     Case: 13-20308         Document: 00512607429         Page: 1     Date Filed: 04/24/2014




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                                United States Court of Appeals
                                                                                         Fifth Circuit

                                                                                        FILED
                                        No. 13-20308                                  April 24, 2014
                                                                                  Lyle W. Cayce
JONIBACH MANAGEMENT TRUST,                                                             Clerk


                                                    Plaintiff–Appellee,
v.

WARTBURG ENTERPRISES, INC.,

                                                    Defendant–Appellant.




                     Appeal from the United States District Court
                          for the Southern District of Texas


Before STEWART, Chief Judge, DENNIS, Circuit Judge, and GILSTRAP,
District Judge. ∗
CARL E. STEWART, Chief Judge:
      This appeal arises from the district court’s grant of summary judgment
for Plaintiff–Appellee Jonibach Management Trust, trading as Bumbo
International Trust (“Bumbo”), on counterclaims by Wartburg Enterprises,
Inc. (“Wartburg”) alleging breach of contract. For the reasons herein, we affirm
in part and reverse in part.




      ∗
          District Judge for the Eastern District of Texas, sitting by designation.
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                                  No. 13-20308


                                       I.
      From 2003 to 2010, South African company Bumbo sold plastic baby
seats to a United States distributor, Wartburg, which in turn supplied them to
retailers including Wal-Mart, Toys “R” Us, and Babies “R” Us. There was
never any written contract between the parties.            Eventually, the parties’
relationship   soured.      Although        the   circumstances   surrounding    this
deterioration are not crystal clear, Wartburg’s inability to pay for merchandise
in a timely manner and Bumbo’s decision to enter into an agreement with
another distributor were factors.
      On February 25, 2010, Bumbo filed a complaint against Wartburg
seeking specific performance of an oral distribution agreement between the
companies. Bumbo also sought a temporary restraining order (“TRO”) and
preliminary injunction requiring Wartburg to distribute Bumbo’s baby seats to
three retailers: Walmart, Toys “R” Us, and Babies “R” Us. Bumbo asserted
that Wartburg was refusing to distribute goods Bumbo had delivered, but for
which Wartburg had not yet paid, to the retailers for whom the goods were
intended. According to Bumbo, this refusal was in retaliation for Bumbo’s
decision to retain a different distributor.         The district court granted the
temporary injunction, finding that “Bumbo and Wartburg had a clear course of
dealing over several years that strongly suggests an enforceable oral
distribution agreement.”
      Soon thereafter, Wartburg filed counterclaims against Bumbo for breach
of contract, fraud, and quantum meruit. On February 16, 2011, the district
court dismissed with prejudice all of Bumbo’s claims and lifted the temporary
injunction against Wartburg. The next day, the district court granted Bumbo’s
motion to dismiss Wartburg’s fraud and quantum meruit counterclaims,
leaving only Wartburg’s counterclaims for breach of contract.


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                                   No. 13-20308


      These breach of contract counterclaims are the only claims at issue in
this appeal. In these counterclaims, Wartburg alleges that Bumbo breached
the parties’ agreement in three ways. First, Wartburg claims Bumbo breached
their contract by “refusing to sell and/or provide its products to Wartburg for
sale to Wartburg’s customers” (“refusal of sale claim”).           Wartburg further
accuses   Bumbo      of   breaching   by   “taking    over     Wartburg’s    customer
relationships” (“customer relationships claim”). These two claims stem in part
from the recall by the Consumer Products Safety Commission of Bumbo’s baby
seat in 2007, during which time Bumbo allegedly offered Wartburg exclusive
distributorship rights in the United States in exchange for serving as Bumbo’s
representative during the recall and handling product issues in the United
States with regard to Toys “R” Us, Babies “R” Us, Wal-Mart, and Target.
      Lastly—and most importantly for this appeal—Wartburg alleges that
Bumbo committed a breach by “demand[ing] that Wartburg only sell its
inventory to certain retailers, e.g., WalMart, Toys “R” Us, and Babies “R” Us”
(“retailer limitation claim”). The parties dispute whether this claim arises out
of the exclusive distributorship agreement at issue in the refusal of products
claim and the customer relationships claim, or out of the initial contract on
which Bumbo’s preliminary injunction was based.
      Bumbo moved for summary judgment on these counterclaims, which the
district court granted. The district court explained that all three contract
claims arose “not as a result of any initial oral agreement between the parties,
but out of an alleged later oral modification or agreement under which Bumbo
granted Wartburg exclusive rights to distribute Bumbo seats in the United
States.” Wartburg had introduced no evidence of a written agreement to any
modification.   The district court determined that, therefore, summary




