Opinion

Professional Advantage Software Solutions, Inc. v. West Gulf Maritime Asociation Inc.

Court: Texas Court of Appeals, 1st District (Houston)
Filed: Dec 11, 2015
Status: Published
Cited by: 0 cases
Authority: More cited than 3.1%

"'When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract.'" (quoting Am. Nat'l Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 282 (Tex. 1990), and Jim Walter Homes, 711 S.W.2d at 618)

How later courts described this case

"'When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract.'" (quoting Am. Nat'l Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 282 (Tex. 1990), and Jim Walter Homes, 711 S.W.2d at 618)
“If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law."
“The chief consideration when determining the validity of contractual terms—in contracts with or without a nexus to the internet—is whether the party to be bound had reasonable notice of the terms at issue and whether the party manifested assent to those terms.”
“[T]he damages recoverable for a negligent misrepresentation do not include the benefit of the plaintiff's contract with the defendant.”

Written by the judges who cited it.

The opinion

ACCEPTED

01-15-01006-CV

FIRST COURT OF APPEALS

HOUSTON, TEXAS

12/11/2015 12:51:33 PM

CHRISTOPHER PRINE

CLERK

CAUSE NO. 01-15-01006-CV

__________________________________________________________________

FILED IN

1st COURT OF APPEALS

IN THE HOUSTON, TEXAS

FIRST COURT OF APPEALS 12/11/2015 12:51:33 PM

HOUSTON, TEXAS CHRISTOPHER A. PRINE

Clerk

__________________________________________________________________

PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.,

Appellant

WEST GULF MARITIME ASSOCIATION, INC.

Appellee

__________________________________________________________________

Appealed From the 151st Judicial District Court

Harris County, Texas

Trial Court Cause No. 2012-58827,

the Honorable Mike Engelhart, Presiding.

__________________________________________________________________

APPELLEE’S RESPONSE TO APPELLANT’S

EMERGENCY MOTION FOR TEMPORARY RELIEF

__________________________________________________________________

TO THE HONORABLE FIRST COURT OF APPEALS:

Appellee WEST GULF MARITIME ASSOCIATION files this Response to

the Appellant’s Emergency Motion for Temporary Relief (the “Motion”), and in

support thereof, respectfully states as follows:

SUMMARY OF THE RESPONSE

Appellee filed suit over three years ago. Appellant filed its counterclaim for

breach of contract and declaratory judgment more than a year ago. Now, despite five

prior trial settings (the most recent at the request of Appellant after it hired new

counsel on the eve of trial), five motions for summary judgment on the merits (all of

which were denied) and having participated in four depositions, a mediation and

extensive discovery, Appellant asks this Court to stay the case from going to trial on

January 19, 2016 (the 6th trial setting), while Appellant appeals the trial court’s denial

of its motion to compel arbitration. Because the trial court has already found that

Appellant waived its right to arbitrate and refused to stay the proceedings, this Motion

should be denied and the case should be allowed to proceed to trial.

RESPONSE

A. Appellant Has Waived its Right to Arbitration

The trial court found that the Appellant has waived its right to arbitrate. The

trial court’s ruling is firmly supported by the Texas Supreme Court’s decisions in In

re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex.2006) and Perry Homes v. Cull, 258

S.W.3d 580, 597 (Tex. 2008).

In Vesta, after considering and citing Com–Tech Assoc. v. Computer Assoc.,

938 F.2d 1574 (2d Cir. 1991), the Texas Supreme Court held that “allowing a party to

conduct full discovery, file motions going to the merits, and seek arbitration only on

the eve of trial defeats the FAA's goal of resolving disputes without the delay and

expense of litigation.” The Texas Supreme Court in Perry Homes reaffirmed the

holding in Vesta thus making the waiver issue before this Court fairly simple.

The Appellant’s failure to seek arbitration during the last three years while

actively and aggressively participating in the litigation of this case are exactly the

type of actions that constitute waiver as set forth in Vesta and Perry Homes. In the

trial court Appellant filed five motions for summary judgment, propounded written

discovery on the merits (71 Requests for Admissions, 17 Interrogatories and 38

Requests for Production), produced over 32,000 pages of documents, received over

77,000 pages of documents from Appellee, participated in three depositions by

agreement, attended mediation, moved for continuances, filed a counterclaim seeking

a declaratory judgment and attorneys’ fees, filed a motion to designate a responsible

third party, filed a motion to compel, and on the same day as the fifth trial setting,

sought arbitration after the case had been pending for more than three years.1

On this record and considering the totality of the circumstances in this case, it is

clear that Appellant has waived arbitration by substantially invoking the judicial

process.

In addition, Appellee has been sufficiently prejudiced as a result of Appellant’s

failure to move to compel arbitration for over three years. “Prejudice” has many

meanings, but in the context of waiver under the FAA it relates to inherent

unfairness—that is, a party’s attempt to have it both ways by switching between

litigation and arbitration to its own advantage:

[F]or purposes of a waiver of an arbitration agreement[,] prejudice refers

to the inherent unfairness in terms of delay, expense, or damage to a

party’s legal position that occurs when the party’s opponent forces it to

litigate an issue and later seeks to arbitrate that same issue.

Perry Homes at 597, citing Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d

341, 346 (5th Cir.2004).

The procedural history of this lawsuit relevant to Appellant is summarized in Appellee’s Response

to Appellant’s Motion to Compel Arbitration (See Tab A, pp. 3-6). Although the Appellant’s

attached their Motion to Compel Arbitration to their Motion at Tab B, the Appellant’s did not add

Appellee’s Response to their Motion to Compel. As such, Appellee’s response is attached hereto at

Tab A and is incorporated as if fully set forth herein.

Here, Appellant is purposefully and unjustifiably manipulating the exercise of

its arbitral rights to gain an unfair tactical advantage over Appellee. Appellant, on the

eve of trial and after aggressively litigating this case for over three years, is now

seeking to delay disposition by switching to arbitration when trial was imminent and

arbitration is not. Such manipulation by Appellant to its advantage and Appellee’s

detriment is precisely the kind of inherent unfairness that constitutes prejudice under

federal and state law. Perry Homes at 597.

Additionally, the time and expense in defending an action is another factor to

consider in establishing prejudice. See Frye v. Paine, Webber, Jackson & Curtis, Inc.,

877 F.2d 396, 399 (5th Cir.1989), cert. denied, 494 U.S. 1016 (1990).

In this case, the record shows that Appellant obtained extensive discovery

under one set of rules and now seeks to arbitrate the case under another. In connection

with discovery, Appellee was required to electronically produce over 76,000 pages of

documents at a cost of $6,046.01. Appellee also spent $3,331.47 on depositions. (See

Tab A, Affidavit of Blake E. Rizzo, Ex. A).

