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CAUSE NO. C-5241-16-G
ENVIRO-LITE SOLUTIONS, LLC § IN THE DISTRICT COURT OF
Plaintiff §
§
v. §
§ HIDALGO COUNTY, TEXAS
EDINBURG CONSOLIDATED §
INDEPENDENT SCHOOL §
DISTRICT §
Defendant § 370th JUDICIAL DISTRICT
DEFENDANTS’ ORIGINAL ANSWER, MOTION TO DISMISS & COUNTERCLAIMS
Defendant, Edinburg Consolidated Independent School District, files this Original Answer,
Motion to Dismiss and Counterclaims to Plaintiff Enviro-Lite Solutions, LLC’s original petition;
and shows the Court the following:
GENERAL DENIAL
1. Defendant generally denies each allegation of Plaintiff’s original petition, and demands
strict proof thereof as required by the Texas Rules of Civil Procedure.
VERIFIED PLEAS
2. Defendant denies Plaintiff’s allegation that all conditions precedent have been performed
or have occurred. Specifically, Plaintiff’s request for the Court to determine its questions of
construction or validity is moot because it materially breached the contract by knowingly installing
LED lights that: 1) did not qualify under Energy Star nor Design Lights Consortium programs,
and not eligible for an energy incentive rebate; 2) did not meet the specification of approving
authorities; 3) were installed in a manner that violated electrical standards and practices of the
National Electrical Code or NFPA70 (NEC); 4) did not follow the standards, practices, lighting
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levels and measurements of the Illumination Engineering Society of North America; caused
immediate danger at five school campuses in Plaintiff’s district; and 5) resulted in fires in one of
Defendant’s schools. Moreover, Plaintiff was aware at the time of installation that its LED bulbs
could not be installed in accordance with the NEC; and thus should have made necessary efforts
to obtain LED bulbs and equipment that would comply with the NEC and the Contact. Therefore,
the remainder of the contract, including paragraphs 3 and 6 for which Plaintiff seeks clarification,
was nullified due to Plaintiff’s breach; and Defendant’s obligations are discharged.
3. Defendant denies Plaintiff’s allegation that it is entitled to attorney’s fees pursuant Texas
Civil Practice and Remedies Code Chapter 37. Plaintiff’s request for declaratory relief is merely
incidental to its central claim for relief under its contract with Defendant; and therefore attorney’s
fees are not allowed.1
AFFIRMATIVE DEFENSES
4. Defendants specifically pleads, invokes, and reserves the following rights as guaranteed
by Chapter 33, Texas Civil Practice & Remedies Code to the extent they are ultimately applicable
to this case:
A: the right to elect the application of credit toward any judgment which may be
B: The rights to determination by the trier of fact on the issues of the percentage of
responsibility of each Plaintiff, each Defendant, each liable Defendant, each responsible
obtained in this case;
1
E.g., Jackson v. State Office of Administrative Hearings, 351 S.W.3d 290, 301 (Tex. 2011); and see Dewhurst, 90
S.W.3d at289.
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 2 of 23
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C: The right to a full reduction on limitation or any sums which may be recovered by
the plaintiffs; third party, and each settling person or party; and
D: The right to contribution from any other person or entity found to be liable to the
Plaintiffs or to the Defendants.
5. Defendant invokes all protections afforded to it by the doctrine of sovereign immunity;
6. Defendant asserts that it is immune from Plaintiffs’ claims with the exceptions that fall
within the limited waiver of immunity contained in the Texas Local Government Code (TEX. LOC.
GOV’T CODE) Ch. 71;
7. Defendant specifically, asserts that Plaintiff seeks monetary damages that are not allowed
by TEX. LOC. GOV’T CODE § 271.153. Particularly, Plaintiff’s monetary damages are limited to
“balances due and owed” under the contract.2 Plaintiff provides no evidentiary support, and makes
no assertion that the monetary damages it seeks equals the balance due and the amount owed by
Defendant.
8. Defendant asserts all defenses and limitations on liability and damages set out in Texas
Civil Practice & Remedies Code Ann. § 108.002, and any other applicable statutes and law.
9. Pursuant to Texas Civil Practice & Remedies Code Ann. § 37.009, Defendant respectfully
requests that the Court award them all costs and reasonable and necessary attorney’s fees incurred
in the defense of this action.
2
Cite §271.153 and the Sharyland case.