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judgment was appropriate because the alleged modification was barred by the
statute of frauds.
      Wartburg thereafter made a motion for new trial under Federal Rule of
Civil Procedure 59. It argued that the district court’s dismissal of its contract
counterclaims on statute of frauds grounds was at odds with the court’s earlier
grant of injunctive relief to Bumbo. Specifically, Wartburg argued that in
granting the preliminary injunction to Bumbo against Wartburg, the district
court found that Bumbo and Wartburg had an enforceable oral distributorship
agreement. The district court denied the motion for a new trial, reiterating
that the initial oral agreement was distinct from the later, unproven oral
modification on which Wartburg’s counterclaims were based.              It further
explained that the injunction order concerned goods that had already been
delivered by Bumbo and accepted by Wartburg and thus were not subject to
the statute of frauds. See Tex. Bus. & Com. Code Ann. § 2.201(c)(3). Wartburg
timely appealed the summary judgment.
                                      II.
      We review summary judgment de novo, applying the same standards as
the district court. Antoine v. First Student Inc., 713 F.3d 824, 830 (5th Cir.
2013); see also Fed. R. Civ. P. 56(a) (“[Summary judgment is proper] if the
movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”). There is no genuine issue
of material fact “[i]f the record, taken as a whole, could not lead a rational trier
of fact to find for the nonmoving party.” Deidol v. Best Chevrolet, Inc., 655 F.3d
435, 439 (5th Cir. 2011) (citing Floyd v. Amite Cnty. Sch. Dist., 581 F.3d 244,
247 (5th Cir. 2009)).
      Under Texas law, “a contract for the sale of goods for the price of $500 or
more is not enforceable . . . unless there is some writing sufficient to indicate


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that a contract for sale has been made between the parties and signed by the
party against whom enforcement is sought. . . .” Tex. Bus. & Com. Code Ann.
§ 2.201(a); see also Hugh Symons Group, plc v. Motorola, Inc., 292 F.3d 466,
469 (5th Cir. 2002). 1 However, “[a] contract which does not satisfy the [the
writing] requirements of Subsection (a) but which is valid in other respects is
enforceable. . . with respect to goods for which payment has been made and
accepted or which have been received and accepted.” Tex. Bus. & Com. Code
Ann. § 2.201(c)(3). Furthermore, an unwritten contract is enforceable “if the
party against whom enforcement is sought admits in his pleading, testimony
or otherwise in court that a contract for sale was made.” Id. at § 2.201(c)(2).
In such a situation, “the contract is not enforceable . . . beyond the quantity of
goods admitted.” Id.
       As explained above, this appeal concerns the district court’s grant of
summary judgment for Bumbo on three counterclaims alleging breach of
contract: the refusal of sale claim, the customer relationships claim, and the
retailer limitation claim. Wartburg contends that the district court erred by
determining that these counterclaims stemmed not from the original oral
contract at issue in the earlier preliminary injunction—which the district court
indicated was enforceable based on a clear course of dealing over several
years—but from a later, unproven oral modification to the initial oral
agreement. According to Wartburg, the district court reached this conclusion
by mistakenly focusing only on the two counterclaims alleging Bumbo
breached the exclusivity portion of the agreement—the refusal of sale claim
and the customer relationships claim. Wartburg contends that the district


1Because the district court exercised diversity jurisdiction over this dispute, we apply the
substantive law of Texas. See City of New Orleans v. BellSouth Telecomms., Inc., 690 F.3d
312, 322 (5th Cir. 2012).


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court ignored its retailer limitation claim, which asserted that Bumbo’s
insistence that Wartburg supply only certain retailers—in part through the
preliminary injunction—constituted a breach.
      Wartburg insists that the retailer limitation claim is based on the same
contract at issue at the preliminary injunction phase. Therefore, Wartburg
argues that just as the statute of frauds did not bar Bumbo from suing to
enforce an oral contract allegedly requiring Wartburg to distribute product
solely to three retailers, it likewise does not bar Wartburg from
counterclaiming that the same contract contained no such limitation.
Furthermore, even if the statute of frauds otherwise applies, Wartburg argues
that Bumbo was estopped from denying the existence of an enforceable oral
distributorship agreement based on its numerous representations to the
contrary.   Specifically, Wartburg contends that the doctrines of judicial
estoppal, judicial admission, and quasi-estoppal bar Bumbo’s statute of frauds
defense.
      The district court was correct that the refusal of sale claim and the
customer relationships claim are rooted in a later oral modification relating to
exclusive distribution. There was no written evidence of this modification to
the original contract. The modification does not fall into any of the exceptions
to the statute of frauds. Nor did Bumbo make any sworn statements or judicial
admissions relating to this modification; it never took the position that there
was such a modification. As such, this oral modification is not enforceable
under Texas’s statute of frauds. The district court correctly granted summary
judgment to Bumbo as to the refusal of sale claim and the customer
relationships claim.
      Therefore, the only question for us to resolve is whether the district court
erred in granting summary judgment on Wartburg’s retailer limitation claim.


