Opinion issued October = 4,=20 2007
:=20
In=20 The
For=20 The
ORION =
REFINING=20
CORPORATION AND JOHN STANLEY, Appellants UOP, A =
GENERAL=20
PARTNERSHIP; UOP LLC; EM SECTOR HOLDINGS, INC; AND CATALYSTS, =
ADSORBENTS=20
AND PROCESS SYSTEMS, INC., Appellees
On =
Appeal from the=20
129th District Court Harris =
County,=20
Texas Trial =
Court Cause=20
No. 2002-16080
O P I N =
I O=20
N Appellant, =
Orion=20
Refining Corporation, challenges the summary judgment rendered in =
favor of=20
appellees, UOP, a General Partnership; UOP, LLC; and Catalysts, =
Adsorbents=20
and Process Systems, Inc. (collectively, UOP) on Orion's=20
breach-of-contract and extra-contractual claims.
A.=20
Background UOP=20
obtained a licensing agreement from the BAR-CO Processes Joint =
Venture=20
(BARCO) in 1994. By this agreement, UOP acquired rights to use =
BARCO's=20
"patents and technical information relating to the MSCC =
process," UOP and=20
Orion's predecessor-in-interest, TransAmerican Refining =
Corporation=20
(TransAmerican), executed an agreement, described as a license, The=20
agreement recites background information explaining that =
TransAmerican=20
solicited bids relating to the MSCC process from UOP for the =
"detailed=20
design, procurement, construction, operation and maintenance" of =
an=20
existing TransAmerican unit at Norco, Louisiana. UOP had=20
previously extended an MSCC license to only one other facility, a =
New=20
Jersey refinery known as CEPOC. According to Orion's pleadings, =
although=20
only three refineries in the world use the MSCC process, the Norco =
unit is=20
one-of-a kind among these three. Orion became the owner of the =
Norco unit=20
in 1998, when TransAmerican was forced to sell the unit to =
creditors who=20
financed the reconstruction and foreclosed. The shareholders of =
Orion are=20
TransAmerican's former creditors. The record reflects that Orion's =
purchase was an asset transfer of TransAmerican's property, =
including=20
TransAmerican's rights under the agreement with UOP. B.=20
Key Terms of the Agreement Article 7=20
of the agreement between TransAmerican and UOP addresses =
"Responsibility=20
and Liability" of both TransAmerican and UOP. Pursuant to article =
7.1, UOP=20
warranted that the services to be provided under the agreement =
would be=20
"performed according to accepted engineering practices." With=20
respect to performance, article 7.2 of the agreement states that =
the=20
"guarantees relating to the performance of the Unit are specified =
in=20
Attachment V," Attachment=20
V specifies the details of UOP's performance guarantee, the =
performance=20
tests contemplated, and UOP's responsibility. Article 1, paragraph =
1.1 of=20
Attachment V guaranteed that "during a Performance Test Article 7.3=20
of the agreement qualified that TransAmerican would "at all times =
remain=20
solely responsible for the detailed design, procurement, =
construction[,]=20
and maintenance of the Unit." Pursuant to article 7.4, UOP's =
liability for=20
bodily injury or property damage arising out of its services was=20
restricted to damages "caused by the willful misconduct or =
negligence of=20
UOP." And as article 7.4 further specified, IN=20
NO EVENT [WOULD] UOP BE LIABLE FOR SPECIAL, CONSEQUENTIAL, OR =
INDIRECT=20
DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR LOSS OF =
USE.=20
This limitation shall apply whether the cause of action =
relates=20
to this agreement or arises out of the technology, goods[,] or =
services=20
provided by UOP under this agreement, and shall apply regardless =
of the=20
legal theory (tort or contract) upon which the action is=20
based. (Emphasis=20
and upper case in original.) In addition, article 7.7 expressly =
limited=20
"UOP's aggregate liability" under the agreement to $1.4 million, =
"except=20
for UOP's expenses (if any) associated with any breach of the =
warranty in=20
Article 7.1," specifically, the engineering warranty to perform =
according=20
to accepted engineering practices. Finally,=20
pursuant to Article 13, the May 1, 1995 agreement "embodie[d] the =
entire=20
understanding between the parties relating to the subject of th[e] =
agreement"; there were "no related prior representations or =
agreements."=20
D.=20
Procedural History Orion sued=20
UOP in March 2002. Orion's live pleadings allege that UOP (1) =
fraudulently=20
misrepresented the MSCC process by knowingly, and with reckless =
disregard=20
for the truth, concealing material information that, if provided, =
would=20
have precluded the agreement; (2) fraudulently induced the =
agreement,=20
which fraud was not excused by the agreement's "NO =
WARRANTIES OR=20
GUARANTEES, EXPRESS OR IMPLIED" provision (emphasis and =
upper=20
case in original); (3) owed UOP attorney's fees under the Illinois =
deceptive trade practices act; (4) was negligent; (5) was =
equitably=20
estopped from denying its liability; (6) negligently =
misrepresented the=20
MSCC process; (7) breached the agreement; and (8) violated the =
Illinois=20
Consumer Fraud Act. Soon after=20
Orion filed its original petition, UOP filed a unified pleading =
that=20
combined special exceptions and a motion for traditional summary =
judgment.=20
UOP based its motion for summary judgment solely on the agreement. =
Orion=20
then conducted extensive discovery and filed several responses, to =
which=20
UOP filed replies. Orion amended its pleadings three times. The =
trial=20
court conducted three oral hearings that are not part of the =
record on=20
appeal. After an=20
initial interlocutory summary judgment rendered in UOP's favor on =
all of=20
Orion's claims except one, for which the trial court sustained =
UOP's=20
special exceptions, the trial court later rendered a final summary =
judgment in favor of UOP and granted UOP's motion to strike the =
petition=20
by which Stanley sought to intervene in the lawsuit. The trial =
court did=20
not state the grounds on which it rendered summary judgment, but =
the=20
record reflects that the trial court took judicial notice of =
Illinois case=20
law, in response to Orion's requests. Because the summary-judgment =
record=20
shows that the parties relied on Illinois law, we assume, but do =
not=20
decide, that Illinois law controls.
