HOUSTON – The Court of Appeals for the 1st District of Texas reversed one part if an earlier trial court decision that a medical care company had disparaged a computer support company resulting in business loss, but upheld the computer company’s breach of contract suit and money awards.
The high court reversed the earlier trial court ruling on the business disparagement claim, awarding instead a “take-nothing” (meaning that though an argument has merit, a plaintiff receives no monetary award), while upholding the remainder of the trial court’s judgment on breach of contract.
According to the Oct. 26 ruling, High Standards Networking and Computer Services (HST), a Houston-based computer consulting firm, entered into a management services agreement with Louis F. Puig M.D. in 2009 and his Occupational Medical Care (OMC), a Pasadena-based firm specializing in treating work-related injuries. Under the agreement HST was to provide OMC with computer, telephone and network services.
Computer servers were to be provided for OMC as a service; devices that OMC did not own or lease. HST would obtain the servers from CharTec, a computer hardware provider, which would monthly debit payments from an account set up by HST for OMC’s use of the servers and OMC would reimburse HST, the ruling states.
HST would bill OMC a monthly flat rate for the computer and phone services. The contract could be terminated if OMC failed to pay for HST’s services or attempted to tamper with the system HST had exclusive right to maintain, according to the ruling.
In December 2013, OMC was allegedly in default of payments and refused to pay HST a project bill of $32,912.
Officials at HST informed the medical company that despite its failure to pay, CharTec was still taking money out of HST’s account for the use of the servers by OMC.
HST technicians attempted to log-in to servers at OMC offices and were told that OMC had changed the password created by HST. HST employees changed the system to a new password, the ruling states.
In January 2014, HST suspended service.
The ruling states that an OMC employee, Cassie Curlin, allegedly emailed Comcast, HST’s internet service provider, and told them HST had “broken into our computer system causing damage" and "committed a felony.”
Curlin also allegedly contacted GloStream, which did business with both HST and OMC, stating a desire to file a complaint against HST.
In June of 2014, Lymphedema and Wound Care Institute of Texas canceled a contract dating from 2009 with HST. HST officials alleged that OMC and GloStream had contacted Lymphedema, resulting in the firm losing the business with Lymphedema, the ruling states.
In 2015 HST sued OMC and OMC counterclaimed.
The ruling states that the trial court jury found that OMC had breached the contract and HST had not. The jury also found that OMC had disparaged HST by alleging that HST had “unlawfully hacked” OMC’s computer system.
The jury awarded $62,124 in damages to HST for breach of contract, and $190,000 for damages and attorney fees. The court rejected OMC’s countersuit for breach of contract, unauthorized access and trespass. The court also denied a motion by OMC for a new trial.
OMC appealed.
In its Oct. 26 opinion, the Texas 1st District Court found in favor of OMC on the disparagement claim by HST.
On the breach of contract charge, the court rejected an allegation by OMC that HST breached the contract first months before termination of the agreement because problems with the phone system resulted in medical patients being unable to schedule appointments, causing OMC to lose business.
The court also rejected OMC’s claim that HST committed harm by locking the medical firm out of its computer system by changing the password; HST had the right to terminate OMC’s access to the servers and remove them.
The charge of trespass by OMC was thrown out.
An additional charge, that HST had no right to claim attorney fees in the breach of contract claim, was also rejected.
“OMC did not challenge the right of HST to claim attorney fees at any point in the trial proceedings,” the brief read.