Finally, evidence of compromise to WGMA’s legal positions is another factor

relevant to determining prejudice. Adams v. StaxxRing, Inc., 344 S.W.3d 641, 652

(Tex.App.-Dallas 2011, pet. denied). Here, regardless of the fees and expenses

involved, Appellee was prejudiced in responding to five motions for summary

judgment, because Appellant has forced Appellee to marshal its evidence, and even

more damaging, marshal the thought processes and legal analysis of Appellee’s

attorneys on the merits.

If, after all that has occurred in this litigation, the parties are forced to arbitrate,

the Appellee would be substantially prejudiced.

B. Temporary Relief is Not Necessary

Pursuant to Tex. Civ. Prac. & Rem. Code Ann. § 171.0259(a), the trial court

shall stay a proceeding only if an order for arbitration was made. In this case, no such

order was made and a stay is not warranted. The decision to stay the proceedings is

left to the trial court’s discretion. See Williamson v. Tucker, 615 S.W.2d 881 (Tex.

Civ. App.—Dallas 1981, writ ref'd n.r.e.) (stating that “[a] motion to stay a state court

proceeding is a matter directed to the discretion of the [trial] court.”).

In order to prevail on appeal, Appellant will have to show that there was no

evidence to support the trial court’s ruling and that the trial court abused its discretion

in finding that Appellant waived its right to arbitration. See Pepe Int’l Dev. Co. v. Pub

Brewing Co., 915 S.W.2d 925, 929 (Tex. App. Houston [1st Dist.] 1996, no writ) (“In

an appeal from an interlocutory order denying a motion to compel arbitration, the

applicable standard of review is that of ‘no evidence.’ Under the ‘no evidence’

standard, the appellate court considers only the evidence and inferences tending to

support the finding under attack and disregards all evidence and inferences to the

contrary.”) Like the trial court in Pepe Int’l Dev. Co., the trial court did not enter

findings of fact and conclusions of law2, thus this Court must affirm the trial court’s

order if “there is sufficient evidence to support it upon any legal theory asserted.” Id.

Here, the record is replete with evidence supporting the trial court’s ruling and the

likelihood of Appellant’s success on appeal is slim.

The trial court has already determined that Appellant waived its right to

arbitrate and that a stay is not warranted. This Motion should be taken for nothing

more than yet another attempt by Appellant’s new counsel to delay these proceedings

and deny Appellee its day in court.

Of course, it was Appellant’s decision not to have findings of fact and conclusions of law entered.

After Appellee prepared findings of fact and conclusions of law, Appellant requested that only a

simply denial of the motion to arbitrate be entered.

PRAYER

WHEREFORE, PREMISES CONSIDERED, APPELLEE WEST GULF

MARITIME ASSOCIATION respectfully requests that the Court deny APPELLANT

PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.’S Motion for

Temporary Relief, and award Appellee such other and further relief to which it may be

justly entitled.

Dated: December 11, 2015.

Respectfully submitted,

CARRIGAN, McCLOSKEY & ROBERSON,

L.L.P.

By: /s/Blake E. Rizzo

Timothy M. McCloskey

SBOT:13417650

Blake E. Rizzo

SBOT: 24034073

945 Heights Boulevard

Houston, Texas 77008

713-868-5581

713-868-1275 (fax)

ATTORNEYS FOR APPELLEE WEST GULF

MARITIME ASSOCIATION

CERTIFICATE OF COMPLIANCE

I certify that the foregoing response is in compliance with Texas Rule of

Appellate Procedure 9.4 because it contains 1504 words and has been prepared in a

proportionally spaced typeface using Microsoft Word in 14-point Times New Roman

font for text and 12-point Times New Roman font for footnotes, which meets the

typeface requirements.

/s/Blake E. Rizzo

Blake E. Rizzo

CERTIFICATE OF SERVICE

I certify that a true and correct copy of the above and foregoing has this 11TH

day of December, 2015, been sent to the following counsel by electronic service:

Jamey L. Voge

Brian Cooper

STUBER COOPER VOGE, PLLC

2600 Network Blvd., Suite 305

Frisco, Texas 75034

Fax: (214) 472-2790

Thomas C. Wright

Natasha N. Taylor

WRIGHT & CLOSE, LLP

One Riverway, Suite 2200

Houston, TX 77056

Telephone: (713) 572-4321

Fax: (713) 572-4320

/s/Blake E. Rizzo

Blake E. Rizzo

APPENDIX

A. Plaintiff’s Response to Professional Advantage Software Solutions, Inc.’s

Motion to Compel Arbitration and Stay Proceedings

TAB A

11/5/2015 4:38:00 PM

Chris Daniel - District Clerk Harris County

Envelope No. 7708715

By: JIMMY RODRIGUEZ

Filed: 11/5/2015 4:38:00 PM

CAUSE NO. 2012-58827

WEST GULF MARITIME ASSOCIATION ' IN THE DISTRICT COURT

VS. '

BUSINESS MICROVAR, INC. D/B/A ' OF HARRIS COUNTY, T E X A S

INTERDYN BMI, PROFESSIONAL '

ADVANTAGE, and TECHNOLOGY '

SUPPORT, INCORPORATED ' 151st JUDICIAL DISTRICT

PLAINTIFF’S RESPONSE TO PROFESSIONAL ADVANTAGE

SOFTWARE SOLUTIONS, INC.’S MOTION TO COMPEL

ARBITRATION AND STAY PROCEEDINGS

TO THE HONORABLE JUDGE OF SAID COURT:

Plaintiff WEST GULF MARITIME ASSOCIATION (“WGMA”) files this Response to

the Motion to Compel Arbitration and Stay Proceedings (the “Motion”) filed by Defendant

PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC. (“ProFad”), and in support

thereof, respectfully states as follows.

INTRODUCTION

Over three years ago, on October 4, 2012, WGMA invoked this Court’s jurisdiction by

filing the underlying lawsuit. Now, three years later, after six trial settings, five motions for

summary judgment filed by ProFad, depositions taken by agreement, and the passage of the

discovery deadline, ProFad, on the eve of trial, asks this court to compel arbitration and stay the

proceedings. ProFad has waived its right to arbitration and this motion should be denied.