A.=20
Standard of Review--in General We review=20
summary judgments de novo, as questions of law. Valence =
Operating Co.=20
v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Because the =
trial court=20
did not state the grounds on which it rendered summary judgment, =
we may=20
affirm the ruling on any meritorious theory on which UOP relied to =
defeat=20
Orion's claims. See Joe v. Two Thirty Nine Joint Venture, =
145=20
S.W.3d 150, 156-57 (Tex. 2004). Summary judgment is proper only if =
UOP, as=20
movant, established the absence of any genuine issue of material =
fact and=20
that it was entitled to judgment as a matter of law. See=20
Rh=F4ne-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex. =
1999). To=20
prevail by traditional summary judgment against Orion's causes of =
action,=20
UOP had to defeat at least one essential element of each of them. =
See=20
Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. =
1997).=20
Once the=20
movant establishes that it is entitled to summary judgment, the =
nonmovant=20
can defeat that showing only by producing evidence that raises a =
genuine=20
issue of material fact. Tex. R. Civ. P. 166a(c); A fact is "material" and will =
preclude=20
summary judgment if it affects the outcome of the suit under the=20
substantive law. See Collins v. Guinn, 102 S.W.3d 825, =
834 (Tex.=20
App.--Texarkana 2003, pet. denied). A material fact issue is =
"genuine"=20
only if a reasonable jury could find the fact in favor of the =
nonmoving=20
party based on that fact. See Lampasas v. Spring Ctr., =
Inc., 988=20
S.W.2d 428, 433 (Tex. App.--Houston [14th Dist.] 1999, no pet.) =
(decided=20
under Tex. R. Civ. P. 166a(i)). B. "Malooly" and =
"Global"=20
Issues
As part of its fourth issue, =
Orion=20
contends that it has viable claims for breach of contract that are =
not=20
precluded by the agreement and, therefore, that the trial court =
erred by=20
rendering summary judgment in favor of UOP on the =
breach-of-contract=20
claim. Orion further contends that the limitations on damages, in =
articles=20
7.4 and 7.7 of the agreement, and the duration clauses for the =
engineering=20
warranty stated in article 7.1 and the performance guarantee =
stated=20
Attachment V, article 1.2(b) of the agreement, are exculpatory =
provisions=20
that render the agreement "a nullity" and, therefore, =
unenforceable as a=20
matter of law. A.=20
Interpretation of Written Agreements under Illinois=20
Law 1. General=20
Principles Illinois courts construe =
contracts de=20
novo as questions of law. See Avery v. State Farm Mut. Auto =
Ins.=20
Co., 835 N.E.2d 801, 821 (Ill. 2005). The primary objective =
is give=20
effect to the parties' intent, which the court ascertains from the =
language used in the agreement. See id.; Lewis X. =
Cohen Ins.=20
Trust v. Stern, 696 N.E.2d 743, 751 (Ill. App. Ct. 1998); =
see=20
also W.W. Vincent & Co. v. First Colony Life Ins. Co., =
814 N.E.2d=20
960, 966 (Ill. App. Ct. 2004). In the absence of ambiguity, which =
is also=20
a question of law, but not an issue in this case, courts determine =
the=20
parties' intent "'solely from the plain language of the contract'" =
and may=20
not go beyond its four corners. See Lewis X. Cohen, 696 =
N.E.2d at=20
751 (quoting Tishman Midwest Mgmt. Corp. v. Wayne Jarvis, =
Ltd.,=20
500 N.E.2d 431, 434 (Ill. App. Ct. 1986)). Illinois courts accord =
clear=20
and unambiguous terms their "ordinary and natural meaning" and =
must=20
interpret contracts "as a whole, giving meaning and effect to each =
provision" in the agreement. Id. (quoting Srivastava =
v.=20
Russell's Barbecue, 523 N.E.2d 30, 33 (Ill. App. Ct. 1988)).=20
2. Agreements =
between=20
Business Entities It is undisputed that both =
TransAmerican=20
and UOP were established business entities and that they =
negotiated their=20
agreement at arm's length. Illinois public policy, as =
"found in=20
[the] constitution, statutes[,] and judicial decisions" of the =
state,=20
"strongly favors freedom to contract." McClure =
This case does not involve a =
publicly=20
regulated contract. When interpreting nonregulated contracts that =
have=20
been negotiated at arm's length between private business entities, =
as is=20
undisputed here, Illinois decisions reflect "a widespread policy =
of=20
permitting competent parties to contractually allocate business =
risks as=20
they see fit." McClure Eng'g, 447 N.E.2d at 402-03; =
Hicks v.=20
Airborne Express, Inc., 858 N.E.2d 48, 54 (Ill. App. Ct. =
2006)=20
(citing McClure Eng'g, 447 N.E.2d at 403); see also =
Vigortone=20
AG Prods., Inc. v. PM AG Prods., Inc., 316 F.3d 641, 645 (7th =
Cir.=20
2002) (noting, in context of integration clause construed under =
Illinois=20
law, that Illinois policy favors enforcing terms of contract =
negotiated=20
"between sophisticated commercial enterprises"). 3. Exculpatory and =
Limiting=20
Provisions a. In =
General This appeal centers on terms =
and=20
provisions in the TransAmerican-UOP agreement that limit the =
parties'=20
remedies. These terms and provisions include the following, which =
appear=20
above in more complete versions: (1) the time limitations stated =
in the=20
portion of article 7.1, pursuant to which reperformance by UOP =
would be=20
the exclusive remedy for failure of UOP to perform according to =
accepted=20
engineering practices; (2) the portion of article 7.2 that refers =
to=20
Attachment V and specifies that, except as provided by article 7 =
or=20
Attachment V, UOP made "NO WARRANTIES OR GUARANTEES, =
EXPRESS OR=20
IMPLIED" (emphasis and upper case in original); (3) the =
portion=20
of article 7.3 that placed sole responsibility for detailed =
design,=20
procurement, construction and maintenance of the unit on =
TransAmerican;=20
(4) the portion of article 7.4 that limited UOP's liability for =
bodily=20
injury or property damage arising out of its services to those =
caused by=20
its willful misconduct or negligence; (5) an additional portion of =
article=20
7.5 that barred recovery from UOP for "special, consequential[,] =
or=20
indirect damages, including, but not limited to, loss of profits =
or loss=20
of use . . . ." (emphasis and upper case omitted here); (6) the =
portion of=20
article 7.7 that limited UOP's aggregate liability to $1.4 =
million, except=20
for breach of the engineering warranty stated in article 7.1; and =
(7) the=20
time limitations on the performance guarantee stated in Attachment =
V.=20
Illinois courts enforce =
exculpatory or=20
limiting provisions like these in contracts that have been =
negotiated=20
between sophisticated business owners, as here, on the grounds =
that=20
competent parties to a business agreement are free to allocate =
their=20
respective risks. See McClure Eng'g, 447 N.E.2d at =
402-03. In=20
accordance with settled Illinois policy favoring freedom of =
contract=20
between business owners, exculpatory or limiting provisions =
require no=20
specialized rules of interpretation in Illinois. See=20
id. Under an exception to this =
policy,=20
Illinois courts will not enforce exculpatory and limiting =
provisions when=20
they are unconscionable and result from unreasonable bargaining =
power and=20
thus violate the public policy that generally favors freedom of =
contract.=20
See Willmott, 2006 WL 3743716 at *8 (surveying Illinois =
law);=20
see also Premier Transport, Ltd. v. Nextel Comm., Inc., =
No.=20
02C4536, 2003 WL 21267096, *4 (N.D. Ill., 2003) (unreported memo =
op.)=20
(same) (citing First Fin'l Ins. Co. v. Purolator Sec., =
Inc., 388=20
N.E.2d 17, 21 (Ill. App. Ct. 1979)) (citing Checkley v. Ill. =
Cent.=20
R.R. Co., 100 N.E. 942, 943-44 (Ill. 1913)). Orion does not =
expressly=20
contend that the TransAmerican-UOP agreement is unconscionable or =
that it=20
violates public policy, but contends that we must construe the =
agreement=20
against UOP and has relied on authorities that recognize the =
exception.=20
Illinois public policy will not =
bar=20
enforcement of an exculpatory or limiting provision on grounds of=20
unconscionability unless giving effect to the clause will =
categorically=20
absolve the breaching party of any liability for breach =
of the=20
promise that forms the basis of the contract. See Jewelers =
Mut. Ins.=20
Co. v. Firstar Bank Illinois, 820 N.E.2d 411, 413-15 (Ill. =
2004);=20
Willmott, 2006 WL 3743716 at *8 (citing Jewelers =
Mut.,=20
820 N.E.2d at 415). When enforcing the clause would categorically =
absolve=20
the breaching party of any liability for breach, Illinois courts =
will=20
strictly construe the limiting, exculpatory language against the =
party=20
benefitted. See Jewelers Mut. Ins. Co, 820 N.E.2d at =
414-16);=20
Willmott, 2006 WL 3743716 at *8 (emphasizing that =
enforcing=20
agreement construed in Jewelers Mutual would have =
completely=20
absolved defendant bank of any liability). Exculpatory and limiting =
clauses that=20
merely limit remedies do not render a contract =
unenforceable.=20
See Willmott, 2006 WL 3743716, *8 (citing Jewelers =
Mut.,=20
820 N.E.2d at 415). As the party seeking to avoid an exculpatory =
clause or=20
limitation, Orion has the burden to establish unenforceability.=20
Id.; see Reuben H. Donnelley Corp., 592 N.E.2d =
at 11.=20
b. The Orion contends that the =
limitations on=20
damages, in articles 7.4 and 7.7 of the TransAmerican-UOP =
agreement, as=20
well as the time limits for the engineering warranty in article =
7.1 and=20
the performance guarantee in Attachment V, article 1.2(b) render =
the=20
agreement unenforceable under Jewelers Mutual, require =
that we=20
