The opinion
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-20167
EXPANSION PLUS INCORPORATED,
Plaintiff-Appellant,
versus
BROWN-FORMAN CORPORATION;
NABANCO MERCHANT SERVICES CORPORATION;
FIRST FINANCIAL BANK;
NATIONAL BANCARD CORPORATION’S;
RANDOLPH HUTTO;
LOUISE F ADAMS;
THOMAS J HOLMES, JR.;
HOMES FAMILY LIMITED PARTNERSHIP,
Defendants-Appellees.
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BROWN FORMAN CORPORATION,
Plaintiff-Appellee,
versus
EXPANSION PLUS INCORPORATED; ET AL
Defendants,
EXPANSION PLUS INCORPORATED,
Defendant-Appellant.
Appeal from the United States District Court
For the Southern District of Texas
January 12, 1998
Before HIGGINBOTHAM and STEWART, Circuit Judges, and WALTER*,
District Judge.
HIGGINBOTHAM, Circuit Judge:
*
District Judge of the Western District of Louisiana, sitting
by designation.
This case requires us to determine the obligations of the
parties not to disclose information about the subject matter of
their agreement. Based on our examination of the parties’
negotiations and the documents evidencing their agreement, we hold
that at the relevant time, Brown-Forman did not owe EPI a duty not
to disclose. The judgment of the district court is AFFIRMED.
I
Expansion Plus, Inc., developed a credit card “data capture”
and “paper processing” program. After implementing the Program on
a small scale, EPI sought a national expansion. EPI contacted
Brown-Forman about working together to promote the Program. The
two companies conducted negotiations during which EPI disclosed
confidential information to Brown-Forman. Both parties recognized
the confidential nature of the information disclosed. These
initial negotiations led to a Master Agreement, executed in 1987.
The Master Agreement contained a non-disclosure provision under
which Brown-Forman agreed not to disclose any information relating
to the Program and to advise its employees of the nondisclosure
obligation it owed EPI. See R. 148, Tab 4. This provision
expressly stated that the obligation not to disclose was to remain
in effect until three years after the termination or expiration of
the agreement for any reason whatsoever. Id.
In 1988, the parties executed a new contract. Under the 1988
Agreement, EPI transferred and assigned to Brown-Forman “all of its
rights, title and interest in and to the Program” and Brown-Forman
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agreed “to accept the right to control, implement, and promote the
Program.” R. 148, Tab 11. The 1988 Agreement expressly stated
that it was for a term of five years. It also contained an
integration clause stating “[t]his agreement contains the entire
agreement of the parties relating to the subject matter hereof and
supersedes any prior agreements and representations relating to
such subject matter that are not set forth herein.” Id. The 1988
Agreement did not contain any non-disclosure provisions. EPI
received up front a $225,000 consulting fee and approximately $1.8
million over the term of the contract from its percentage of the
transaction fees that Brown-Forman received from the Program. Id.
In September 1993, the 1988 Agreement expired by its own terms
and Brown-Forman sold the Program to NaBanco Merchant Services
Corporation, First Financial Bank, and National Bancard Corporation
for more than $31 million. At the time of the sale, EPI was a
shell company with few assets. More than six months after the sale
to NaBanco, EPI wrote Brown-Forman contending for the first time
that the 1988 Agreement was a marketing and consulting contract;
that it did not transfer ownership of the Program from EPI to
Brown-Forman. After receiving this letter, Brown-Forman filed suit
in the Western District of Kentucky seeking a declaration of the
parties’ rights under the 1988 Agreement. EPI then filed suit in
a Texas state court alleging that by the sale to NaBanco, Brown-
Forman converted EPI’s property, misappropriated its trade secrets,
breached their confidential relationship, and tortiously interfered
with EPI’s contracts. EPI abjured any claim for breach of
3
contract. Brown-Forman removed EPI’s case to the United States
District Court for the Southern District of Texas. Ultimately, the
Kentucky and Texas suits were consolidated.
EPI moved for partial summary judgment seeking a declaration
that the 1988 Agreement transferred to Brown-Forman only a limited
interest for a limited duration. Brown-Forman filed a cross motion
for summary judgment on all of EPI’s claims. A magistrate judge
recommended granting Brown-Forman’s motion. The district court
accepted the recommendation in part, entering an order denying
EPI’s motion for partial summary judgment, granting summary
judgment for Brown-Forman on EPI’s tortious interference of
contract and conversion claims and deferring its ruling on EPI’s
breach of confidential relationship and misappropriation of trade
secrets claims until the magistrate made additional findings in
response to EPI’s objections to the magistrate’s recommendation.