ARGUMENT AND AUTHORITIES

ProFad’s Motion Must be Denied Based on Texas Supreme Court Authority

In this case, WGMA asserts that ProFad has waived its right to arbitrate. WGMA’s

position is confirmed by the Texas Supreme Court’s opinions in In re Vesta Ins. Group, Inc., 192

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 1

S.W.3d 759 (Tex.2006) and Perry Homes v. Cull, 258 S.W.3d 580, 597 (Tex. 2008) which are

dispositive of the issue. In Vesta, the Texas Supreme Court held that “allowing a party to conduct

full discovery, file motions going to the merits, and seek arbitration only on the eve of trial defeats

the FAA's goal of resolving disputes without the delay and expense of litigation.” The Texas

Supreme Court in Perry Homes reaffirmed the holding in Vesta while finding that the Plaintiff

had waived its right to seek arbitration.

In this case, there is no question that ProFad met all three factors outlined in Vesta and

Perry Homes, as it conducted full discovery1, filed five motions for summary judgment going to

the merits, and sought arbitration only on the eve of trial after a three year delay and five separate

trial settings. According to the Texas Supreme Court, ProFad’s actions herein, clearly “defeat[s]

the FAA's goal of resolving disputes without the delay and expense of litigation.” On this basis

alone, ProFad’s motion must be denied.

In Perry Homes, the Texas Supreme Court further held that if the three factors set forth

above have not been met, whether a party has waived arbitration must be decided by the Court

on a case-by-case basis, based upon an examination of the totality of the circumstances. Perry

Homes at 591.

In Perry Homes the Texas Supreme Court identified a variety of factors a court can

consider when determining whether waiver has occurred. In making this determination, courts

can consider:

• whether the party who pursued arbitration was the plaintiff or the defendant;

ProFad propounded 71 Requests for Admissions, 17 Interrogatories and 38 Requests for Production, produced over

32,000 pages of documents, received over 77,000 pages of documents from WGMA, issued three third party

subpoenas, and participated in three depositions by agreement. See Rizzo Affidavit attached hereto as Exhibit A.

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 2

• how long the party who pursued arbitration delayed before seeking arbitration;

• when the party who pursued arbitration learned of the arbitration clause’s existence;

• how much the pretrial activity related to the merits rather than arbitrability or jurisdiction;

• how much time and expense has been incurred in litigation;

• whether the party who pursued arbitration sought or opposed arbitration earlier in the

case;

• whether the party who pursued arbitration filed affirmative claims or dispositive motions;

• how much discovery has been conducted and who initiated the discovery;

• whether the discovery sought would be useful in arbitration;

• what discovery would be unavailable in arbitration;

• whether activity in court would be duplicated in arbitration;

• when the case was to be tried; and

• whether the party who pursued arbitration sought judgment on the merits.

Baty v. Bowen, 423 S.W.3d 427, 432–33, (Tex.App.-Houston [14th Dist.] 2013, no pet.

h.), citing Perry Homes, 258 S.W.3d at 591-92.

Under either the three Vista/Perry Homes factors or the totality of the circumstances, it is

clear that ProFad has waived its right to arbitrate because it has substantially invoked the judicial

process to the detriment and prejudice of WGMA. Clearly, ProFad’s failure to seek arbitration

over the last three years while actively and aggressively participating in the litigation of this case

is the essence of waiver.

The procedural history of this lawsuit relevant to ProFad that is summarized below shows

the extent to which ProFad invoked the judicial process by actively and aggressively

participating in this litigation. For example,

 October 4, 2012, Plaintiff filed its original petition and request for disclosures

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 3

 November 9, 2012 ProFad filed a Verified Plea in Abatement, Original

Answer and Demand for Jury Trial

 On January 15, 2013, the Court entered a Docket control Order setting the trial

for December 2, 2013

 On July 23, 2013, the parties filed a Joint Motion to Amend the Scheduling

Order

 On August 1, 2013, the Court entered an Order resetting the trial to September

15, 2014

 On February 18, 2014, ProFad responded to WGMA’s Request for

Disclosures

 On May 6, 2014, ProFad sent Interrogatories (10) and Requests for

Production (23) to WGMA

 On May 6, 2014, ProFad sent Requests for Disclosures to WGMA

 On June 16, 2014, the parties filed an agreement to mediate the case before

Judge Mark Davidson

 On July 16, 2014, ProFad filed a Motion for Leave to Designate Responsible

Third Party

 On July 18, 2014 the parties filed a Joint Motion for Entry of Amended

Scheduling Order

 On July 21, 2014 ProFad issued a subpoena to Tatum LLC seeking 13

categories of documents related to the merits of the case

 On July 21, 2014 ProFad issued a subpoena to Sirius Solutions, LLP

seeking 13 categories of documents related to the merits of the case

 On July 21, 2014 ProFad issued a subpoena to Ignite Media seeking 10

categories of documents related to the merits of the case

 On July 25, 2014 the Parties filed an Agreed Motion for Continuance

 On August 11, 2014 ProFad filed its Designation of Expert Witnesses

 On August 19, 2014, the Court entered an Amended Scheduling Order setting

the trial for January 19, 2015

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 4

 On September 8, 2014 ProFad filed a Traditional and No Evidence Motion

for Summary Judgment

 On September 18, 2014, ProFad filed a response to WGMA’s motion to

designate additional experts

 On October 13, 2014, ProFad filed a Motion for Partial Summary

Judgment Limiting Liabilities and Dismissing Warranty Claims

 On November 10, 2014, ProFad filed a Motion for Leave to file Answer and

Counterclaim

 On November 19, 2014 ProFad filed a Motion for Continuance and Entry

of New Docket Control Order (requesting a fourth trial setting)