construe the limitations and exculpatory provisions be construed =
against=20
UOP, and compel that we reverse the summary judgment in UOP's =
favor and=20
remand the cause for a trial on damages. We disagree. In Jewelers Mutual, =
the Supreme=20
Court of Illinois rejected a bank's attempt to disclaim liability =
for=20
theft of over $1 million worth of merchandise stored in three of =
the=20
bank's safety-deposit boxes. 820 N.E.2d at 412, 417. Relying on=20
exculpatory language in the rental contracts executed by jewelers =
who=20
rented the bank's safety-deposit boxes, the bank had prevailed by =
summary=20
judgment in the trial court based solely on the exculpatory clause =
in the=20
rental contract, pursuant to which the jewelers who rented the =
boxes=20
"assume[d] all risks." Id. at 412-13. The Illinois =
Supreme Court=20
rejected the bank's reliance on the exculpatory cause. =
Id. at=20
417. Jewelers Mutual is=20
distinguishable from this case on several grounds. We first note =
that=20
ambiguity had not only been raised in the trial court proceedings, =
but=20
that the Illinois Supreme Court ruled that the trial court had =
correctly=20
concluded that the rental contract for the safety-deposit boxes =
was=20
ambiguous. Id. at 413, 417. The ambiguity arose because =
the=20
contract disclaimed any liability whatsoever, but simultaneously =
assumed a=20
duty of care that "formed the heart of the parties' agreement."=20
Id. at 415. Orion neither claims that the =
TransAmerican-UOP=20
agreement is ambiguous, nor directs us to conflicting provisions =
in the=20
agreement, and we discern no similarly irreconcilable provisions =
in the=20
agreement. Accordingly, the reasoning that required strict =
construction=20
against the bank in Jewelers Mutual does not apply, =
see id.=20
at 413, and we need not construe the TransAmerican-UOP =
agreement=20
strictly against UOP in applying Illinois law. The Jewelers Mutual =
court=20
refused to permit the bank to enforce the assumed-all-risks =
provision=20
against the jewelers because the bank had not only assumed an =
express duty=20
of care in the contract, but, in addition, conceded that it had =
(1)=20
negligently carried out that duty and (2) breached the contract.=20
Id. at 413. Given these circumstances, the court reasoned =
that=20
permitting the bank to escape liability based on the =
assumed-all-risks=20
provision would result in the bank's avoiding liability even if it =
were to=20
"hand[] the keys to anyone who came in off the street and asked =
for them."=20
Id. T 417. But the circumstances in Jewelers =
Mutual that=20
warranted departure from "a wide-spread policy of permitting =
competent=20
parties to contractually allocate business risks as they see fit," =
see=20
McClure Engineering, 447 N.E.2d at 403, have no =
correspondingly=20
similar circumstances in this case. Likewise, there is no claim of =
ambiguity=20
here, and, in contrast to the bank's posture in Jewelers =
Mutual,=20
UOP has not conceded either negligence or that it breached the =
agreement.=20
More importantly, the exculpatory language in Jewelers =
Mutual,=20
which negated any risk for the bank while placing all =
risk on the renters and thus compelled a strict construction =
against=20
the bank, see Jewelers Mutual, 820 N.E.2d at 413, =
contrasts=20
starkly with the freely negotiated reciprocity of risks and =
benefits to=20
both parties in the TransAmerican-UOP agreement. Unlike the safety-deposit =
rental=20
contracts construed in Jewelers Mutual, the agreement =
here does=20
not benefit UOP exclusively while passing all risks to =
TransAmerican and=20
its successor, Orion. It is undisputed that all exculpatory =
portions of=20
the agreement, like all terms of the agreement, resulted from =
negotiation=20
between sophisticated business owners regarding use of newly =
trademarked=20
technology. Though the exculpatory provisions that Orion attacks =
limited=20
certain damages and disclaimed warranties or guarantees not =
recited in the=20
agreement, the remainder of the agreement simultaneously provides=20
remedies, not only by an engineering warranty and by a performance =
guarantee, but also envision reperformance. And though the =
agreement=20
imposed time constraints on these latter provisions, it is =
undisputed that=20
these constraints likewise resulted from sophisticated business=20
negotiations. In short, the circumstances that compelled both the=20
reasoning and the outcome in Jewelers Mutual do not apply =
to this=20
case. B. Enforcing the=20
TransAmerican-UOP Agreement Orion did not meet its burden =
to=20
establish its claim that the exculpatory and limiting provisions =
of the=20
TransAmerican-UOP agreement are unenforceable. See =
Willmott, 2006=20
WL 3743716 at *8; Reuben H. Donnelley Corp., 592 N.E.2d =
at=20
11. Having been negotiated between =
two=20
"sophisticated commercial enterprises," see Vigortone, =
316 F.3d=20
at 645, and McClure Engineering, 447 N.E.2d at 403, the=20
TransAmerican-UOP agreement afforded two remedies for a perceived =
breach=20
or other challenge to TransAmerican, Orion's =
predecessor-in-interest. The=20
first remedy appears in article 7 of the main portion of the =
agreement.=20
Article 7.1 contains UOP's express, three-year engineering =
warranty, to=20
perform according to accepted engineering practices. It is =
undisputed that=20
before Orion purchased TransAmerican's assets in 1998, =
TransAmerican had=20
not asserted a claim for breach of the engineering warranty within =
the=20
three-year period stated in article 7.1, which expired on May 1, =
1998.=20
Accordingly, the engineering warranty remedy expired on its own =
terms.=20
The second remedy provided by =
the=20
agreement, the performance test contemplated by the performance =
guarantee=20
in article I, paragraph 1.1 of Attachment V, is outlined and =
described=20
fully above. These extensively detailed remedies provided for =
redesign or=20
re-engineering of the unit, or both, under the conditions stated =
in the=20
TransAmerican-UOP agreement. Based on the May 1, 1995 origin date =
of the=20
agreement, the deadline for any performance test under paragraph =
1.1 of=20
the performance guarantee, was May 1, 1998. Because the unit was =
not=20
completely built by then, and construction had not even begun =
until 1997,=20
it is undisputed that the condition imposed by article 1.2(b) of =
the=20
Performance Guarantee in Attachment V could not be met. The =
performance=20
guarantee, too, thus expired under its own terms without =
TransAmerican's=20
having exercised any right to enforce it. UOP moved=20
for summary judgment on Orion's breach-of-contract claim on the =
grounds=20
that the engineering warranty and the performance guarantee had =
expired.=20
UOP also relied on the following provisions of the agreement: (1) =
article=20
7.2's uppercased and bold-faced disclaimer of any other =
"warranties or=20
guarantees, express or implied," (2) article 7.5's disclaimer of =
liability=20
for "special, consequential[,] or indirect damages, including, but =
not=20
limited to loss of profits or use," and (3) article 7.7's =
limitation on=20
UOP's aggregate liability to $1.4 million. Orion challenges the =
summary=20
judgment by claiming that the time limits and the disclaimers =
render the=20
agreement a nullity. The summary=20
judgment record and the law bar Orion from avoiding the =
consequences of=20
TransAmerican's failure to enforce the guaranty and performance =
terms that=20
TransAmerican had negotiated by claiming that those terms rendered =
the=20
agreement unenforceable. Nothing in the summary judgment record =
raises a=20
fact issue to support that inference. Given the breadth of the =
provisions=20
of the engineering warranty, to comply with accepted engineering=20
practices, and the specificity of the provisions of the =
performance=20
guarantee, as negotiated by TransAmerican and extended in its =
favor by=20
UOP, we cannot say that UOP's disclaimer, in article 7.2, of any =
other=20
"warranties or guarantees, express or implied" renders the =
agreement an=20
unenforceable nullity. Likewise, we cannot say that the negotiated =
disclaimer of liability in article 7.5, for "special, =
consequential[,] or=20
indirect damages, including, but not limited to loss of profits or =
loss of=20
use" or article 7.7's limitation on UOP's aggregate liability to =
$1.4=20
million, render the agreement an unenforceable nullity. =
In contrast=20
to the terms of the box-rental contract in Jewelers =
Mutual, which=20
passed all risks to the box renters, the limitation in =
article=20
7.5 applies only to the damages specified in article 7.5 and thus =
merely=20
limits damages without precluding liability. See =
Willmott, 2006=20
WL 3743716, *8-9 (citing Jewelers Mut., 820 N.E.2d at =
414-15).=20
The same provision, article 7.5, also recognizes potential =
liability for=20
property damage or property damage caused by UOP's "willful =
misconduct or=20
negligence." Similarly, article 7.7 creates an exception to the =
$1.4=20
million ceiling for breach of the agreement's engineering =
warranty, to=20
perform according to accepted engineering practices. We conclude=20
that the agreement validly forecloses Orion's successor claims for =
breach=20
of contract, and that the trial court properly rendered summary =
judgment=20
in favor of UOP on that cause of action. We overrule=20
the portion of the fourth issue in which Orion contends that its =
claims=20
for breach of the TransAmerican-UOP agreement remain viable, =
despite the=20
terms of that agreement.
