22-03042
Bankr. N.D. Tex.Aug 11, 2022Background
- PIRTEK USA, LLC (Plaintiff) and James Bradley Lager/JBL Hose Service LLC (Debtors/Defendants) resolved franchise disputes by a First Settlement (Jan. 2020) and then a Second Settlement (Sept. 2020) that included a Non‑Disparagement Clause and a confidentiality NDA in exchange for ~$453,000 (cash paid + waived fees).
- Plaintiff alleges Lager agreed to the Second Settlement intending to comply but soon thereafter (June 2021–Feb 2022) made ~20 social‑media and website posts (including on unhappyfranchisee.com) accusing PIRTEK of racial discrimination, breaching the Non‑Disparagement Clause and NDA.
- Lager filed Chapter 11 (Jan. 17, 2022); JBL Hose Service LLC later filed (Mar. 10, 2022). Debtors moved to reject the Second Settlement; the bankruptcy court approved rejection effective April 1, 2022.
- PIRTEK sued in adversary proceeding asserting: (I) breach of Second Settlement (non‑disparagement), (II) breach of Second Settlement (confidentiality/NDA), (III) nondischargeability under 11 U.S.C. § 523(a)(6), and (IV) nondischargeability under 11 U.S.C. § 523(a)(2)(A).
- Debtors moved to dismiss under Fed. R. Civ. P. 9(b) and 12(b)(6). After briefing and hearing, the Court denied the motion in full.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Count III (§523(a)(2)(A)) adequately pleads fraud/nondischargeability | Lager promised to comply with the Second Settlement with no intent to do so; that promise induced PIRTEK to pay money | Complaint fails to identify a false representation, fraudulent intent, or justifiable reliance; Rule 9(b) not satisfied | Denied dismissal — complaint pleads who/what/when/where/how; misrepresentation by promise and circumstantial evidence of intent; justifiable and actual reliance adequately alleged |
| Whether Count IV (§523(a)(6)) pleads willful and malicious injury | Lager’s repeated targeted disparagement while bound by the covenant shows intent to injure and substantial certainty of harm | Alleged injury is merely breach of contract, not an intentional tort; §523(a)(6) inapplicable | Denied dismissal — complaint alleges knowing breach of clear contractual obligation certain to cause injury; sufficient to survive pleading stage |
| Effect of rejection of the Second Settlement on survivability/enforceability of restrictive covenants (Non‑Disparagement/NDA) post‑petition (Tempnology issue) | Under Tempnology, rejection is a breach, not rescission; counterparty’s rights survive and restrictive covenants that require only forbearance remain enforceable | Rejection repudiates future obligations and should free debtor from covenant duties; rejection limits plaintiff to an unsecured claim for damages | Denied dismissal — Tempnology preserves the non‑debtor’s rights; covenants requiring only refraining from conduct survive rejection and remain enforceable |
| Whether equitable relief (injunction) is available despite liquidated‑damages remedy | Money damages may be inadequate; Florida law favors injunctive relief for restrictive covenants and presumes irreparable harm | Second Settlement’s damages provisions (liquidated/return of payments) displace injunctive relief; rejection leaves only monetary claim | Denied dismissal — liquidated damages clause did not preclude equitable relief on the face of the agreement; under Fla. law injunctive relief is available and presumed appropriate for restrictive covenants |
Key Cases Cited
- Mission Prod. Holdings v. Tempnology, LLC, 139 S. Ct. 1652 (2019) (rejection of an executory contract operates as a breach, not rescission; counterparty retains rights received under the agreement)
- Cohen v. De La Cruz, 523 U.S. 213 (1998) (§523(a)(2)(A) bars discharge of liabilities arising from fraud)
- RecoverEdge, L.P. v. Pentecost, 44 F.3d 1284 (5th Cir. 1995) (elements for nondischargeability under §523(a)(2)(A))
- Selenberg v. Bates, 856 F.3d 393 (5th Cir. 2017) (discussing standards for §523(a)(2)(A) claims)
- AT&T Universal Card Servs. v. Mercer, 246 F.3d 391 (5th Cir. 2001) (a promise to perform can be a misrepresentation of present intent supporting nondischargeability)
- Williams v. IBEW Local 520 (In re Williams), 337 F.3d 504 (5th Cir. 2003) (§523(a)(6) willful and malicious injury standard: objective substantial certainty or subjective motive)
- Aquaplex v. Rancho La Valencia, Inc., 397 S.W.3d 768 (Tex. 2009) (a promise made with no intent to perform is an actionable misrepresentation)