 On November 25, 2014 ProFad filed its Answer to amended petition and

Counterclaim

 On December 12, 2014, the Court entered an Order resetting the trial to July 6,

2015

 On March 19, 2015, ProFad sent Requests for Admissions (71),

Interrogatories (7) and Requests for Production (15) to WGMA

 On March 23, 2015 ProFad filed its Amended Designation of Expert

Witnesses

 On May 21, 2015, WGMA, pursuant to an agreement with ProFad, took

the deposition of Brent Hitterdal, a ProFad employee

 On April 17, 2015, WGMA and ProFad filed an Agreed Motion for Entry

of Docket Control Order extending the discovery deadlines

 On April 23, 2015, ProFad took the deposition of Nathan Wesely, WGMA’s

President

 On April 24, 2015, WGMA, pursuant to an agreement with ProFad, took

the deposition of Craig Erickstad, a ProFad employee

 On April 30, 2015 the Court entered an Order extending the discovery

deadlines

 On May 1, 2015, ProFad filed a Motion to Compel

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 5

 On May 18, 2015 ProFad filed a second Traditional and No-Evidence

Motion for Summary Judgment

 On May 21, 2015, the Court entered an order granting, in part, ProFad’s motion

to compel

 On June 1, 2015, ProFad and WGMA filed a Joint Motion for Continuance

 On June 16, 2015, the Court entered an Order amending the docket control

Order and setting trial for October 19, 2015

 On September 25, 2015, the Court entered Orders denying ProFad’s summary

judgment motions

 On October 2, 2015, ProFad filed a Motion for Continuance

 On October 15, 2015, the Court entered an Order setting the trial for January

18, 2016

 On October 19, 2015, ProFad filed the underlying Motion to Compel

Here, ProFad has filed five dispositive motions on the merits in the form of motions for

summary judgment, propounded written discovery on the merits (71 Requests for Admissions, 17

Interrogatories and 38 Requests for Production), produced over 32,000 pages of documents,

received over 77,000 pages of documents from WGMA, participated in three depositions by

agreement, including deposing WGMA’s President Nathan Wesely, attended mediation, moved

for continuances, filed a counterclaim seeking a declaratory judgment and attorneys’ fees, filed a

motion to designate a third party, filed a motion to compel, and on the same day as the fifth trial

setting, sought arbitration after the case had been pending for over three years.

On this record and considering the totality of the circumstances in this case, it is clear that

ProFad has waived arbitration by substantially invoking the judicial process. An abundance of

Texas law is in accord. See, e.g. Ideal Roofing Inc. v. Armbruster, No. 05-13-0046-

CV, 2013 WL 6063724 (Tex. App.-Dallas Nov. 18, 2013, nopet.) (arbitration waived wherein

Ideal L.L.P. filed a dispositive motion on the merits in the form of a motion for summary judgment

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 6

and the motion was twice set for hearing, appellants propounded written discovery on the merits,

performed inspection of appellees’ roof, deposed appellee Nery Armbruster and appellees’ expert

witness, attended two days of mediation, and sought arbitration after the case had been pending

for nineteen and one-half months and only four months before the third trial setting.); See Adams

v. StaxxRing, Inc., 344 S.W.3d 641, 648 (Tex.App.-Dallas 2011, pet. denied) (arbitration waived

where Adams filed answer, affirmative defense, counterclaims, brought in third parties, engaged

in discovery, and filed motions to compel); In re Christus Spohn Health Sys. Corp., 231 S.W.3d

475, 479 (Tex.App.-Corpus Christi 2007, orig. proceeding) (noting actions inconsistent with right

to arbitrate include some combination of filing answer and counterclaim, conducting extensive

discovery, moving for continuance, and failing to timely request arbitration); Okorafor v. Uncle

Sam & Assocs., Inc., 295 S.W.3d 27, 40 (Tex.App.-Houston [1st Dist.] 2009, pet. denied) (finding

circumstances reflected concerted effort seven months into simple defense strategy of denying

sworn account, to escalate process by multiple sworn and affirmative defenses, claims of failures

of conditions precedent, and affirmative claims for relief, including declaratory relief, attorney’s

fees, and sanctions).

WGMA Has Been Severely Prejudiced by ProFad’s Actions Herein

In addition to showing that ProFad substantially invoked the judicial process, WGMA also

has the burden to show prejudice. See Perry Homes at 595 (“waiver of arbitration requires a

showing of prejudice”). Here, WGMA has been sufficiently prejudiced as a result of ProFad’s

failure to move to compel arbitration for over three years.

“Prejudice” has many meanings, but in the context of waiver under the FAA it relates to

inherent unfairness—that is, a party’s attempt to have it both ways by switching between litigation

and arbitration to its own advantage:

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 7

[F]or purposes of a waiver of an arbitration agreement[,] prejudice refers to the

inherent unfairness in terms of delay, expense, or damage to a party’s legal

position that occurs when the party’s opponent forces it to litigate an issue and

later seeks to arbitrate that same issue.

Perry Homes at 597, citing Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341,

346 (5th Cir.2004).

Thus, “a party should not be allowed purposefully and unjustifiably to manipulate the exercise of

its arbitral rights simply to gain an unfair tactical advantage over the opposing party.” Perry Homes

at 597, citing In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 46 n.5 (1st Cir.2005).

As stated by the Texas Supreme Court in Perry Homes, prejudice should be easier to show

against a party that initially opposed arbitration than against one who sought it from the start:

While the mere failure to assert the right to demand arbitration does not alone

translate into a waiver of that right, such failure does bear on the question of

prejudice, and may, along with other considerations, require a court to conclude

that waiver has occurred. The failure to demand arbitration affects the burden

placed upon the party opposing waiver. When a timely demand for arbitration

was made, the burden of proving waiver falls even more heavily on the

shoulders of the party seeking to prove waiver. A demand for arbitration puts a

party on notice that arbitration may be forthcoming, and therefore, affords that

party the opportunity to avoid compromising its position with respect to

arbitrable and nonarbitrable claims. In contrast, where a party fails to demand

arbitration ... and in the meantime engages in pretrial activity inconsistent with

an intent to arbitrate, the party later opposing a motion to compel arbitration

may more easily show that its position has been compromised, i.e., prejudiced.

Perry Homes at 600 citing Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th

Cir.2004). See also Subway, 169 F.3d at 327 (referring to “inherent unfairness—in terms of delay,

expense, or damage to a party's legal position—that occurs when the party's opponent forces it to

litigate an issue and later seeks to arbitrate that same issue”).