In its=20
second issue, Orion contends that it was entitled to pursue its=20
extra-contractual claims, and that the trial court erred by =
rendering=20
summary judgment in favor of UOP on those claims. Orion's=20
extra-contractual claims include fraudulent inducement to =
contract,=20
fraudulent misprepresentation, and fraudulent promise. Through =
these=20
claims, Orion contends that it is entitled to seek damages from =
UOP=20
despite the remedies under the TransAmerican-UOP having expired, =
because=20
UOP procured the agreement by fraud, whether by fraudulent =
inducement,=20
fraudulent misrepresentation, or fraudulent promise. Recovery=20
for fraud is subject to several limitations in Illinois. We =
address those=20
pertinent to this case below. Illinois=20
law proscribes recovery in tort "for what is essentially a breach =
of=20
contract." Johnson v. George J. Ball, Inc., 617 N.E.2d =
1355, 1361=20
(Ill. App. Ct. 1993). Accordingly, when the terms of a contract =
bar a suit=20
for breach, as we have just ruled above, a party to the contract =
cannot=20
circumvent that bar by seeking recovery for fraud as an =
alternative=20
remedy. See id. 2.=20
No Recovery for "Promissory Fraud" Orion's=20
pleadings include claims for "fraudulent promise." Most =
jurisdictions=20
permit a plaintiff to recover in fraud for "a promise made without =
the=20
intent to perform," on the grounds that a misrepresentation of =
intent to=20
perform constitutes the existing, material misprepresentation that =
is the=20
predicate to a fraud claim. See Bank Computer Network Corp. v. =
Continental Ill. Nat'l Bank & Trust Co., 442 N.E.2d 586, =
593,=20
(Ill. App. Ct. 1982) (quoting Prosser, Law of Torts =A7 109 at 729 =
(4th ed.=20
1971)). Illinois courts reject this majority rule. See id.=20
(citing Vance Pearson, Inc. v. Alexander, 408 N.E.2d =
782,=20
786 (Ill. App. Ct. 1980)). "[M]isrepresentations of intention to =
perform=20
future conduct, even if made without a present intention =
to=20
perform, do not generally constitute fraud"; fraud requires a=20
misrepresentation of an "existing" fact. HPI Health Care =
Servs. Inc.=20
v. Mt. Vernon Hosp., Inc., 545 N.E.2d 672, 682 (Ill. 1989) =
(emphasis=20
added). An Illinois claimant may not, therefore, recover in fraud =
by=20
claiming that a party to a contract misrepresented his personal =
present=20
intent, or the intent of another, to perform a promise in the =
future.=20
See id. As applied to this case, the =
Illinois bar=20
to a claim of promissory fraud means that Orion may not rely on =
statements=20
in the agreement that relate to future intent or conduct as =
substantive=20
evidence to raise a material issue of fact in support of Orion's =
fraud=20
claims. Orion's pleadings do not refer=20
specifically to the Illinois "scheme to defraud" exception, but =
Orion=20
relies on internal communications among UOP employees pertaining =
to the=20
CEPOC facility, in particular, yields indicating a "substantial =
debit"=20
from that facility, to support its contention that UOP was aware =
of=20
defects in the MSCC process. 3.=20
Misrepresentations Must Refer to Present or Pre-Existing=20
Facts Because=20
statements of future intent or conduct are not actionable as =
fraudulent=20
misrepresentations in Illinois and must be remedied through an =
action on=20
the contract, a claim of fraudulent misrepresentation can derive =
only from=20
"statements of present or preexisting facts." See Bradley Real =
Estate=20
Trust, 640 N.E.2d at 12-13; see also HPI Health Care =
Servs.,=20
545 N.E.2d at 682 (stating that fraud requires a misrepresentation =
of an=20
existing fact). Orion=20
grounds its claims of fraudulent misrepresentation on the=20
TransAmerican-UOP agreement signed on May 1, 1995. Because fraud =
requires=20
a misrepresentation of an existing fact, HPI Health Care =
Servs.,=20
545 N.E.2d at 682, to defeat UOP's motion for summary judgment, =
Orion had=20
to present competent summary-judgment evidence of statements, =
actions, or=20
conduct by UOP that occurred on or before May 1, 1995, the onset =
date of=20
the agreement date. Therefore, we do not consider evidence on =
which Orion=20
relied in the trial court and in this Court that relates to =
statements by=20
UOP after the May 1, 1995 onset date of the TransAmerican-UOP =
agreement.=20
B.=20
Misrepresentation as Fraud To be=20
actionable as fraud in Illinois, a "misrepresentation" must =
contain the=20
following elements: (1) it must=20
be a statement of material fact, as opposed to opinion; See=20
Mother Earth, Ltd. v. Strawberry Camel, Ltd., 390 N.E.2d 393, =
403=20
(Ill. App. Ct. 1979) (citing Broberg v. Mann, 213 N.E.2d =
89,=20
91-92 (Ill. App. Ct. 1965)) Orion's=20
live pleadings allege that UOP's fraudulent misrepresentations =
about the=20
MSCC process induced TransAmerican to enter into the agreement =
with UOP,=20
and that TransAmerican relied on those misrepresentations. =
Specifically,=20
Orion alleged that UOP misrepresented (1) that the MSCC process =
was=20
superior to the former FCC process; (2) that the process was =
milli-second,=20
when it was actually "multi"-second; and (3) that TransAmerican =
could=20
expect specific yields on implementing the MSCC process. In moving =
for=20
summary judgment on Orion's fraud claims, UOP argued, in part, =
that there=20
was no reliance by TransAmerican beyond the terms of the agreement =
as a=20
matter of law, because the agreement specifies that, "Except as =
specified=20
in article 7 and in Attachment V, UOP MAKES NO WARRANTIES =
OR=20
GUARANTEES, EXPRESS OR IMPLIED." (Emphasis and upper case =
in=20
original.) Because the=20
only promises made were those expressly stated in the agreement, =
which was=20
the parties' "complete" agreement pursuant to article 13, which =
further=20
disclaimed any other representations or agreements, UOP argued =
that Orion=20
had to establish the requisite element of reliance by its =
predecessor,=20
TransAmerican. 1.=20
MSCC as "Milli-Second"--Not A Fraudulent=20
Misrepresentation We first=20
address Orion's contention that UOP's fraudulent =
misrepresentations are=20
apparent on the face of its agreement with TransAmerican and =
appear even=20
in its title ("Milli-Second Catalytic Cracking=99 =
(MSCC=99) Process=20
License, Engineering and Guarantee Agreement") (emphasis added). =
Orion=20
contends that, because the MSCC process is not =
"milli"-second, as=20
UOP allegedly promised, but actually "multi"-second in =
practice,=20
the TransAmerican-UOP agreement "embodies the fraud," and that =
this=20
misrepresentation constitutes actionable fraud on the face of the=20
agreement. We disagree. It is=20
undisputed that the MSCC process constituted new technology; that =
the=20
terms "MSCC" and "MSCC process" were proprietary and trademarked; =
that the=20
process was patented; that the agreement incorporates the patent, =
as Orion=20
has stipulated, and therefore, that the process was fully =
disclosed when=20
TransAmerican and UOP entered into the agreement. Despite the =
appearance=20
of the term "MSCC" in both title of the process and the title of =
the=20
agreement, the summary judgment record demonstrates that neither =
the=20
entire process, nor the residence time for hydrocarbons in the =
reactor, is=20
described in terms of "milli"-seconds. According=20
to the patent, only the "reaction zone" time is stated in terms of =
less=20