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 3 of 23
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10. Defendant is not liable to Plaintiff because Plaintiff’s material breach of the Contract
discharged Defendant’s obligations. Specifically, in violation of its contract with Defendant,
Plaintiff installed LED lights that: 1) did not qualify under Energy Star nor Design Lights
Consortium programs, and not eligible for an energy incentive rebate; 2) did not meet the
specification of approving authorities; were installed in a manner that violated electrical standards
and practices of the National Electrical Code or the NFPA70 (NEC); 3) did not follow the
standards, practices, lighting levels and measurements of the Illumination Engineering Society of
North America; 4) caused immediate danger at six school campuses Defendant’s district; and 5)
resulted in fires in one of Defendant’s schools.
11. Defendant is not liable to Plaintiff because Plaintiff materially breached multiple express
warranties, which Defendant relied upon when deciding to into contract with Plaintiff. As a result,
Defendant suffered significant damages to Defendant.
12. Defendant is not liable to Plaintiff because Plaintiff breached its implied warranty of
fitness. Defendant relied detrimentally upon Plaintiff’s skill and judgement to furnish and or select
suitable goods to meet its obligations under the Contract. However, Plaintiff furnished and
supplied goods that were not suitable to meet the requirements of the Contract with Defendant. As
a result, the underlining contractual purpose of achieving an energy incentive rebate was obsolete;
and Defendant suffered substantial damages.
13. Defendant is not liable to Plaintiff because Plaintiff material breached its implied warranty
of merchantability. Specifically, Plaintiff designed, supplied and selected goods that lacked
necessary requirements to make them fit for the ordinary purpose to supply LED lighting in the
United States. Plaintiff’s breach invalidated the fundamental purpose of the Contract; to ensure
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 4 of 23
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Defendant was eligible for energy rebates by retrofitting and or replacing its existing lighting with
LED lighting technology. As a result, Defendant incurred substantial injury.
14. Defendant is not liable to Plaintiff because Plaintiff engaged in fraud by knowingly making
material representations that were false in order to gain Defendant’s business. Defendant relied
upon Plaintiff’s deceptive representations to its determent; resulting in substantial injury to
Defendant.
15. Defendant is not liable to Plaintiff because Plaintiff is strictly liable to Defendant because
Plaintiff designed, supplied and installed products that were in a defective condition and were
unreasonably dangerous due to defects in its design, manufacture, and marketing.
16. Defendant is not liable to Plaintiff because Plaintiff was negligent in the design, manufacture,
marketing, distribution and installation of the LED lights in question. Specifically, marketed, designed,
ordered and installed LED lights branded as “Enviro-Light Solutions” that: 1) contained self-ballasted
T8 LED tubes containing unauthorized Interek Certification Marks; 2) were not UL listed; and 3) were
installed in violation of approving authorities. Plaintiff’s negligence caused immediate danger and
significate damages at six school campuses in Defendant’s district, including, fires in one of
Defendant’s schools.
COUNTERCLAIMS
FACTUAL BACKGROUND
17. On April 8, 2015, USA Promlite Technology, Inc., by and through Enviro-Lite Solutions,
LLC, its authorized agent, contracted with Edinburg Consolidated Independent School District to
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 5 of 23
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“perform a full retrofit and or replacement of all existing lighting into LED light technology” at
six of Defendant’s elementary schools.3 The scope of the work was extensive; encompassing
nearly every indoor and outdoor light at each school.4
18. Certified (licensed) personnel was required to perform the electrical work, and the LED
lights were required to qualify under Energy Star or Design Lights Consortium programs in order
to be eligible for an energy incentive rebate; meet the specification of approving authorities; be
installed in a manner that was in compliance with electrical standards and practices of the National
Electrical Code or NFPA70 (NEC); and follow the standards, practices, lighting levels and
measurements of the Illumination Engineering Society of North America.5
19. Plaintiff installed LED bulbs throughout Defendant’s six elementary schools that it
specifically designed and had manufactured through Shenzhen Ledision Lighting Technology Co.,
Ltd., based in China, and were branded with labels containing “Enviro-Lite Solutions, LLC” and
its logo.
20. In order to qualify for rebates under the Energy Star or Design Lights Consortium
programs, Plaintiff’s LED bulbs were required to be certified by Intertek, which tests, certifies and
validates whether lighting is compliant for use in the United States and Canada. Certified LED
bulbs would contain either Extract, Transform and Load (ETL) or Underwriters Laboratories (UL)
markings and numbers.
3
Defendant attaches a copy of the Contract as Exhibit A and incorporated by reference. Please note that the total
agreement between the parties encompassed two contracts. The first agreement allowed Plaintiff’s to updated the
lighting at one of Defendant’s school to obtain sample Plaintiff’s work. The major terms of each contract mirrors each
other.