Here, ProFad is purposefully and unjustifiably manipulating the exercise of its arbitral

rights to gain an unfair tactical advantage over WGMA. ProFad, on the eve of trial and after

aggressively litigating this case for over three years, is now seeking to delay disposition by

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 8

switching to arbitration when trial was imminent and arbitration is not. Such manipulation by

WGMA to its advantage and WGMA’s detriment is precisely the kind of inherent unfairness that

constitutes prejudice under federal and state law. Perry Homes at 597. Numerous Texas Courts

are in accord. See, e.g. Oak Partners, 248 S.W.3d at 851 (concluding that plaintiff showed

prejudice when defendant delayed nineteen months before moving to compel arbitration, during

which time it actively pursued litigation in the trial court, sought discovery from plaintiff, and

actively sought relief from the trial court, which forced plaintiff to respond and to incur attorney's

fees); Jones v. Citibank (South Dakota), N.A., 235 S.W.3d 333, 340-41 (Tex.App.-Fort Worth

2007, no pet.) (holding appellant waived her right to arbitrate when she waited for over two years

after card issuer's first petition was filed before requesting arbitration, and by that time had filed

numerous motions including a motion to dismiss, a counterclaim, and opposition to summary

judgment); Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc., 817 F.2d 250, 253 (4th

Cir.1987) (finding sufficient prejudice to support waiver where brokerage firm delayed four-and-

one-half years before seeking arbitration, two trial dates passed, and opposing party was required

to respond to two motions for partial summary judgment and three motions to dismiss); Miller

Brewing Co. v. Fort Worth Distrib. Co. 781 F.2d 494, 497–98 (5th Cir.1986) (finding waiver

where plaintiff unconditionally filed suit, waited eight months to assert right to arbitrate, and did

not pursue arbitration until after its suit was dismissed three years later for want of prosecution);

Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1162 (5th Cir.1986) (prejudice resulted in

waiver when the party opposing arbitration had been put to the expense and time of defending a

motion to dismiss and for summary judgment because unlike a perfunctory motion to dismiss

before answering, a federal rule 12(b) motion to dismiss and for summary judgment “could not

have caused anything but substantial prejudice to the Prices.”

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 9

Additionally, the time and expense in defending an action is another factor to consider in

establishing prejudice. See Frye v. Paine, Webber, Jackson & Curtis, Inc., 877 F.2d 396, 399 (5th

Cir.1989), cert. denied, 494 U.S. 1016 (1990) (prejudice shown by attorney's fees and costs

incurred during pretrial proceedings and an aborted trial and by time and expense in defending

against cross-claim); see also Marble Slab Creamery, Inc. v. Wesic, Inc., 823 S.W.2d 436, 439

(Tex.App.—Houston [14th Dist.] 1992, no writ) (prejudice shown by expense of attorney's fees

and discovery costs in defending suit).

In this case, the record shows that ProFad obtained extensive discovery under one set of

rules and now seeks to arbitrate the case under another. In connection with discovery, WGMA was

required to electronically produce over 76,000 pages of documents at a cost of $6,046.01. WGMA

also spent $3,331.47on depositions. See Rizzo Affidavit attached hereto as Exhibit A. Clearly

WGMA has been prejudiced. A party who requests lots of discovery is not prejudiced by getting

it and taking it to arbitration in the same way that a party who produces lots of discovery outside

the stricter discovery limits in arbitration. Perry Homes at 600.

Finally, evidence of compromise to WGMA’s legal positions is another factor relevant to

determining prejudice. Adams v. StaxxRing, Inc., 344 S.W.3d 641, 652 (Tex.App.-Dallas 2011,

pet. denied). Here, regardless of the fees and expenses involved, WGMA was prejudiced in

responding to five motions for summary judgment, because ProFad has forced WGMA to marshal

its evidence, and even more damaging, marshal the thought processes and legal analysis of

WGMA’s attorneys on the merits. Clearly, WGMA’s legal position has been damaged. See

Ellman v. JC Gen. Contractors, 419 S.W.3d 516, 520 (Tex.App.–El Paso 2013, no pet.); Nw.

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 10

Const. Co., Inc. v. Oak Partners, L.P., 248 S.W.3d 837, 850 (Tex.App.-Fort Worth 2008, pet.

denied).

CONCLUSION

The record herein is not unlike that described by the Supreme Court in its Perry Homes

decision:

[Movants] got extensive discovery under one set of rules and then sought to

arbitrate the case under another. They delayed disposition by switching to

arbitration when trial was imminent and arbitration was not. They got the court to

order discovery for them and then limited their opponents’ rights to appellate

review. Such manipulation of litigation for one party’s advantage and another’s

detriment is precisely the kind of inherent unfairness that constitutes prejudice

under federal and state law.

Perry Homes, 258 S.W.3d at 597.

Similarly, WGMA has been prejudiced by ProFad’s strategic attempt to switch to

arbitration and a different set of rules after three years of aggressive litigation in which it obtained

extensive discovery, took full advantage of the rules of procedure, and repeatedly avoided a trial

date.

Because ProFad substantially invoked the juridical process to the detriment and prejudice

of WGMA, ProFad’s motion must be denied, as ProFad has waived any arbitration rights it may

have had.

PRAYER

WHEREFORE, PREMISES CONSIDERED, PLAINTIFF WEST GULF MARITIME

ASSOCIATION respectfully requests that the Court deny Professional Advantage Software

Solutions, Inc.’s Motion to Compel Arbitration and Stay Proceedings, and award WGMA such

other and further relief to which it may be justly entitled.

Dated: November 5, 2015.

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 11

Respectfully submitted,

CARRIGAN, McCLOSKEY & ROBERSON, L.L.P.

By: /s/Blake E. Rizzo

Timothy M. McCloskey

SBOT:13417650

Blake E. Rizzo

SBOT: 24034073

945 Heights Boulevard

Houston, Texas 77008

713-868-5581

713-868-1275 (fax)

ATTORNEYS FOR WEST GULF MARITIME ASSOCIATION

CERTIFICATE OF SERVICE

I certify that a true and correct copy of the above and foregoing has this 5th day of

November, 2015, been sent in accordance with Texas Rule of Civil Procedure 21(a) to the

following:

Jamey L. Voge

Brian Cooper

STUBER COOPER VOGE, PLLC

2600 Network Blvd., Suite 305

Frisco, Texas 75034

Fax: (214) 472-2790

Attorneys for Defendant, Professional Advantage Software Solutions, Inc.

/s/Blake E. Rizzo

Blake E. Rizzo

Plaintiff’s Response to ProFad’s Motion to Compel Arbitration

Page 12

EXHIBIT 1

R&R

CAL

EXHIBIT 2

EXHIBIT 3

EXHIBIT 4

EXHIBIT 5

9/8/2014 12:35:00 PM

Chris Daniel - District Clerk Harris County

Envelope No. 2411370

By: VERONICA GONZALEZ

CAUSE NO. 2012-58827 R&R

CAL

WEST GULF MARITIME ASSOCIATION, § IN THE DISTRICT COURT OF

INC. §

VS. § HARRIS COUNTY, TEXAS

BUSINESS MICROVAR, INC. D/B/A §

INTERDYN BMI, PROFESSIONAL §

ADVANTAGE AND TECHNOLOGY §

SUPPORT, INC. § 151ST JUDICIAL DISTRICT

PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.’S TRADITIONAL

AND NO-EVIDENCE MOTION FOR SUMMARY JUDGMENT

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW Professional Advantage Software Solutions, Inc. (“ProFad”), Defendant

in the above-captioned and numbered cause, and files this Traditional and No-Evidence Motion

for Summary Judgment as to all of Plaintiff West Gulf Maritime Association, Inc.’s (“WGMA”)

claims and in support hereof would respectfully show the Court the following:

I. SUMMARY OF THE ARGUMENT

1. ProFad’s motion is brought on the following grounds:

 WGMA’s tort causes of action are negated by the economic loss rule.

