The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge
ORDER GRANTING IN-PART AND DENYING IN- PART DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT [DOC. 36]
Pending before the Court is Defendants Jones Motor Company, Inc., Jones Motor Group, Inc., and Jones Express, Inc.'s (collectively, "Jones Motor") motion for judgment on the pleadings or for summary judgment. Plaintiff Sam Kholi Enterprises, Inc. ("Kholi") opposes.
The Court decides the matter on the papers submitted and without oral argument. See Civil Local Rule 7.1(d.1). For the reasons stated below, the Court GRANTS IN PART and DENIES IN PART Jones Motor's motion [Doc. 36].
In 2007, Plaintiff Kholi contacted Thompson Trucking after seeing an advertisement in California seeking truck-driver owner/operators. (See Compl., ¶10.*fn1
After several telephone conversations with Thompson Trucking's owner, Tom R. Thompson, Kholi traveled to Texas hoping to purchase Thompson Trucking. (Id., ¶ 11.)
In their meetings, Thompson represented that Thompson Trucking had a well-established customer base that would remain loyal and would be an asset to any buyer. (Compl., ¶ 12.) Thompson also told Kholi that key employees were bound by non-competition agreements and would remain with the company to maintain relationships and ongoing contractual agreements with customers. (Id.)
On or about October 7, 2007, Kholi also met with representatives from Jones Motor. (Compl., ¶ 14.) Kholi alleges Thompson and Jones Motor represented that Jones Motor provided services to Thompson, such as computer software and hardware, non-recourse accounts receivable and cash flow, and liability and cargo insurance. (Id.) Kholi further alleges Thompson and Jones Motor failed to inform Kholi that Thompson was subject to a legally binding non-compete agreement with Defendant Jones Express Inc. ("Express"), a subsidiary of Jones Motor. (Id., ¶¶ 15, 16.)
On October 12, 2007, Thompson agreed to sell his business to Kholi. (Compl., ¶ 17.) As part of the agreement, Thompson agreed to sign a non-compete agreement with Kholi, despite already being bound by the terms of Thompson's non-compete agreement with Express. (Id., ¶ 18.)
By January 2008, Kholi suspected that Thompson did not, in fact, have the well-established customer base he had represented. (Compl., ¶ 21.) Instead, Kholi began to believe that Thompson Trucking mostly relied on third-party brokers, and that its most important client, Harbor Freight, was actually controlled by Jones Motor. (Id.) Kholi contends that he voiced his concerns to Thompson and Jones Motor, but that both assured Kholi that Harbor Freight was Kholi's customer and would stay with the business. (Id., ¶ 22.) As a result of the assurances, Kholi made further payments to the outstanding balance owed on the purchase price. (Id.)
On March 10, 2008, despite the representations that the key Thompson Trucking employees were bound by non-compete agreements, several key employees left and began working for Jones Motor. (Compl., ¶¶ 23, 24.) Before leaving, Kholi alleges that these employees destroyed or removed business records vital to Kholi's business interests. (Id., ¶ 25.) Additionally, Kholi contends that "in March of 2008, [he] finally confirmed that Harbor Freight was controlled by [Jones Motor] and its subsidiaries, not THOMPSON as he and [Jones Motor] had both represented." (Id., ¶ 26.)
On or about November 14, 2008, Kholi filed suit against Tom R. Thompson dba Thompson Trucking (hereinafter, "Thompson") in the United States District Court for the Western District of Texas, Waco Division (the "Texas Action"). (See Defs.' Proposed State. [Doc. 36-2], Ex. B; Benson Dec. [Doc. 36-5], ¶ 4.) Kholi asserted causes of action for fraud in the inducement and breach of contract. ( Defs.' Proposed State. [Doc. 36-2], Ex. B.)
On June 3, 2009, the jury returned a verdict in favor of Thompson. (See Defs.' Proposed State., Ex. C [Doc. 36-3].) The jury found that Thompson did not commit fraud against Kholi with respect to the 2007 agreement, that both parties materially breached the October 2007 Agreement, but that Kholi materially breached first. (Id.) The jury, therefore, awarded Thompson $2,316,670. (Id.)
On December 21, 2010, Kholi filed this action against Jones Motor and Thompson Trucking in the California Superior Court. (See Compl.) The case was subsequently ...