After considering EPI’s new arguments, the magistrate again
recommended granting summary judgment in favor of Brown-Forman on
EPI’s remaining claims. After a de novo review, the district court
adopted the magistrate’s memoranda and recommendations and granted
summary judgment against EPI on its breach of confidential
relationship and misappropriation of trade secrets claims. EPI
appeals the dismissal of its conversion, breach of confidential
relationship, and misappropriation of trade secrets claims. This
court has jurisdiction under 28 U.S.C. § 1291.
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II
Though the parties and the trial court have devoted much
attention to whether EPI’s claims sound in contract or tort, we
need not enter this fray. At oral argument, EPI conceded, and
properly so, that for any of its claims to prevail, Brown-Forman
must have owed it a duty not to disclose confidential information
at the time Brown-Forman sold the Program to NaBanco. We turn
first to this issue.
The district court ruled that EPI failed to present evidence
of a duty of Brown-Forman not to disclose information about the
Program at the time of sale. We review this ruling de novo. Norman
v. Apache Corp., 19 F.3d 1017, 1023 (5th Cir. 1994).
A confidential relationship may arise “‘where one person
trusts in and relies upon another, whether the relation is a moral,
social, domestic, or merely personal one.’” Crim Truck & Tractor
v.Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992)
(quoting Fitz-Gerald v. Hull, 237 S.W.2d 256, 261 (Tex. 1951)).
Trusting another or enjoying a cordial relationship of long
duration is not enough to establish a confidential relationship.
Id. at 594-95. In order to determine the nature of the
relationship between EPI and Brown-Forman at the time of sale, we
look to the contracts they executed in the course of their dealings
with each other. See Norman, 19 F.3d at 1023-24.
Their agreements convince us that at the time of the sale to
NaBanco, Brown-Forman had no duty not to disclose information about
the Program. The 1988 Agreement manifested their entire agreement
5
and terminated the 1987 Master Agreement. The absence of a
nondisclosure provision in the 1988 Agreement is significant. In
1987, the parties bargained for confidentiality to last for three
years after their agreement was terminated for any reason. The
1988 Agreement addressed nothing on this score. Assuming the 1988
Agreement did not abrogate the nondisclosure provision of the 1987
Agreement, the best case for EPI, the nondisclosure obligation
remained in effect only until 1991, three years after its
termination. In 1993, Brown-Forman was free to sell the Program as
it did not owe EPI any duty of confidentiality at that time.
EPI’s assertions to the contrary are unpersuasive. EPI places
great weight on the fact that during their negotiations Brown-
Forman recognized the confidential nature of the information
surrounding the Program. This observation is of no moment. We
agree that at one time Brown-Forman owed EPI a duty of
confidentiality. The parties defined that duty by their contract
and it expired prior to 1993. The suggestion that a common law
duty of confidentiality with open-ended limits of duration and
scope was untouched by the written agreements of the parties makes
no sense. It would cut the heart from the carefully crafted
bargain.
Similarly, Brown-Forman’s treatment of the Program as
confidential after the 1988 Agreement does not affect our
conclusion. First, Brown-Forman was arguably bound by the
confidentiality provision in the 1987 Master Agreement. That
provision precluded Brown-Forman from disclosing information about
6
the Program until 1991 and required it to advise its employees
about the confidential obligation it owed EPI. Second, any
representations Brown-Forman made to third parties about the
confidential nature of the Program did not affect its nondisclosure
obligation. There is no evidence in the record that Brown-Forman’s
performance demonstrated its intent to alter the deal struck in
1988. Any subjective trust of EPI that Brown-Forman would not
disclose the Program after 1991 is not enough to create a
confidential relationship. Crim Truck & Tractor, 823 S.W.2d at
595. “The objective intent of the parties controls, and absent an
allegation of ambiguity in the contract’s language, the contract
alone will generally be deemed to express the intent of the
parties.” Norman, 19 F.3d at 1024.
EPI’s reliance on this court’s holding in Metallurgical Indus.
Inc., v. Fourteck, Inc., 790 F.2d 1195 (5th Cir. 1986) is misplaced
as well. In Fourteck, we held that the trial court erred in not
admitting into evidence past agreements between the parties which
were relevant to whether a confidential relationship existed
between them. Id. at 1206-07. Unlike Fourteck, the trial court
here examined the prior agreements between EPI and Brown-Forman to
determine the nature of their relationship. The parties’ bargained
for the terms of a confidential relationship and that bargain
provided that it expired no later than 1991.
The judgment of the district court is AFFIRMED.
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