 WGMA’s DTPA claim is negated by Tex. Bus. & Comm. Code § 7.49 (g).

 WGMA’s breach of contract claims are barred based on the terms of

ProFad’s limited warranty.

 WGMA has no evidence to support one or more of its claims against

ProFad and they must be dismissed.

II. BACKGROUND FACTS

2. This case involves a project wherein Plaintiff West Gulf Maritime Association,

Inc. (“WGMA”), hired via separate agreements, Technology Support, Inc., Business Microvar,

Inc. and Professional Advantage for a project related to WGMA’s payroll, HR and accounting

555262.1 PLD 0002573 8786 KLS

EXHIBIT 6

systems. According to WGMA’s Original Petition and the discovery to date in this matter,

WGMA and Defendant Business Microvar, Inc. d/b/a Interdyn BMI (“BMI”) entered into an

agreement (“the October 4 Agreement”) on October 4, 2010, regarding the implementation of

Microsoft Dynamics Great Plains (“Dynamics GP”) financial accounting system and Personnel

Agency Management (“PAM”). ProFad was later hired to customize and deliver the code for the

PAM system.

3. ProFad was not a signatory or a party to the October 4 Agreement. See Exhibit A

to Plaintiff’s Original Petition, attached hereto as Exhibit 1. Later WGMA and BMI signed a

Statement of Work (“SOW”) concerning the implementation of Dynamics GP. On November 5,

2010, WGMA signed several project documents with ProFad including but not limited to a

Statement of Work and a Functional Design Specification which included the specification for

the Overtime Calculations. See excerpts from the ProFad SOW and FDS attached hereto as

Exhibit 2. This specification and its requirements were provided to ProFad by WGMA. ProFad

never had access to WGMA’s old system. Any specifications and requirements were determined

solely by WGMA and communicated to ProFad for inclusion in the FDS. Each agreement

signed between WGMA and ProFad included the following limited warranty:

Customizations, modifications and features are subject to a 30-day warranty

period commencing from the date of delivery. During this period, any

issues/programming errors will be modified free of charge. The Professional

Advantage software warranty is subject to our client having completed user

acceptation testing. Failure to complete UAT can result in the voiding of the

warranty period. Any issues identified after the warranty period will be subject to

standard consulting fees.

Professional Advantage makes every effort to reduce the possibility of software

issues and conduct extensive testing prior to delivery. It is the responsibility of

the client to conduct thorough acceptance testing during the warranty period to

ensure satisfaction with the delivered software.

See Exhibit 2 at PA0025231.

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4. The Overtime Calculation was implemented in PAM in compliance with the FDS.

Code was developed and delivered to WGMA for testing. The system went live on January 3,

2012. See Derek Hall email attached hereto as Exhibit 3.

5. For the first time in April 2012, WGMA informed PAM that there was a

mismatch between the AS400 OT calculation and the PAM OT calculation. This was discussed

during the weekly project meeting on April 17, 2012, and ProFad requested examples of the

mismatch from WGMA. By May 1, 2012, ProFad determined that AS400 did not include all

timesheets in the OT pay calculation. It was determined that in the cases where the AS400 OT

did not match Professional Advantages OT pay calculation there were Adjusted Timesheets that

were not included in the AS400 OT calculation. In the cases where the PAM OT pay calculation

and the AS400 OT pay calculation matched the Adjusted Timesheets were included in the

AS400 OT calculation. ProFad requested from WGMA information regarding how AS400

included some but not all Adjusted Timesheets in the OT calculation so that it could include this

previously undisclosed requirement into the PAM system. ProFad repeatedly requested this

information through and including December 2012 but received no response. See Exhibit 4,

chain of emails from May 2012 through December 2012 requesting information on the OT issue.

Further, this issue remained on the weekly project meeting agenda produced by Derek Hall of

Sirius Solutions, Inc., the project manager hired by WGMA to oversee this project, as unresolved

and under review by WGMA for a consecutive 21 weeks. In November 2012, the issue was

closed and dropped from the agenda and this lawsuit was filed. See Exhibit 5, November 12,

2012 email from Derek Hall with excerpts from attached document titled “WGMA Payroll Key

Issues Status Report 11-12-2012 v56.xlsx.”

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6. WGMA failed to fulfill its obligation to perform User Acceptance Testing within

30 days of delivery of the code by ProFad. Further, WGMA failed to fulfill its obligation under

the Statement of Work to provide complete requirements and specifications. For whatever

reason, WGMA chose not to provide information to ProFad which would have allowed it to

address the OT pay calculation mismatch. Instead WGMA filed suit and has allegedly hired

another contractor to implement a fix. On this basis alone, WGMA cannot prove any of its

claims and they should be dismissed in their entirety.

7. WGMA alleges that Defendants, including Professional Advantage, guaranteed

specific attributes of the finished system which were allegedly not carried out including but not

limited to an alleged failure by ProFad to deliver a system with correct overtime calculations.

Based on these allegations, WGMA has sued ProFad. ProFad denies all liability.

8. WGMA claims that the project that is the subject of this suit was valued at

$600,000. See Original Petition at ¶9.

9. Further, WGMA is not relying on its contracts with ProFad for its claims. Rather,

it is relying on a contract with BMI to which ProFad was not a party. WGMA’s claims for

damages for alleged torts are indistinguishable from its claims for breach of contract. When

asked to specify its claims against ProFad, WGMA relies on the language from its contract with

BMI stating:

Professional Advantage guaranteed that the System would (i) run a payroll

system with at least the same functionality as West Gulf Maritime’s current

system, (ii) maintain worker records in the payroll system with at least the

level of detail as West Gulf Maritime’s current system, and (iii) run

accounting programs for West Gulf Maritime and its affiliated entities and

benefit programs. The total cost for the System, including any additional

vendors, was represented to be approximately $600,000.

