Labor & Employment Law

Texas Unfair Competition Law: Court Rejects Tortious Interference and Participating and Assisting Breach of Fiduciary Duty Claims

By Robert Wood, David Ellis, and James Landon

In July 2001, Sysco, a distributor of food service products, issued a Request for Proposal (“RFP”). Among the companies that received the RFP were Mark III and BI.

Mark III and BI had a business relationship that involved them sharing information and customers.  Unbeknownst to Sysco, their relationship was formalized in a written contract. 

Mark III and BI submitted a joint response to the Sysco RFP.  Sysco accepted their proposal, awarding Mark III one function and BI a different function.

Sometime later, a BI employee left BI and became a Sysco manager.  The new Sysco manager then terminated several Sysco employees and replaced them with BI employees.  The manager then informed Mark III that it would no longer perform the functions awarded it under the RFP (and that BI would perform them).  BI informed Mark III that it would perform work for Sysco without Mark III’s help.

Mark III filed suit against Sysco for breach of contract, tortious interference with contracts and relationships, and aiding and abetting BI’s breach of fiduciary duty.

In support of its contract claim, Mark III pointed to language in Sysco’s letter awarding the RFP stating that “if there were any issues with either company that could not be resolved to Sysco’s satisfaction, it would be grounds for both companies to lose Sysco’s business.”  However, the court held that this language imposed no legal obligation upon Sysco to keep Mark III as one of the companies performing the work.

With respect to Mark III’s tortious interference claim, the court found that Sysco was unaware of the contractual relationship between Mark III and BI.  Thus, an essential element of a tortious interference claim could not be met.

The court also declined to accept Mark III’s invitation to recognize a claim for Sysco’s alleged “participating and assisting” BI’s breach of fiduciary duty.

From Mark III’s perspective, this case illustrates the importance of proper documentation of a business deal so that, if the deal falls through, the damaged party enjoys necessary legal protections.  Here, Mark III needed a more definite written contract with Sysco, to prevent work from being taken from Mark III and its partner in responding to the RFP, BI.

Mark III Systems, Inc. v. Sysco Corp., 2007 WL 529960 (Tex. App.—Houston [1^st Dist.] 2007).

Full post as published by Texas Non-Compete Law Blog on July 13, 2007 (boomark / email).