TCJL and Texans for Lawsuit Reform have submitted a joint brief to the Texarkana Court of Appeals in a breach of contract case in which a Harrison County district court entered judgment on a jury verdict for the plaintiff of $300 million.
Plaintiff, Koninklijke KPN N.V. (“KPN”), filed a breach-of-contract case against Samsung Electronics Co., Ltd. Even though the parties agreed that the contract at issue was unambiguous, the trial court refused to construe the contract as a matter of law. Instead, the trial court permitted Plaintiff to present to the jury (1) a legally incorrect interpretation of the contract, (2) a patent-infringement damages model rather than an expectation damages model founded on the contract and the facts, and (3) a flawed theory of unjust enrichment to make KPN’s interpretation of the contract and wildly inflated breach-of-contract damages appear reasonable.
Both the “nuclear” verdict and the trial court’s failure to apply even the most basic contract-interpretation principles should sound alarm bells for the Texas business community. In our brief, we point out that although the Texas law has long stipulated that a trial court, not the jury, must determine the interpretation of an umambiguous contract as a matter of law, the court in this case failed to conduct any analysis at all. In addition to that, even if the trial court had believed the contract to be unambiguous (which, again, the parties did not), SCOTX authority demands that “[b]efore declaring a contract ambiguous, a court must seek to understand its objective meaning based on its plain language, but if the text alone is inconclusive, the court may consider extrinsic circumstances that shed light on the objective meaning conveyed by the text.” Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998). As we state in our brief, “[p]lainly, if the trial court thought that it could not determine the objective meaning of the contract from the plain text, it had a duty to consider “extrinsic circumstances.” Nevertheless, it neither required KPN to show a “greater degree of linguistic determinacy” nor made any effort to determine “the objective meaning conveyed by the text.”
Important legal principles aside, we state the larger implications for the business community in the conclusion to our brief:
This case cannot be permitted to become a blueprint for prolonging contract litigation that should be determined before trial as a matter of law. Only if the court conducts the proper analysis, finds that it cannot determine what the plain text objectively means, and issues a ruling explaining why the court could not make that determination should the question pass to the factfinder. Smart lawyers can conjure “ambiguity” from just about any text. Trial courts thus have to follow the “pertinent rules” and make the tough calls if contract interpretation is not to become a lawless and unpredictable free-for-all.
Samsung has filed its brief and requested oral argument, and we understand that KPN’s response is due February 5. Our brief can be read in full below.