555262.1 PLD 0002573 8786 KLS

See Answer to Interrogatory No. 1, attached hereto as Exhibit 6; Compare Original

Petition Exhibit A.

10. Further when asked to differentiate between its bases for each of its claims against

ProFad, WGMA relied on its allegations in answer to Interrogatory 1 for each: DTPA, breach of

contract, negligent misrepresentation, negligence/gross-negligence, and breach of express and

implied warranties. See Exhibit 6 at Answers to Interrogatory Nos. 1-6.

11. When asked to differentiate its categories of damages for each claim, WGMA

refused to do so and lumped everything in to the same categories as follows:

Plaintiff’s items of damages include, the difference between what the BMI

system was represented to cost, $600,000, and the amount it did cost, over

$2,000,000. The amount overcharged by Professional Advantage. The cost

currently being spent to replace the PAM module by Ignite, which has been

estimated to be $135,000. The cost of additional personnel to run the BMI

system because of the reduced functionality compared to the AS400. The

additional personnel cost approximately $250,000 per year for the life of the

BMI system.

See Exhibit 6 at Answers to Interrogatory No. 7.

III. SUMMARY JUDGMENT STANDARD

12. A motion for summary judgment shall be granted if the pleadings and summary

judgment evidence show that there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c), (e); McFadden v. American

United Life Ins. Co., 658 S.W.2d 147, 148 (Tex. 1983). A party moving for summary judgment

bears the burden of showing that there is no genuine issue of material fact, and thus, it is entitled

to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt., 690 S.W.2d 546, 548 (Tex. 1985). A

defendant’s summary judgment motion should be granted if the defendant disproves at least one

essential element of a plaintiff’s cause of action. Vela v. Rocha, 52 S.W.3d 398, 402 (Tex.

App.—Corpus Christi 2001, no pet.). Evidence favoring the motion for summary judgment is

555262.1 PLD 0002573 8786 KLS

not considered unless it is uncontroverted. Great Am. Reserve Ins. Co. v. San Antonio Plumbing

Supply Co., 391 S.W.2d 41, 47 (Tex. 1965). However, uncontroverted evidence that supports the

summary judgment must be considered in the movant’s favor. Id.

13. A defendant may conclusively establish, by way of competent summary judgment

proof, that at least one essential element of the plaintiff’s cause of action is missing. Bradley v.

Quality Svc. Tank Line, 659 S.W.2d 33, 34 (Tex. 1983). Although a presumption exists for

summary judgment purposes that the allegations contained in the plaintiff’s pleadings are to be

taken as true, where the defendant’s summary judgment evidence conclusively negates at least

one essential element of the plaintiff’s cause of action, the plaintiff must come forward with

competent summary judgment evidence to present a fact issue. Torres v. Western Cas. & Surety

Co., 457 S.W.2d 50, 52-53 (Tex. 1970).

14. A court may grant a no-evidence motion for summary judgment if the movant can

show that an adequate time for discovery has passed, and the non-movant has no evidence to

support one or more essential elements of his or her claim or defense. TEX. R. CIV. P. 166a(i).

Under Rule 166a(i), the movant needs not produce any proof in support of its no-evidence claim.

Id. Instead, the mere filing of a motion that specifically points out the elements as to which there is

no evidence is enough to shift the burden to the respondent (non-movant) to come forward with

enough evidence to take the case to a jury. Galveston Newspapers, Inc. v. Norris, 981 S.W.2d at

799-800. In other words, the burden to avoid summary judgment falls on the party who bears the

burden of proving his or her case at trial - i.e., the Plaintiff in this case. See Esco Oil & Gas, Inc. v.

Sooner Pipe & Supply Corp., 962 S.W.2d 193, 197 n.3 (Tex. App.—Houston [1st Dist.] 1997, pet.

denied) (commenting that under Rule 166a(i) the plaintiff as non-movant has the burden to raise a

triable fact issue on each element essential to the plaintiff against each movant defendant).

555262.1 PLD 0002573 8786 KLS

Accordingly, the non-movant is required to produce competent summary judgment evidence raising

a genuine issue of material fact. TEX. R. CIV. P. 166a(i); Norris, 981 S.W.2d at 799-800. If the non-

movant fails to adduce sufficient evidence to demonstrate the existence of a material fact issue upon

which he or she could prevail at trial, Rule 166a(i) mandates that summary judgment be granted. Id.

IV. AN ADEQUATE TIME FOR DISCOVERY HAS PASSED

15. This case was filed two years ago in October 2012. Although the case was abated

for a time, it the abatement was lifted by agreement as of September 6, 2013, over a year ago. The

parties have engaged in significant written discovery and have exchanged expert disclosures.

Plaintiff has served what it purports to be expert reports. Even still, Rule 166a(i) “does not require

that discovery must have been completed, only that there was ‘adequate time.’” Specifically

Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 145 (Tex. App—Houston [14th Dist.] 2000, pet.

denied). As the case has been on file for two years, an adequate time for discovery has passed. See

TEX. R. CIV. P. 166a(i).

V. SUMMARY JUDGMENT EVIDENCE

ProFad submits the following as summary judgment evidence in this matter:

Exhibit 1 - Plaintiff’s Original Petition

Exhibit 2 - Excerpts from the Statement of Work and Functional Design Specification

Exhibit 3 - January 3, 2012 email from Derek Hall

Exhibit 4 - Email chain between Job Garcia and Craig Erickstad for May 2012 –

December 2012 (redacted)

Exhibit 5 - November 12, 2012 email from Derek Hall and excerpts from the attached

document (redacted for confidentiality)

Exhibit 6 - WGMA’s Answers to Interrogatories

Exhibit 7 - Affidavit of Craig Erickstad

555262.1 PLD 0002573 8786 KLS

VI. ARGUMENT AND AUTHORITIES

WGMA’s Tort Causes of Action Are Negated by the Economic Loss Rule

16. It is clear that in Texas under the economic loss rule, if a plaintiff only seeks to

recover for the economic loss or damage to the subject matter of a contract, the plaintiff cannot

maintain a tort action — the plaintiff's remedy lies exclusively under the contract.1 LAN/STV v.

Martin K. Eby Constr. Co., 435 S.W.3d 234 (Tex. 2014); Jim Walter Homes, Inc. v. Reed, 711.

S.W.2d 617 (Tex. 1986); Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991);

Sterling Chemicals Inc. v. Texaco, Inc., 259 S.W.3d 793, 796 (Tex. App. — Houston [1st Dist.],

2007).