than seconds, specifically: "contact time in said reaction zone =
before=20
passage into the separation zone" being not greater than [a =
specified=20
percentage of a second]." 2.=20
Remaining Alleged Misrepresentations--No Justifiable=20
Reliance In opposing=20
the motion for summary-judgment, in which UOP relied solely on the =
terms=20
of its agreement with TransAmerican, Orion claimed that it was =
entitled to=20
recover for fraud--despite article 7.2's bold-faced disclaimer of =
any=20
warranties, express or implied, article 13's "entire agreement" =
and=20
disclaimer of other representations or agreements, and the =
remedies and=20
performance guarantee provided by the agreement--because UOP's =
fraud had=20
vitiated the TransAmerican-UOP agreement and rendered it =
unenforceable.=20
Having=20
rejected above Orion's claim that the agreement "embodies the =
fraud" by=20
implying that the entire reactor process occurs in milli-seconds, =
we=20
address Orion's remaining contentions, as follows: that UOP =
misrepresented=20
the superiority of the MSCC process over the former FCC process =
and that=20
TransAmerican could expect specific yields on implementing the =
MSCC=20
process To prevail=20
on this claim under Illinois law, Orion had to establish that=20
TransAmerican, its predecessor-in-interest, To support its claim that UOP=20
misrepresented the performance yields anticipated through the MSCC =
process, Orion relied on telecopier transmission to TransAmerican =
from=20
Daniel Kauff of UOP, dated May 1, 1995, the onset date of the =
agreement.=20
The five-page document consists of a cover sheet and four pages of =
tables=20
provided to TransAmerican in response to its request during a =
meeting that=20
occurred in the previous week. As reflected in the subject line =
for the=20
transmission, however, the information consisted of "MSCC Yield=20
Estimates for RCC Revamp" (emphasis added), and each of =
the four=20
tables provided is labeled an "estimate." Furthermore, the cover =
sheet not=20
only states that the estimate "is the basis for design, except =
for=20
some aspects of the regenerator system," but also refers to=20
additional design "to accommodate the maximum air rate" and "for =
higher=20
coke burning capacity if possible." As estimates only, and =
estimates that=20
contemplate as-yet-unaccomplished design development, as well as =
eventual=20
performance testing in accordance with the agreement, the data =
conveyed to=20
TransAmerican on May 1, 1995 is no evidence that UOP knew that the =
estimates conveyed were false, and, therefore, is no evidence that =
UOP=20
knowingly misrepresented the anticipated yields from the MSCC =
process at=20
the Norco facility. Orion also relies on an =
internal e-mail=20
generated from Kauff that is dated May 5, 1995, and thus after the =
May 1,=20
1995 date of the TransAmerican-UOP agreement. Because the summary =
judgment=20
record implies that UOP and TransAmerican engaged in continuing=20
negotiations early in May 1995, despite the May 1 date recited as =
the=20
onset date of the agreement, we consider this internal e-mail in=20
determining whether Orion raised a material issue of fact =
concerning=20
TransAmerican's reliance on allegedly knowing misrepresentation by =
UOP=20
concerning the MSCC process at the Norco facility. Kauff's e-mail reports two =
conversations=20
with TransAmerican on May 5, 1995, and sets "[s]everal things" to =
be done=20
on the following Monday by others at UOP because Kauff would be =
away from=20
the office. The e-mail sets up a conference call to respond to=20
TransAmerican's inquiries on the following Monday and states in =
part as=20
follows: Bill Byrne from Houston called =
with many=20
questions on the yield estimate. When he added up the dollar value =
of MSCC=20
vs. Brand K, they were very similar. Further discussion indicates =
that=20
MSCC gasoline and LPG are higher, but LCO is lower than Brand K. =
Since LCO=20
price is nearly the same as gasoline and far higher than LPG, MSCC =
does=20
not score any better on product value. . . . . The trickiest part of the =
conversation=20
was concerning MSCC. Jack Stanley is convinced that MSCC gives +2 =
[XXXX Contrary to our belief that the =
project=20
is in the bag, others around Stanley are still skeptical and =
asking tough=20
questions. We need to keep on top of this over the next two weeks =
to stay=20
on track. In addition to referring to =
yield=20
estimates, as opposed to fixed guarantees. Kauff's e-mail =
discloses "hard=20
questions" by TransAmerican, a misunderstanding by Stanley =
concerning a=20
UOP representative's reference to paraffinic feeds, "damage" to be =
controlled, and unfavorable comparisons with "Brand K" (UOP's =
competing=20
bidder, which had not proposed an MSCC conversion). Neither =
Stanley's=20
misunderstanding nor the skepticism and tough questions of those =
around=20
him constitute actionable misrepresentations by UOP because they =
lack=20
justifiable reliance. Any reliance by TransAmerican =
on either=20
allegedly intentional misrepresentations of yields or allegedly =
false=20
claims regarding the superiority of the MSCC process would not =
have been=20
justified as a matter of law, given the terms of the agreement and =
the=20
undertaking envisioned to construct a new facility, using =
technology that=20
was undisputedly newly patented. This agreement, which resulted =
from=20
negotiations between two sophisticated business enterprises, =
produced the=20
following explicit provisions regarding those enterprises' =
understandings=20
and their apportionment of risk: (1) article 7.1's express =
engineering=20
warranty, to perform according to accepted engineering practices, =
and the=20
corresponding remedy to reperform at UOP's expense; (2) Attachment =
V's=20
express performance guarantee and its extensively detailed =
remedies; (3)=20
article 7.2's express disclaimer that, except as provided by the =
two=20
preceding provisions, "UOP MAKES NO WARRANTIES OR =
GUARANTEES,=20
EXPRESS OR IMPLIED"; and (4) article 13's acknowledgment =
that the=20
agreement not only "embodie[d] the entire understanding between =
the=20
parties relating to the subject of th[e] agreement," but also =
disclaimed=20
any "related prior representations or agreements." (Emphasis and =
upper=20
case in original.) The TransAmerican-UOP agreement =
explicitly provides for two express, though limited-in-time =
guarantees,=20
one that applied to engineering practices and a second that =
applied to=20
performance; and, in addition, the agreement explicitly disclaims =
any=20
other warranties or guarantees, whether express or implied and any =
other=20
representations. Accordingly, reliance by TransAmerican on any =
other=20
representations by UOP, whether as to yields or superiority of the =
MSCC=20
was unjustified. As Judge Posner commented in=20
Vigortone, there is no reason to set aside an agreement =
when the=20
combined effect of its provisions and the circumstances of the =
case negate=20
justifiable reliance as a matter of law. See Vigorton, =
316 F.3d=20
at 645. We hold that the =
TransAmerican-UOP=20
agreement precludes the requisite element of justifiable reliance =
to=20
support Orion's fraud claims and that Orion did not raise a fact =
issue on=20
justifiable reliance through its summary judgment evidence. =
Because lack=20
of justifiable reliance defeats Orion's fraud claims, we overrule =
Orion's=20
second issue.
