Hino Electric Holding Company, L.P. D/B/A Hino Electric Power Company v. Constellation Newenergy, Inc.

Citation: Not availableDocket: 13-09-00657-CV

Court: Court of Appeals of Texas; May 19, 2011; Texas; State Appellate Court

Original Court Document: View Document

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Hino Electric Holding Company, L.P. ("Hino") appealed a directed verdict granted in favor of Constellation NewEnergy, Inc. ("Constellation") and CP&L Retail Energy L.P. ("CP&L") in a tortious interference lawsuit. Hino claimed that Constellation and CP&L interfered with its contracts with the City of Harlingen. The background includes a "Master Power Sales Agreement" between Hino and the City for electricity supply in 2006. In April 2006, they agreed on a "Blend and Extend" option for 2007 at lower rates, which allowed the City to terminate the contract at the end of each budget period. As energy prices fell, the City requested Hino to present alternative pricing, but Hino refused and insisted on the contract's validity. Consequently, the City opted to revert to the original agreement and later sought pricing from other suppliers, including Constellation and CP&L. Ultimately, the City chose CP&L for its 2007 electricity supply after receiving competing offers. The appellate court affirmed the trial court's decision, indicating that Hino did not present sufficient evidence to establish its claims against Constellation and CP&L.

Hino initiated a lawsuit against the City for breach of contract after the City contracted with CP&L for electricity in 2007, seeking specific performance and damages of $603,691.07. Hino later amended the complaint to include Constellation and CP&L, alleging they tortiously interfered with its contract with the City but did not specify which contract was allegedly interfered with. The case went to trial in August 2009, where the court granted directed verdicts favoring Constellation and CP&L after Hino presented its case. Hino filed a motion for a new trial within thirty days, claiming there were material fact issues regarding Constellation and CP&L's intent and knowledge, but the motion was overruled by operation of law. Hino appealed, arguing that the trial court wrongly granted directed verdicts, asserting the evidence presented raised fact issues on its claims. The legal framework for reviewing directed verdicts emphasizes the sufficiency of evidence, allowing a court to grant such verdicts when no probative evidence supports the plaintiff's claims or when a definitive defense is established. The appellate court may uphold a directed verdict if supported by alternative reasoning despite any errors in the trial court's rationale.

Hino claims there is evidence of a valid "Blend and Extend" energy contract with the City, which was allegedly interfered with by Constellation and CP&L through the submission of lower price quotes that led to the contract's termination. Hino asserts this resulted in a loss of $540,000 and $220,000 in lost profits. To support a tortious interference claim, a plaintiff must demonstrate the existence of an existing contract, intentional interference by the defendant, proximate causation of injury, and actual damages. For interference with prospective business relations, a plaintiff must show a reasonable probability of entering into a contract, unlawful acts by the defendant preventing that relationship, intentional or knowledgeable interference, and actual harm.

Constellation's involvement is clarified; it did not win the City’s electricity contract for 2007 and was not privy to Hino’s contract details when it submitted quotes through the STAP. Joshua Hansel from Constellation stated that the company typically inquires about contract expiration when quoting prices but did not do so with the City because the transactions were handled through the STAP. He emphasized that it is standard practice for energy providers to respond to price requests, even when a customer is under contract, to avoid missing the opportunity to secure pricing. Hansel asserted that Constellation had no intention to interfere with Hino’s contract or to induce any breach, and only became aware of the "Blend and Extend" contract after litigation began.

Constellation did not interfere with Hino's "Master Power Sales Agreement" with the City, nor did the City breach that agreement. Hino's CEO, Alex Hinojosa Jr., acknowledged that the City fulfilled its obligations under the agreement, and Hino received all due payments. When Hino attempted to bill the City under a reduced rate from a terminated "Blend and Extend" contract, the City clearly communicated that the contract was no longer valid and that billing should follow the "Master Power Sales Agreement." Hino's claim that Constellation's lower price quotes led to the termination of the "Blend and Extend" contract lacks evidence of Constellation's knowledge of that contract at the time the quotes were made. For tortious interference liability, Hino needed to demonstrate Constellation's awareness of the contract and intentional interference, as established in Texas case law. Testimony indicated that Constellation dealt through the STAP, suggesting no active contract was in place with the City during that time. Industry practices allow retail energy providers to rely on customer representations regarding existing contracts. Hino had previously engaged in similar practices by providing quotes to the City while it was under a contract with another provider. Under Texas law, merely encouraging a party to terminate a contract after proper notice does not constitute tortious interference.

A party claiming tortious interference must demonstrate that the defendant knowingly induced a contracting party to breach its obligations, as established in Texas case law. In this instance, the City terminated the "Blend and Extend" contract in accordance with its terms, and there is no evidence of the City breaching any obligations to Hino. Consequently, Hino failed to present any facts supporting its claims against Constellation for tortious interference, as there was no proof of intentional interference or unlawful acts by Constellation that would have affected a contractual relationship with the City.

Regarding CP&L, it contacted the City about electricity prices following a newspaper article about the City's negotiations with Hino. Cordoba from CP&L, unaware of the "Blend and Extend" contract, was informed by the City Attorney that there was no contract for 2007, which led to a competitive price quote and a contract signed on November 1, 2006. Since the "Blend and Extend" contract had already been validly terminated before this contact, CP&L did not interfere with any existing contract. Therefore, for a claim of tortious interference to be valid, there must be evidence of an existing contract that the alleged interference affects.

Until a contract is terminated, it remains valid, and third parties cannot tortiously interfere with it. Tortious interference requires affirmative actions that induce a breach, such as offering better terms or incentives. Hino failed to present evidence of intentional interference by CP&L regarding its contractual relationship with the City, leading to the trial court's directed verdict in favor of CP&L. Hino's appeal was overruled, affirming the trial court's judgment. The City had limitations on contract duration, agreeing to a nine-month "Blend and Extend" option drafted by its attorney, although signed later. Hino’s claims against the City were separated from those against Constellation and CP&L, with summary judgment granted for the City. During cross-examination, it was noted that energy providers generally rely on customer representations regarding existing contracts rather than conducting open-records requests. Constellation’s standard contract requires customers to warrant non-interference with other agreements.