4
See Addendum “A” of the Contract.
5
Id ¶ 2 (Expectations” and 3 “(Specifications”).
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 6 of 23
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21. However, Plaintiff’s LED bulbs display no UL markings and contain fraudulent ETL
markings and numbers; deceptively indicating the LED bulbs had been certified by Intertek. In
fact, on September 23, 2016, Intertek issued a public notice that Plaintiff’s LED bulbs “bear
unauthorized Interek Certification Marks for the United States and Canada” and that the “products
have not been evaluated by Intertek”. Moreover, Intertek warned that Plaintiff’s LED bulbs
“should not be used” in the United States or Canada. Moreover, Plaintiff’s LED bulbs contained
erroneous certification labels form Design Lights Consortium (DLS), falsely indicating Plaintiff’s
bulbs were eligible for energy rebates.
24. Further, Plaintiff’s LED bulbs were obviously inadequate to satisfy the contracted purpose
of retrofitting and or replacing all existing lighting into LED light technology. Specifically,
Plaintiff installed retrofit kits that were not authorized for use in the United States. Generally,
retrofit kits that are authorized in the United States require LED bulbs that can be: 1) snapped into
place easily with no additional wiring or effort; 2) ran on independent circuits; and 3) operated
safely using a dimmer switch.
25. However, Plaintiff’s bulbs were required to be hard wired into the retrofit fits; thus, when
installation was complete, all of the LED light ran on one continuous circuit; in violation of the
National Electric Code. Most notably, Plaintiff’s bulbs were placed in retrofits with dimmers;
however, the bulbs specifically states, “CAUTION: RISK OF ELECTRIC SHOCK, DO NOT USE
WITH DIMMERS”, clearly indicating that the LED bulbs were never safe for use with the retrofit
kits that were operated with dimmers.
26. As a result of Plaintiff’s fraudulent and substandard LED bulbs and its negligent
installation, most, if not all, of the electrical wiring in Defendant’s six elementary schools were
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 7 of 23
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damaged and/or compromised; placing Defendant’s students in imminent danger. In fact,
Plaintiff’s negligence resulted in four fires at one of Defendant’s schools; which initiated
investigations by local and state officials.
27. Specifically, on October 7, 2016, the Edinburg Fire Marshal’s Office issued a notice to
Defendant’s Superintendent stating the following:
“[I]t has been discovered by the Texas Fire Marshal’s Office, Texas Department of
Licensing and Regulations, City of Edinburg Code Enforcement and the Edinburg
Fire Department Fire Marshal’s Office that the following conditions exist at the
above mentioned campuses:
The contractor performing the work, Enviro-Lite Solutions, is not licensed
by the State of Texas to perform this type of service.
The products used by Enviro-Lite Solutions that where purchased from
Ledision, a company based out of China, has an ETL label that is
unauthorized. ETL has declared that all this equipment should be removed
and shouldn’t be used in the United States.
No electrical design package with spec sheets and load calculations were
submitted to the City of Edinburg for review prior to the installation at the
referenced schools and no electrical permit was ever issued for the work
performed. Further, no study was done of pre-existing conditions before the
equipment was installed.
The electrical contractor hired by Enviro-Lite Solutions, 1st Class Electrical
Services, installed equipment knowing that is was in violation of
manufactured guidelines.
There has been four electrical fires at Escandon Elementary and Cavazos
Elementary that were contained to the electrical boxes and that were not
reported to the fire department when fire occurred.
On September 15, 2016, during our inspection at Escandon Elementary, we
determined that half of the emergency lights that were installed by 1st Class
Electrical Services were not working.
No approved UL Retrofit Kit was used in modifying the existing light
fixtures.
In October 5, 2016, we discovered at Eisenhower Elementary, that inside
the components of the tube model bearing the unauthorized ETL Label
“4007161”, are burning from the inside causing the smell of smoke and the
light to turn off.
Several lights at the above mentioned schools are no longer working.
Several electrical violations were noticed during our inspections
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 8 of 23
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It is essential that immediate action take place correcting the issues mentioned
above. The concerns with these issues was brought to the attention of the school
district on August 4, 2016. Although some of the issues have been addressed, it is
imperative that we continue to correct the situation especially now that we have
determined that LED lamps are beginning to fail.”
COUNT 1 – BREACH OF CONTRACT
28. Defendant was excused from complying with the terms of its agreement with Plaintiff
(including paragraphs 3 and 6 for which Plaintiff seeks clarification) because, Plaintiff failed to
comply with multiple material obligations of the Contract. Plaintiff’s breach, resulted in
significant injury to Defendant.