Orion's third issue challenges =
the=20
summary judgment rendered on its claims asserted under the =
Illinois=20
Consumer Fraud and Deceptive Business Practices Act, 815 Ill. =
Comp. Stat.=20
Ann. 505/2 (West 1998) (Consumer Fraud Act, or, the Act). UOP =
opposed=20
Orion's late-filed amended pleadings invoking the Act in the trial =
court=20
and also contended that it was entitled to summary judgment on =
that claim=20
because Orion could not recover under the Act. We agree that =
summary=20
judgment was proper. Pursuant to the Act, =
[U]nfair or deceptive acts or =
practices,=20
including but not limited to the use or employment of any =
deception,=20
fraud, false pretense, false promise, misrepresentation or the=20
concealment, suppression or omission of any material fact, with =
intent=20
that others rely upon the concealment, suppression or omission of =
such=20
material fact, or the use or employment of any practice described =
in=20
Section 2 of the "Uniform Deceptive Trade Practices Act" . . . in =
the=20
conduct of any trade or commerce are hereby declared unlawful =
whether any=20
person has in fact been misled, deceived or damaged =
thereby. Id. Section 10(a) of =
the Act=20
creates a remedy for persons who are damaged by conduct that =
constitutes a=20
violation of the Act. 815 Ill. Comp. Stat. Ann. 505/10a(a) (West =
1998).=20
"The Consumer Fraud Act is a regulatory and remedial statute =
intended to=20
protect consumers, borrowers, and business persons against fraud, =
unfair=20
methods of competition, and other To prevail under the Act, a =
claimant must=20
show "(1) a deceptive act or practice by the defendant; (2) the=20
defendant's intent that the plaintiff rely on the deception; (3) =
the=20
occurrence of the deception during a course of conduct involving =
trade or=20
commerce; and (4) actual damage to the plaintiff (5) proximately =
caused by=20
the deception." Id.; Oliveira v. Amoco Oil Co., =
776=20
N.E.2d 151, 160 (Ill. 2002). In=20
addition, the Act is directed against conduct "affecting the =
people of=20
[Illinois]," 815 Ill. Comp. Stat. Ann. 505/1(f) (West 1998); it =
has no=20
"extraterritorial effect." Avery v. State Farm Mut. Auto Ins.=20
Co., 835 N.E.2d 801, 852-53 (Ill. 2005). A nonresident of =
Illinois=20
may pursue a private cause of action under the Act, provided "the=20
circumstances that relate to the disputed transaction occur =
primarily and=20
substantially in Illinois." Gridley v. State Farm Mut. Auto. =
Ins.=20
Co., 840 N.E.2d 269, 274-75 (Ill. 2005) (citing =
Avery, 835=20
N.E.2d at 853-54). In=20
Avery, an attempted class-action premised on claims that =
State=20
Farm failed to pay for original equipment manufacturer parts, the =
Illinois=20
Supreme Court held that the overwhelming majority of circumstances =
relating to the claims of the nonresident, Avery, occurred outside =
Illinois. Avery, 835 N.E.2d at 854. The circumstances =
that=20
negated his claims included the following: Avery was a resident of =
Louisiana who kept his car in Louisiana; his accident occurred in=20
Louisiana; the estimate for repairs to his car was written in =
Louisiana;=20
the alleged deception, the failure to disclose the inferiority of=20
nonoriginal equipment manufacturer parts, occurred in Louisiana; =
his car=20
was repaired in Louisiana; and he contacted State Farm through a =
Louisiana=20
agent, a Louisiana Orion and its predecessor, =
TransAmerican,=20
are not Illinois residents, whom the Act is intended to benefit. =
See=20
We hold that Orion cannot =
recover under=20
the Act because the alleged circumstances that relate to its =
claims did=20
not occur "primarily and substantially in Illinois," as that =
phrase has=20
been construed by the Illinois courts. See Avery, 835 =
N.E.2d at=20
853-54. Accordingly, the trial court properly rendered summary =
judgment on=20
Orion's claims under the Act. We overrule Orion's third =
issue.=20
In the=20
portion of its fourth issue that we have not yet addressed, Orion=20
challenges the summary judgment rendered on its negligence claims, =
on the=20
grounds that these claims remained viable. Broadly construed, =
Orion's=20
pleadings encompass general negligence claims and specific claims =
of=20
negligent misrepresentation. UOP moved for summary judgment on the =
grounds=20
that the economic-loss rule barred any negligence =
recovery. A.=20
General Negligence Claims Orion seeks damages as =
TransAmerican's successor as compensation for perceived losses =
derived=20
from converting the Norco facility to the MSCC process, including =
the=20
costs of building the facility. Moorman Mfg. Co. v. Nat'l =
Tank=20
Co., 435 N.E.2d 443, 450 (Ill. 1982), prohibits recovery of =
economic=20
loss in Illinois tort cases. See First Midwest Bank, N.A. v. =
Stewart=20
Title Guar. Co., 843 N.E.2d 327, 333-35 (Ill. 2006) =
(characterizing=20
Moorman as adopting the "economic loss rule" of most=20
jurisdictions because "'contract law, which protects expectation=20
interests, provides the proper standard when a qualitative defect =
is=20
involved'") (citing and quoting Moorman, 435 N.E.2d 443). =
"Economic loss" damages seek =
compensation=20
for "inadequate value, costs of repair and replacement of the =
defective=20
product, or consequent loss of profits--without any claim of =
personal=20
injury or damage to other property." Moorman, 435 N.E.2d =
at 449.=20
Economic loss for diminution in value occurs when a product is of =
inferior=20
quality and does not work for the general purpose for which it was =
manufactured and sold. See id. To =
recover=20
purely economic loss under a negligence theory, the complaining =
party must=20
demonstrate harm that rises above and goes beyond diminished =
expectations.=20
See Mars, Inc. v. Heritage Bldrs, 763 N.E.2d =
428, 434=20
(Ill. App. Ct. 2002) (citing Redarowicz v. Ohlendorf, 441 =
N.E.2d=20
324, 327 (Ill. 1982)). The limitation imposed by the economic-loss =
rule=20
"holds true" even when, as here, the plaintiff is precluded from=20
recovering on the contract. Id. (citing Anderson =
Elec., Inc.=20
v. Ledbetter Erection Corp., 503 N.E.2d 246, 249 (Ill. =
1986)).=20
A party who seeks economic =
losses alone,=20
but has incurred no other injury--whether to person or =
property--is=20
generally precluded from recovery in tort. See Bd. of Educ. v. =
A, C=20
& S, Inc., 546 N.E.2d 580, 586 (Ill. 1989). The =
distinction=20
between recovery pursuant to a contract for economic loss and tort =
recovery for physical harm to person or other property generally =
depends=20
on (1) the nature of the defect and (2) the manner in which the =
damage=20
occurred. Id. In tort, the claimed defect results in =
either=20
personal injury or property damage, and the manner in which the =
damage=20
occurs is an accident involving some violence or collision with =
external=20
objects. Id. Thus, tort remedies compensate for losses =
occasioned=20
by personal injuries or damage to one's property; contract law and =
the=20
Illinois Uniform Commercial Code control damages derived from =
"diminished=20
commercial expectations" that are not accompanied by injury to =
person or=20
property. In re Chicago Flood Litigation, 680 N.E.2d 265, =
275-76=20
(Ill. 1997); Moorman, 435 N.E.2d at 450-53; Mars, =
Inc.,=20
763 N.E.2d at 434. Illinois recognizes three =
exceptions to=20
the prohibition against seeking contract damages, i.e., =
economic-loss=20
damages, in tort, as follows: (1) the plaintiff has sustained a =
personal=20
injury or property damage as a result of a sudden or dangerous =
occurrence;=20
(2) the plaintiff's damages are proximately caused by the =
defendant's=20
intentional, false misrepresentation; or (3) the plaintiff's =
damages are=20
proximately caused by a negligent misrepresentation made by a =
defendant in=20
the business of supplying information for the guidance of others =
in their=20
business transactions. Trans States Airlines v. Pratt & =
Whitney=20
Canada, Inc., 682 N.E.2d 45, 48 (Ill. 1997); Mars, =
Inc., 763=20
N.E.2d at 434. Injury to other property or personal injury =
nonetheless=20
remains a threshold requirement. A, C & S, 546 N.E.2d =
at=20
586. The losses for which Orion has =
sued UOP=20
in negligence are not compensable under Illinois law because there =
is=20
neither personal injury claimed, nor damage to property other than =
the=20
Norco facility. See id. To the contrary, Orion's claimed =
losses=20
are purely economic losses, in the form of "diminished commercial=20
expectations," and therefore not compensable in tort. See In =
re=20
Chicago Flood Litigation, 680 N.E.2d at 275-76; =
Moorman, 435=20
N.E.2d at 450-53; Mars, Inc., 763 N.E.2d at 434. =
The trial properly rendered =
summary=20
judgment in favor of UOP on the grounds that the economic-loss =
rule barred=20
Orion's general negligence claim. B. =
Negligent=20
Misrepresentation Claim Orion's claims of negligent=20
misrepresentation invoke the third exception to the economic-loss =
rule.=20
Like the general negligence claim, this claim fails at the =
threshold=20
because Orion does not seek compensation for personal injury or =
damage to=20
other property. A, C & S, 546 N.E.2d at 586. This =
claim also=20
fails because it would not apply to UOP regardless, as we explain=20
below. To state a claim for negligent=20
misrepresentation, a plaintiff must allege: (1) a false statement =
of=20
material fact; (2) carelessness or negligence in ascertaining the =
truth of=20
the statement by the party making it; (3) an We overrule the remaining =
portion of=20
Orion's fourth issue.