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We agree with Wartburg that this claim is based not on the modification, but
on the initial contract. This is apparent on the face of the counterclaims and
in the exhibits attached to the response to Bumbo’s motion for summary
judgment. As stated above, Wartburg’s retailer limitation claim alleged that
Bumbo committed a breach by “demand[ing] that Wartburg only sell its
inventory to Walmart, Toys “R” Us, and Babies “R” Us.” Meanwhile, Bumbo’s
motion for a TRO and preliminary injunction asserted that Wartburg breached
its distributorship agreement with Bumbo by refusing to distribute to Wal-
Mart, Toys “R” Us, and Babies “R” Us.          It asked for a TRO “preventing
Wartburg from selling or otherwise disposing of the Bumbo products to anyone
other than Wal-Mart, Toys “R” Us, and Babies “R” Us” and a preliminary
injunction “mandating that Wartburg distribute the Bumbo products it has in
stock to Wal-Mart and Toys “R” Us, as it is supposed to.” Wartburg’s claim
alleging that the parties did not agree that it must supply these retailers is
clearly rooted in the same contract as Bumbo’s earlier claim that they did agree
to this limitation. Accordingly, Wartburg’s retailer limitation claim stems from
the initial oral contract.
      Moreover, the exhibits to Wartburg’s response to Bumbo’s motion for
summary judgment make clear that Wartburg’s retailer limitation claim arises
from the same contract at issue in the preliminary injunction phase. For
example, Wartburg’s second exhibit, a transcript of the deposition of Wartburg
Vice President Mark Buchanan, contains the following text:
      Q: The second breach outlined by Wartburg in their [] first
      amended counterclaim states, “Bumbo demanded that Wartburg
      only sell its inventory to certain retailers, Wal-Mart, Toys “R” Us
      and Babies “R” Us, to the exclusion of Wartburg’s other
      customers.” . . . Is that associated with a motion for injunction that
      was filed by Bumbo requesting the Court to require Wartburg to
      deliver to Wal-Mart, Toys “R” Us and Babies “R” Us?


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       A. Yes.
       Q. Does that refer to any other time frame or is it just that
       particular instance?
       A. Referring to that instance.

       To achieve a preliminary injunction, Bumbo had to show, inter alia, there
was a substantial likelihood it would prevail on the merits. Karaha Bodas Co.
v. Negara, 335 F.3d 357, 363 (5th Cir. 2003). However, this did not amount to
a ruling on the merits. “The purpose of a preliminary injunction is merely to
preserve the relative positions of the parties until a trial on the merits can be
held.” Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). “Given this limited
purpose, and given the haste that is often necessary if those positions are to be
preserved, a preliminary injunction is customarily granted on the basis of
procedures that are less formal and evidence that is less complete than in a
trial on the merits.” Id.         Thus, “the findings of fact and conclusions of law
made by a court granting a preliminary injunction are not binding at trial on
the merits.” Id.; see also Meineke Disc. Muffler v. Jaynes, 999 F.2d 120, 122
n.3 (5th Cir. 1993). As such, the district court’s finding during the preliminary
injunction phase of the proceeding that the contract contained a limitation on
which retailers Wartburg could supply may be challenged at a later stage of
the proceedings.
       The initial oral agreement on which Wartburg bases its retailer
limitation claim is not invalidated by the statute of frauds. The record shows
that Bumbo repeatedly asserted that there was an initial contract. 2


2 Bumbo’s pleadings and testimony regarding the initial contract also constitute judicial
admissions. “To qualify as a judicial admission, the statement must be (1) made in a judicial
proceeding; (2) contrary to a fact essential to the theory of recovery; (3) deliberate, clear, and
unequivocal; (4) such that giving it conclusive effect meets with public policy; and (5) about a
fact on which a judgment for the opposing party can be based.” Heritage Bank v. Redcom
Labs., Inc., 250 F.3d 319, 329 (5th Cir. 2001) (citing Griffin v. Superior Ins. Co., 338 S.W.2d


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Accordingly, this contract falls under one of the exceptions to the Texas statute
of frauds: A contract otherwise barred by the statute is enforceable “if the party
against whom enforcement is sought admits in his pleading, testimony or
otherwise in court that a contract for sale was made.” See Tex. Bus. & Com.
Code Ann. § 2.201(c)(2). As per the exception, it is not enforceable “beyond the
quantity of goods admitted”—that is, there is an enforceable contract between
the two parties only as to the goods that were the subject of the preliminary
injunction. See id.
      In sum, we hold that Wartburg’s retailer limitation claim, regarding
Bumbo’s insistence that Wartburg supply Wartburg’s inventory of Bumbo
products solely to Wal-Mart, Toys “R” Us, and Babies “R” Us, arises from the
initial, admitted-to contract.     As such, this claim falls under one of the
exceptions to Texas’s statute of frauds. Therefore, the district court erred in
granting summary judgment to Bumbo as to this claim on statute of frauds
grounds. We remand this claim to the district court for a determination as to
whether there is any genuine issue of material fact.
                                        III.
      For the foregoing reasons, we AFFIRM IN PART and REVERSE IN
PART the district court’s grant of summary judgment. We REMAND to the
district court for further proceedings consistent with this opinion.




415, 419 (Tex. 1960)). All of these factors are met with regard to the existence of an
enforceable initial contract; Bumbo did not, however, admit to any later modifications.




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