29. Failure to comply with provisions and terms of a bilateral contract may be excused by the
unjustifiable failure (material breach) of the other party to comply with provisions binding on it.
Jordan Drilling Co. v. Starr, 232 S.W.2d 149, 159 (Tex. Civ. App.—El Paso 1949, writ ref’s
n.r.e.). The breach need not be total for rescission to be proper; a partial breach is sufficient if it
affects a material part of the agreement. Hausler v. Harding-Gill. Co., 15 S.W.2d 548, 549 (Tex.
Comm’n App. 1929, judgm’t adopted); Ennis v. Interstate Distributors, Inc., 598 S.W.2d 903, 906
(Tex. Civ. App.—Dallas 1980, no writ).
30. Here, Plaintiff materially breached the Contract by installing LED lights that 1) did not
qualify under Energy Star nor Design Lights Consortium programs, and were not eligible for an
energy incentive rebate; 2) did not meet Defendant’s requirements, nor the specifications of
approving authorities;6 3) were installed in a manner that violated electrical standards and practices
of the National Electrical Code or NFPA70 (NEC), and did not follow the standards, practices,
6
Contract, Addendum “A” ¶ 3(iv).
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 9 of 23
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lighting levels and measurements of the Illumination Engineering Society of North America.7
Moreover, Plaintiff breached its agreement to obtain all governmental permeants, consents, and
authorizations”8; and that “all electrical work [would] be performed by certified personnel;9
31. Plaintiff’s material breach caused immediate danger at six elementary school campuses in
Defendant’s district; and resulted in fires in one of the schools. As a result, Defendant was required
by local and state officials to immediately correct the damage caused by Plaintiff in order to ensure
the safety of its students. Consequently, Defendant suffer significant monetary damages.
32. In light of the above, the Contract shall be deemed nullified; thus, Defendant’s obligations
discharged.
COUNT 2 – BREACH OF EXPRESS WARRANTY
33. Plaintiff made multiple express warranties of which Defendant relied upon when deciding
to into contract with Plaintiff. However, Plaintiff breached these express warranties causing
significant damages to Defendant.
34. Any affirmation of fact or promise made which relates to the goods and becomes part of
the basis of the bargain creates an express warranty that the goods shall conform to the affirmation
or promise. TEX. BUS. COM. CODE § 2.313(a). Also, any description of the goods, which is made
part of the basis of the bargain, creates an express warranty that the goods shall conform to the
description. Id. Moreover, any sample or model which is made part of the basis of the bargain
creates an express warranty that the whole of the goods shall conform to the sample or model. Id.
7
Id ¶ 3(ii) and (iii).
8
Contract, p.4 ¶ 14.
9
Id, Addendum “A” ¶ 2(i).
Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 10 of 23
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35. It is not necessary to the creation of an express warranty that the seller use formal words
such as “warrant” or “guarantee” or that he have a specific intention to make a warranty. Id
§ 2.313(b). Particularly, if the seller has knowledge superior to that of the consumer, an affirmation
of the value of the goods or the opinion of the seller may create a warranty. Valley Datsun v.
Martinez, 578 S.W.2d 485, 490 (Tex. Civ. App.—Corpus Christi 1979, no writ).
36. Here, Plaintiff materially breached its express covenant and agreement that: 1) it “has
experience and technical management capabilities to identify and evaluate energy cost saving
opportunities, and provide for engineering, packaging, procurement, installation, maintenance and
measurement of cost effective cost saving measures;10 2) “all equipment installed … [would] be
in good and proper working condition”;11 and 3) equipment and products installed would qualify
under Energy Star or Design Lights Consortium programs making Defendant eligible for an energy
incentive rebate.
37. Particularly, Plaintiff was not licensed as an electrical contractor to subcontract the
electrical work necessary to execute its contract with Defendant; and the LED bulbs and equipment
Plaintiff provided were subpar, fraudulent and incapable of fulfilling the requirements and purpose
of its contract with Defendant. As a result, Defendant incurred significant damages.
COUNT 3 – BREACH OF IMPLIED WARRANTY OF MERCHANTABILITY
38. Plaintiff supplied and selected goods that lacked necessary requirements to make them fit
for the ordinary purpose to supply LED lighting in the United States. Plaintiff’s breach invalidated
the fundamental purpose of the Contract; to ensure Defendant was eligible for energy rebates by
10
Contract p. 1, Recital 3.
11
Id, p. 2 ¶ 5.
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retrofitting and or replacing its existing lighting with LED lighting technology. As a result,
Defendant incurred substantial injury.