A. Standard of=20
Review Stanley brings a single issue, =
in which=20
he contends that the trial court abused its discretion by striking =
his=20
petition-in-intervention in response to UOP's motion. See In =
re=20
Lumbermens Mut. Cas. Co., 184 S.W.3d 718, 722 (Tex. 2006) =
(applying=20
abuse-of-discretion standard governing trial-court rulings on =
petitions to=20
intervene on appeal); Rule 60 of the Rules of Civil =
Procedure=20
permits a party to intervene in a pending lawsuit "subject to =
being=20
stricken out by the court for sufficient cause on the motion of =
any=20
party." Tex. R. Civ. P. 60. The burden is on the party who opposes =
intervention, here UOP. See id. A trial court abuses its=20
discretion by striking a petition-in-intervention without a motion =
to=20
strike having been filed when (1) the intervenor could have =
brought some=20
or all of the same action in his own name, or, if the action had =
been=20
brought against the intervenor, he could have defeated the action =
in whole=20
or in part, (2) intervention will not complicate the case by =
excessive=20
multiplication of the issues, and (3) intervention is almost =
essential to=20
protect the intervenor's interest. Guar. Fed. Sav. Bank v. =
Horseshoe=20
Operating Co., 793 S.W.2d 652, 657 (Tex. 1990); Stanley, former chief executive =
officer=20
of the now dissolved TransAmerican, sought to intervene to sue UOP =
for=20
damages for the loss of his investment in TransAmerican. Stanley =
cannot=20
satisfy the first element of Guarantee Federal Savings =
test=20
because he could not bring an independent action against UOP. =
Stanley was not a party to the =
agreement=20
in any individual capacity. It is undisputed that TransAmerican's=20
successor, Orion, became the owner of Stanley's former company =
when=20
TransAmerican transferred its assets to Orion. These assets =
necessarily=20
included any cause of action owned by TransAmerican relating to =
property,=20
and, therefore, any cause of action relating to the Norco =
facility.=20
See White v. Independence Bank, N.A., 794 S.W.2d 895, 897 =
(Tex.=20
App.--Houston [1st Dist.] 1990, writ denied) (holding that claims =
of=20
corporation vest in corporation). As a result of the transfer, any =
rights=20
that TransAmerican had against UOP vested in Orion. As a shareholder of =
TransAmerican,=20
Stanley could not have sued in his own name and for his benefit, =
even if=20
he were injured in his status as a shareholder before the =
company's assets=20
were transferred to Orion. See El T Mexican Rests., Inc. v.=20
Bacon, 921 S.W.2d 247, 251 (Tex. App.--Houston [1st Dist.] =
1995, writ=20
denied); Kenneth H. Hughes Interests, Inc. v. Westrup, =
879 S.W.2d=20
229, 235 (Tex. App.--Houston [1st Dist.] 1994, writ denied). In=20
Kenneth H. Hughes Interests, this Court rejected a =
similar claim=20
by a corporate officer and shareholder who sued, individually, for =
loss of=20
investment in a company, reasoning that permitting only the =
company to sue=20
permits the company to be made whole, which, in turn, benefits the =
shareholder. See id., 879 S.W.2d at 235. Stanley alleges =
no cause=20
of action that is independent of his shareholder =
status. Because Stanley, as a =
shareholder, could=20
not bring his suit independently, the trial court did not abuse =
its=20
discretion by denying his plea-in-intervention. We overrule Stanley's sole=20
issue.
We affirm the judgment of the =
trial=20
court.
Sherry Radack Chief Justice Panel consists of Chief Justice =
Radack=20
and Justices Jennings and Bland.=20
1. This record on appeal has been partially =
sealed by=20
order of the trial court. See Tex. R. Civ. P. 76a.=20
2. 815 Ill. Comp. Stat. Ann. 505/2 (West =
1998).=20
3. The rubric "MSCC" stands for the =
trademarked term,=20
"Milli-Second Catalytic Cracking.=99" The agreement refers to the =
both MSCC=20
and Milli-Second Catalytic Cracking as "proprietary names."=20
4. With respect to licensing, the agreement =
provided=20
for a mutual exchange of rights pertaining to UOP's patent rights. =
The=20
agreement describes the license as "nonexclusive" and recites that =
it was=20
granted to UOP and its subsidiaries, both of which were granted =
the right=20
to grant sublicenses.=20
5. As defined in the TransAmerican-UOP =
agreement, the=20
milli-second aspect of the MSCC process implies that many factors, =
in=20
addition to those described as milli-second, will occur =
simultaneously.=20
The contract defines the MSCC process as follows: "a =
process for=20
converting a charge stock consisting essentially of petroleum-type =
hydrocarbons which are liquid at high or normal temperature and =
normal=20
pressure, primarily to produce motor fuels or other liquid fuels =
or=20
napthas of an average, molecular weight lower than that of the =
charge=20
stock, together with by-product, normally gaseous hydrocarbons, =
such=20
conversion being carried out: a. at=20
temperatures in excess of 500 degrees Fahrenheit, b. with a=20
solid catalyst present in a non-riser reaction zone for the =
specific=20
purpose of effecting or influencing the reaction and whereby there =
is=20
produced a result as to yield, character of product or speed of =
reaction=20
different to a definitely determinable degree from the result =
which would=20
be produced with the same starting materials under conditions =
otherwise=20
the same but in the absence of such catalyst, and c. without=20
significant chemical consumption of hydrogen; and in=20
which process: d. the=20
conversion and catalyst regeneration proceed in separate zones =
with=20
transfer of catalyst between zones, e. the=20
catalyst is maintained in the reaction zone in the form of an =
essentially=20
horizontally flowing fluid mass made up of finely divided catalyst =
dispersed in the hydrocarbon vapors undergoing conversion,=20
and f. the=20
average residence time of the catalyst in the reaction zone is =
greater=20
than the average residence time of the hydrocarbon vapors in said =
zone.=20
6. Orion's pleadings state that =
TransAmerican acquired=20
the Norco unit in 1971. The unit was built in 1969, but had been =
shut down=20
from 1983 until 1994, when TransAmerican began the rebuilding =
program that=20
included converting to the MSCC process.=20
7. The Norco unit was to be converted to the =
MSCC=20
process from the Fluidized Catalytic Cracking (FCC) process, which =
had=20
previously been the norm for catalytic conversion for refineries.=20
8. According to Orion, its "stakeholders . . =
. are the=20
unpaid creditors who loaned [TransAmerican] the money to build the =
unit at=20
the refinery that is the subject matter of this dispute."=20
9. See C.M. Asfahl Agency v. =
Tensor,=20
Inc., 135 S.W.3d 768, 780-81 (Tex. App.--Houston [1st Dist.] =
2004, no=20
pet.) (addressing implications of asset transfer); Tex. Bus. Org. =
Code=20
Ann. =A7 10.254 (Vernon 2006) ("Disposition of Property Not a =
Merger or=20
Conversion; Liability").=20
11. We refer to article 7.1 as the =
engineering=20
warranty.=20
12. Attachment I to the agreement defined =
"Start of=20
Initial Operation" as "that moment when hydrocarbons are first =
introduced=20
into the battery limits of the Unit with the intent to operate the =
MSCC=20
Process."=20
13. We refer to the provisions of =
Attachment V as the=20
performance guarantee.=20
14. Attachment I to the agreement defined=20
"Performance Test" as "a period of three (or less[,] if mutually =
agreed)=20
consecutive Operating Days scheduled for the purpose of comparing =
the=20
performance of the Unit with the Performance Guarantee." =
Attachment I=20
defined "Operating Day" as "a continuous period of 24 hours during =
which=20
the Unit is on stream."=20
15. The maximum rate for catalyst consumed =
was not=20
specified, pending receipt of further information from "the =
cyclone=20
vendor."=20
16. The five remaining conditions addressed =
conformity to UOP's design specifications; UOP approval of the =
catalyst=20
used; furnishing of all required materials, facilities, and =
personnel by=20
TransAmerican; operation, shutdown, and restarting per UOP's =
instructions;=20
UOP presence before and during performance testing; and testing in =
conformity with the terms of the agreement. 17. Orion's=20
arguments on appeal encompass tort claims and contract claims. =
Orion's=20
appellant's brief asserts rights under Illinois law, but Orion =
also relies=20
on Texas law. The same is true of UOP. Both parties relied =
virtually=20
exclusively on Illinois law in the trial court until very late in =
the=20
case, when Orion began to invoke Texas precedent to support its =
position.=20
Article 15, the choice-of-law provision in the TransAmerican-UOP=20
agreement, which is entitled "Governing Law," states that "[t]his=20
agreement shall be governed by the laws of the State of=20
Illinois." (Emphasis added.) A choice-of-law provision that =
addresses only=20
