283 F. Supp. 3d 580
S.D. Tex.2017Background
- Cypress Engine bought prechambers from HDMS, alleged defects, and negotiated a settlement by email plus a one‑page outline: Cypress would return prechambers for refunds less a restocking fee.
- After settlement, HDMS offset unrelated past‑due Cypress invoices against the refunds; Cypress sued HDMS for breach and sued Powertech Marine alleging it manufactured the parts.
- HDMS counterclaimed that Cypress breached the settlement by (a) selling prechambers during the buyback period and (b) filing this suit (allegedly released by the settlement); HDMS sought lost profits and attorneys’ fees.
- District court previously held the settlement consisted of the email thread plus the one‑page outline, dismissed Cypress’s claims against HDMS, and left related issues for further motion practice.
- Pending motions: Cypress’s motion for reconsideration, HDMS’s summary‑judgment on its counterclaims, and Powertech Marine’s renewed summary judgment that it is not the proper defendant.
Issues
| Issue | Plaintiff's Argument (Cypress) | Defendant's Argument (HDMS/Powertech) | Held |
|---|---|---|---|
| Whether Cypress’s Rule 60(b) motion for reconsideration of the court’s contract‑formation ruling should be granted | Court misinterpreted what constituted the integrated settlement agreement | No new facts/grounds under Rule 60(b); motion is relitigation | Denied — no Rule 60(b) basis; record supports agreement = emails + outline |
| Whether filing this lawsuit breached the settlement (i.e., whether the release includes a covenant not to sue) | The settlement did not include an express covenant not to sue; at most it creates an affirmative defense | The release covered the claims and filing suit breached the agreement, entitling HDMS to damages | Denied — under Westergren a release without an express covenant not to sue does not create a contractual prohibition on suing; HDMS cannot recover on that counterclaim |
| Whether Cypress’s sales of prechambers during the buyback breached the settlement and whether HDMS mitigated damages | Sales were permitted / factual disputes about market/resale; HDMS failed to mitigate by not reselling at retail | Sales materially breached the agreement; HDMS seeks lost profits but did not resell returned units at retail | HDMS entitled to summary judgment that sales were a material breach, but HDMS cannot recover claimed lost‑profit damages because it failed to mitigate by reselling the returned units at retail |
| Whether HDMS may recover attorneys’ fees: (a) under Tex. Civ. Prac. & Rem. Code § 38.001 against an LLC; (b) under Tex. Bus. & Com. Code § 17.50(c) for a groundless DTPA claim and segregation of fees | HDMS seeks contract fees and DTPA fees for defending against Cypress’s claims | § 38.001 covers "individual or corporation" only; DTPA allows fees if claim was groundless/brought in bad faith; recoverable fees must be segregated or shown interrelated | (a) Denied — court predicts § 38.001 does not authorize fee recovery against an LLC; (b) HDMS may recover fees for groundless DTPA claim, but must segregate or justify nonsegregation of fees (court ordered HDMS to submit segregated fee evidence) |
Key Cases Cited
- St. Paul Mercury Ins. Co. v. Fair Grounds Corp., 123 F.3d 336 (5th Cir.) (procedural rule that FRCP does not recognize a general motion to reconsider)
- Demahy v. Schwarz Pharm. Inc., 702 F.3d 177 (5th Cir.) (timing determines whether a motion to reconsider is analyzed under Rule 59(e) or Rule 60(b))
- Dallas Gas Partners, L.P. v. Prospect Energy Corp., 733 F.3d 148 (5th Cir.) (cases involving express covenants not to sue and contractual fee remedies)
- National Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015) (a release of claims does not, without express language, include a covenant not to sue)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex.) (attorney‑fee segregation rules and the limited interrelated‑claims exception)