17. Texas courts have specifically addressed the application of the economic loss rule

to negligence and negligent misrepresentation claims and have determined that the claim is

barred unless the plaintiff can establish that he suffered an injury that is distinct, separate, and

independent from the economic losses recoverable under a breach of contract claim. Sterling

Chems., Inc., 259 S.W.3d at 797; see, also, D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973

S.W.2d 662, 664 (Tex. 1998)(“[T]he damages recoverable for a negligent misrepresentation do

not include the benefit of the plaintiff's contract with the defendant.”).

As noted by the Texas Supreme Court in LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, (Tex. 2014):

This Court had held in Jim Walter Homes, Inc. v. Reed: “When the injury is only the economic loss to the

subject of a contract itself, the action sounds in contract alone.” 711 S.W.2d 617, 618 (Tex. 1986). See also

Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991) (“When the only loss or damage is to the

subject matter of the contract, the plaintiff's action is ordinarily on the contract.”). We have repeatedly

reaffirmed this rule. Wansey v. Hole, 379 S.W.3d 246, 248 (Tex. 2012) (per curiam) (“[A] duty in tort does

not lie when the only injury claimed is one for economic damages recoverable under a breach of contract

claim.”); 1/2 Price Checks Cashed v. United Auto. Ins. Co., 344 S.W.3d 378, 387 (Tex. 2011) (“[U]nder the

economic loss rule, we have held that a claim sounds in contract when the only injury is economic loss to the

subject of the contract itself.”); Med. City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55, 61 (Tex. 2008)

("'When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract.'"

(quoting Am. Nat'l Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 282 (Tex. 1990), and

Jim Walter Homes, 711 S.W.2d at 618)); Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 12

(Tex. 2007) ("The economic-loss rule . . . generally precludes recovery in tort for economic losses resulting

from the failure of a party to perform under a contract.").

555262.1 PLD 0002573 8786 KLS

18. Under the economic loss rule, if a plaintiff only seeks to recover for the economic

loss or damage to the subject matter of a contract, the plaintiff cannot maintain a tort action —

the plaintiff's remedy lies exclusively under the contract. Jim Walter Homes, Inc. v. Reed, 711.

S.W.2d 617 (Tex. 1986); Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991);

Sterling Chemicals Inc. v. Texaco, Inc., 259 S.W.3d 793, 796 (Tex. App. — Houston [1st Dist.],

2007).

19. Here WGMA has failed to differentiate between damages due to breach of

contract and damages due to its tort claims. See Exhibit 6 at Answers to Interrogatory No. 1-7.

Further, it is clear that the purported injuries are economic and can be directly traced to the

contractual relationship and obligations between WGMA and BMI. See Id. and Original Petition

Exhibit A. Further, the services provided by ProFad about which WGMA is suing were

provided under contract between ProFad and WGMA. As a result, WGMA has not suffered an

injury that is distinct, separate, and independent from the economic loss under a breach of

contract claim, therefore its tort claims against ProFad should be dismissed on summary

judgment. Sterling Chems., Inc., 259 S.W.3d at 797.

WGMA’s DTPA claim is negated by Tex. Bus. & Comm. Code § 17.49 (g)

20. First, it should be noted that, as with its other tort claims, WGMA specifically

incorporates the identical acts, omissions, breaches and claims of damages in its DTPA claim as

it does into its breach of contract claims. See Original Petition at ¶¶19-36. To the extent that

ProFad is found to have committed any acts or omissions as alleged by WGMA, this would be

no more than a breach of contract. The Texas Supreme Court has repeatedly held that a mere

breach of contract, without more, is not a DTPA violation. Rocky Mt. Helicopters v. Lubbock

County Hosp. Dist., 987 S.W.2d 50, 53 (Tex. 1998); Crawford v. Ace Sign, Inc.,

555262.1 PLD 0002573 8786 KLS

917 S.W.2d 12, 14 (Tex. 1996); Ashford Dev., Inc. v. USLife Real Estate Servs. Corp., 661

S.W.2d 933, 935 (Tex. 1983). On this basis alone, TAS’s DTPA claim should be dismissed in

summary judgment.

21. Further, Subsection (g) of section 17.49 of the Texas Business and Commerce

Code provides the following:

Nothing in this subchapter shall apply to a cause of action arising from a

transaction, a project, or a set of transactions relating to the same

project, involving total consideration by the consumer of more than

$500,000, other than a cause of action involving a consumer's residence.

See Tex. Bus. & Comm. Code § 17.49(g)(emphasis added). In other words, the Business

and Commerce Code exempts from the DTPA causes of action arising from a transaction, set of

transactions, or a project if the total consideration amounts to more than $500,000. E. Hill

Marine, Inc. v. Rinker Boat Co., 229 S.W.3d 813, 820 (Tex. App. Fort Worth 2007). "The

purpose of this exemption is to maintain the DTPA as a viable source of relief for consumers in

small transactions and to remove litigation between businesses over large transactions from the

scope of the DTPA." Id. (citing Citizens Nat'l Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459,

473-74 (Tex. App.--Fort Worth 2004, no pet.)(op. on reh'g)); see, also, Geodominion Petroleum,

Inc. v. Boone Exploration, Inc., 2008 Tex. App. LEXIS 6174, 11-12 (Tex. App. Corpus Christi

Aug. 14, 2008)( §17.49(g) exemption applied where the total cost of the project was estimated to

exceed $750,000).

22. Here, it is clear that the set of transactions related to Project Rodeo exceeded

$500,000. In fact, WGMA claims that the project that is the subject of this suit was valued at

$600,000. See Original Petition at ¶9.

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23. Therefore, the 17.49(g) large transactions exemption should apply and WGMA’s

DTPA claim should be dismissed in summary judgment. See Tex. Bus. & Comm.

Code § 17.49(g).

WGMA’s Breach of Contract and Breach of Express/Implied

Warranty Claims are Negated by ProFad’s Limited Warranty

24. ProFad’s services were provided under an express limited warranty which was

applicable for only 30 days. See Exhibit 2 at PA0025231. Any common law implied warranty

was expressly modified by this term. So to the extent that WGMA’s claims rely on a common

law implied warranty, that claim is barred.

25. The Overtime Calculation was implemented in PAM in compliance with the FDS.

Code was developed and delivered to WGMA for testing. The system went live on

January 3, 2012. See Derek Hall email attached hereto as Exhibit 3.

26. For the first time in April 2012, WGMA informed PAM that there was a