the parties' agreement, as here, "does not purport to encompass =
all=20
disputes between the parties or to encompass tort claims" that do =
not=20
depend on interpretation and enforcement of the agreement. =
Stier v.=20
Reading & Bates Corp., 992 S.W.2d 423, 433 (Tex. 1999).=20
Trial=20
courts may not render summary judgment for a reason not presented =
to the=20
trial court, and this Court may address only those grounds =
actually=20
presented to the trial court. See Cincinnati Life Ins. Co. v.=20
Cates, 927 S.W.2d 623, 625 (Tex. 1996). UOP's motion and its =
replies,=20
as well as Orion's responses, must "stand or fall," therefore, on =
the=20
grounds presented in those filings in the trial court. See =
Science=20
Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 912 =
(Tex. 1997).=20
Because UOP did not dispute that Illinois law applied and relies =
on the=20
Illinois choice-of-law provision, moreover, in briefing its third =
issue,=20
we decline to determine sua sponte whether Texas law governs =
Orion's tort=20
claims.=20
18. See McClure Eng'g Assocs. v. Reuben =
H.=20
Donnelly Corp., 447 N.E.2d 400, 402 (Ill. 1983) (defining =
"public=20
policy" as principle declaring that "no one may lawfully do that =
which has=20
a tendency to be injurious to the public welfare").=20
20. An internal e-mail from UOP's Larry =
Upson on=20
April 13, 1995 concerns the CEPOC facility in New Jersey.=20
Upson states that, on reviewing an MSCC report by =
another=20
individual, he "realized that [he] had erred" in an earlier =
comparison of=20
"actual CEPOC MSCC data" and "predicted results for a current day =
UOP=20
riser at the same operating and feed conditions" and had "redone =
the=20
comparison." Upson then reported that This new apples v. apples =
comparison now=20
makes the MSCC results look considerably less attractive. These =
data would=20
indicate a substantial debit for gasoline yield, conversion, and =
bottom=20
cracking for MSCC. MSCC still appears to have a dry gas advantage, =
although the advantage is now much smaller. Since the data in this =
comparison comes=20
from the period prior to the improvement in CEPOC's material =
balance, a=20
similar evaluation of the more recent data may provide a different =
view of=20
MSCC capabilities. I'll try to provide a comparison in the near =
future.=20
Despite reporting a =
"substantial debit,"=20
Upson's e-mail addresses implementation of the MSCC process at the =
CEPOC=20
unit, which Orion has consistently described as a "different" =
facility.=20
Upson's e-mail is no evidence of the MSCC process at the =
TransAmerican=20
Norco unit. Moreover, Upson's e-mail clearly encompasses variables =
at the=20
CEPOC facility, for example, the recent "improvement in CEPOC's =
material=20
balance," which, Upson envisions, could produce a different =
comparison.=20
21. Mother Earth is considered the =
"seminal=20
case" for analyzing fraud in Illinois. Luciani v. Bestor, =
436=20
N.E.2d 251, 256 (Ill. App. Ct., 1982); cf., 22. W.W. Vincent also held that =
the=20
purchasing corporation stated a cause of action for fraudulent =
concealment=20
because the transferring corporation had a duty to disclose that =
the=20
assets transferred did not include the general agents' contract, =
as the=20
transferring corporation had initially represented. W.W. =
Vincent=20
& Co. v. First Colony Life Ins. Co., 814 N.E.2d 960, =
969-70=20
(Ill. App. Ct. 2004). But,=20
neither the TransAmerican-UOP agreement nor Illinois law imposed a =
duty to=20
disclose on UOP. With respect to the agreement, article 5.1, which =
addresses "Technical Information," does not impose a duty of =
disclosure,=20
but, rather, provides that UOP's technical information would be=20
"available to TransAmerican through UOP or its nominee,"=20
(emphasis added) and thus on request. Moreover, as the remaining=20
provisions of article 5 demonstrate, this portion of the agreement =
imposed=20
a duty on TransAmerican and, therefore, Orion, not to disclose, =
but to=20
safeguard the trademarked patent information conveyed by the =
agreement.=20
With=20
respect to the common law, Illinois courts impose a duty to =
disclose only=20
in the context of a special or fiduciary relationship, which this =
case=20
does not involve. See Neptuno Treuhand v. Arbor, 692 =
N.E.2d 812,=20
817 (Ill. App. Ct. 1998). The duty to disclose recognized in =
W.W.=20
Vincent arose because of allegations that the transferring=20
corporation had falsely misrepresented that the assets of the =
corporation=20
included the general agents' contract and, therefore, income from =
the=20
contract; because the assets did not actually include the general =
agents'=20
contract, the transferring corporation had a duty to correct its=20
fraudulent misrepresentation. 23. Specified percentage omitted based on =
redaction=20
and sealing order by trial court.=20
24. Rubric changed in accordance with trial =
court's=20
sealing order.=20
25. The disposition in Vigortone =
does not=20
result from enforcing provisions of the contract construed in that =
case,=20
but from analyzing the evidence, which negated justifiable =
reliance as a=20
matter of law. See 316 F.3d at 645-46.=20
26. The Act "protects consumers who =
purchase=20
merchandise or home improvement services for their own use" and =
applies to=20
both individual consumers and "relationships among business =
persons=20
engaged in trade or commerce." Barille, 682 N.E.2d at =
124. Though=20
the Act was amended in 1990 to provide that "'[p]roof of a public =
injury,=20
a pattern, or an effect on consumers generally shall not be =
required,'"=20
Illinois case law continues to apply the general rule that "the =
Act does=20
not apply to every commercial transaction regardless of the =
relationship=20
between the parties." Id. (quoting 815 Ill. Comp. Stat. =
Ann.=20
505/10a (West 1994)). "[T]he relevant inquiry remains whether the =
alleged=20
conduct involves trade practices addressed to the market generally =
or=20
otherwise implicates consumer protection concerns." Id. =
Applying=20
this inquiry in Barille, the Illinois appellate court =
stated that=20
the Act does not apply when there is no showing that the =
defendant's=20
actions "affected competition, caused confusion to customers, =
influenced=20
the market generally or otherwise implicated consumer[-]protection =
concerns." Id. There must be a showing of either (1) =
conduct that=20
violates public policy or (2) oppressive conduct that leaves the =
consumer=20
with little alternative but to submit. See Robinson v. Toyota =
Motor=20
Credit Corp. 775 N.E.2d 951, 961, 963 (Ill. 2002).=20
27. There must be a showing that the =
defendant=20
intended that the plaintiff rely on the statement, but, in =
contrast to=20
common-law fraud, the plaintiff need not establish its actual =
reliance on=20
the statement. See Oliveira v. Amoco Oil Co., 776 N.E.2d =
151, 161=20
(Ill. 2002); Barille, 682 N.E.2d at 124; Martin v. =
Heinold=20
Commodities, Inc., 643 N.E.2d 734, 754 (Ill. 1994); =
Siegel v.=20
Levy Org. Dev. Co., 607 N.E.2d 194, 198 (Ill. 1992). The =
plaintiff=20
must, however, establish that it was deceived in order to satisfy =
the=20
statutory requirement of proximate cause. Oliveira, 776 =
N.E.2d at=20
163. Because the plaintiff may recover under the Act only if the =
alleged=20
fraud proximately caused the claimed injury, Martin, 643 =
N.E.2d=20
at 746-47, recovery must be premised on statements made before =
the transaction. Connick v. Suzuki Motor Co., 675 =
N.E.2d=20
584, 594 (Ill. 1996) (citing Ill. Comp. Stat. Ann. 505/2). =
Statements made=20
after the transaction are not probative. Id.; cf., =
Rockford=20
Mem. Hosp. v. Havrilesko, 858 N.E.2d 56, 62-63 (Ill. App. Ct. =
2006)=20
(stating that concealed fact must have been known to defendant =
when it was=20
concealed).=20
28. Yet, Orion has also relied on Texas =
law, as we=20
noted in addressing that we apply the Illinois law on which both =
parties=20
relied in moving for summary judgment and responding to the =
motion.=20
(2) it =
must be=20
untrue;
(3) the party making the statement must know or =
believe it to=20
be untrue;
(4) the person to whom the statement is made must =
believe=20
and rely on it, and have a right to do so;
(5) it must have =
been made=20
for the purpose of inducing the other party to act; and
(6) =
the=20
reliance by the person or entity to whom the statement is made =
must lead=20
to the claimed injury.
Orion's negligent-misrepresentation claim =
fails=20
because it is undisputed that the claim arises in the context of =
an=20
agreement between two business entities and not from information =
provided=20
to guide persons in their business transactions. See First =
Midwest=20
Bank, N.A., 843 N.E.2d at 336. Accordingly, the economic-loss =
rule=20
applies under Illinois law. UOP was entitled to prevail by summary =
judgment on its contention that the economic-loss rule barred=20
recovery.