Howard (daughter of Uretek CEO Brent Barron) and her husband, Galen Howard. That same year, Uretek released UdeM from its obligation “to purchase a minimum amount of products and services.” The parties also amended their original Sublicense Agreement. The original Sublicense Agreement contained a provision authorizing liquidated damages only to Uretek in case of breach by UdeM. The amendment authorized liquidated damages to either party in the event of breach by the other, adding the following: (4) b. Prohibited Sales of URETEK PROCESSES to Customers Inside the TERRITORY. In the event URETEK sells services utilizing URETEK PROCESSES to a customer

1 There are two STC projects relevant to this case—the 2009 sole-source contract awarded to Urelift and a 2016 competitive bid won by ALSO. The latter is “commonly referred to as ‘Metro Linea A.’” For ease of reference, only the 2009 sole-source STC project will be referred to as “STC.” The 2016 project will be referred to as “Metro Linea A.”

3 Case: 20-20073 Document: 00516151701 Page: 4 Date Filed: 01/03/2022

inside the TERRITORY, URETEK shall pay, and agrees to pay, SUBLICENSEE liquidated damages equal to fifty percent (50%) of the gross revenues collected from such customers no later than fifteen days from written notification by SUBLICENSEE of such demand therefor. In 2011, Uretek challenged the validity of the 2010 amendments to the Sublicense Agreement. The case went to a jury trial in April 2013, and the jury found in UdeM’s favor. Uretek appealed, and in 2014, a prior panel of this court affirmed the validity of the amended Sublicense Agreement, Uretek (USA), Inc. v. Ureteknologia de Mex. S.A. de C.V., 589 F. App’x 710, 713–15, 716 (5th Cir. 2014) (per curiam). As the initial litigation proceeded, the factual predicate underlying the current litigation began to form. Despite its earlier sole-source designation, Urelift lowered prices on two projects in 2013—the Caminos y Puentes Federales de Ingresos y Servicios Conexos project (“CAPUFE”) and the first of two Secretaria de Infraestructura y Obra Publica’s projects (“SIOP #1”)—allegedly due to competition. It won both projects, but at a lower price than the MX$735.34/kg received when Urelift won STC on a sole-source basis some years earlier. Specifically, CAPUFE was awarded at MX$223.55/kg and SIOP #1 at MX$612.37/kg. Though the record provides no exact date, at some point—late 2013 at the earliest, late 2015 at the latest—Luis Sosa and Abel Guzman formed a soil-stabilization company called ALSO. ALSO purchased Uretek products from SPI. Sosa testified that the first purchase occurred in late 2015. Importantly, key individuals at Uretek and ALSO communicated via email throughout 2014. In a May 2014 email from Guzman to Sosa and Barron, Guzman recounted a meeting with project managers regarding the Metro Linea A project where he raised issues about Urelift and noted that Uretek planned to use the Uretek polymer with someone other than Urelift.

4 Case: 20-20073 Document: 00516151701 Page: 5 Date Filed: 01/03/2022

A few months after that email, Urelift again faced alleged competition, winning two contracts but, again, at different prices. Urelift’s winning streak ended in 2016 when it lost two projects to ALSO. First, in May 2016, ALSO obtained the Chapultepec project on a sole-source basis. Second, in July 2016, three companies submitted competitive bids on the Metro Linea A project: ALSO, Comsa Emte S.A. de C.V. (“Comsa Emte”), and Urelift, but Comsa Emte and Urelift were then disqualified for various reasons. Accordingly, ALSO secured the Metro Linea A project. Immediately preceding the bid, however, Barron sent a letter to the Metro Transportation Systems Project Manager, responding to “certain patent claims recently made by a representative of Urelift SA de CV.” The letter attached the European and U.S. patents and stated that no Mexican patent had been issued.

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Ureteknologia v. Uretek, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ureteknologia-v-uretek-ca5-2022.