39. A warranty that the goods shall be merchantable is implied in a contract for their sale if the
seller is a merchant with respect to goods of that kind. TEX. BUS. & COM. CODE § 2.314(a).
Goods to be merchantable must be at least such as (1) pass without objection in the
trade under the contract description; and (2) in the case of fungible goods, are of
fair average quality within the description; and (3) are fit for the ordinary purposes
for which such goods are used; and (4) run, within the variations permitted by the
agreement, of even kind, quality and quantity within each unit and among all units
involved; and (5) are adequately contained, packaged, and labeled as the
agreement may require; and(6) conform to the promises or affirmations of fact
made on the container or label if any.
TEX. BUS. & COM. CODE § 2.314(b).
“Merchant” means a person who deals in goods of the kind or otherwise by his
occupation holds himself out as having knowledge or skill peculiar to the practices
or goods involved in the transaction or to whom such knowledge or skill may be
attributed by his employment of an agent or broker or other intermediary who by
his occupation holds himself out as having such knowledge or skill.
Id § 2.104(a).
40. Here, Plaintiff’s held itself out to have “experience and technical management capabilities
to identify and evaluate energy cost saving opportunities, and provide for engineering, packaging,
procurement, installation, maintenance and measurement of effective cost saving measures”.12 The
LED bulbs and the retrofits (collectively the “equipment”) Plaintiff supplied and selected to fulfill
its Contract with Defendant were not approved for used in the United States, and therefore
unacceptable in the “trade” of retrofitting and or replacing existing lighting into LED light
technology. And because the equipment was not in compliance with National Electrical Coded
12
Contract p. 1, Recital 3.
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standards for the United States, it was clearly not commercially fungible (interchangeable) with
other equipment of the same kind; nor fit for the ordinary purposes for which the equipment is
used.
41. Furthermore, Plaintiff’s LED bulbs were labeled with fraudulent Extract, Transform and
Load (ETL) certification markings and numbers, and determined to be unfit for use in the United
States by Intertek, which tests, certifies and validates whether lighting is compliant for use in the
United States and Canada. Moreover, Plaintiff’s LED bulbs contained erroneous certification
labels from Design Lights Consortium (DLS), falsely indicating Plaintiff’s bulbs were eligible for
energy rebates. These fraudulent markings, clearly indicated Plaintiff’s bulbs were inadequately
contained, packaged and labeled as required by the agreement to fulfill the purpose of the Contract.
42. It is clear Plaintiff furnished goods and equipment that were inadequate to serve its ordinary
purpose; and incapable of complying with the Contract with Defendant. This breach caused
Defendant extensive damages.
COUNT 4 – BREACH OF IMPLIED WARRANTY OF FITNESS
43. Defendant relied detrimentally upon Plaintiff’s skill and judgement to furnish and or select
suitable goods to meet its obligations under the Contract. However, Plaintiff furnished and
supplied goods that were not suitable to meet the requirements of the Contract with Defendant. As
a result, the underlining contractual purpose of achieving an energy incentive rebate was obsolete;
and Defendant suffered significant damages.
44. When a seller at the time of contracting has reason to know any particular purpose for
which the goods are required and that the buyer is relying on the seller’s skill or judgment to select
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or furnish suitable goods, there is an implied warranty that the goods shall be fit for such purpose.
TEX. BUS. COM. CODE § 2.315.
45. Here, Plaintiff materially breached its implied warranty that the LED bulbs and equipment
it designed and selected were fit for the particular purpose to be qualified under Energy Star or
Design Lights Consortium programs making Defendant eligible for an energy incentive rebate.
46. In order to qualify for rebates under the Energy Star or Design Lights Consortium
programs, Plaintiff’s LED bulbs were required to be certified by Intertek, which tests, certifies and
validates whether lighting is compliant for use in the United States and Canada. Certified LED
bulbs would contain either Extract, Transform and Load (ETL) or Underwriters Laboratories (UL)
markings and numbers.
47. However, Plaintiff’s LED bulbs display no UL markings and contain fraudulent ETL
markings and numbers; deceptively indicating the LED bulbs had been certified by Intertek who
warned that Plaintiff’s LED bulbs “should not be used” in the United States or Canada. Moreover,
Plaintiff’s LED bulbs contained erroneous certification labels form Design Lights Consortium
(DLS), falsely indicating Plaintiff’s bulbs were eligible for energy rebates.
48. Further, Plaintiff’s LED bulbs were obviously inadequate to satisfy the contracted purpose
of retrofitting and or replacing all existing lighting into LED light technology. Specifically,
Plaintiff installed retrofit kits that were not authorized for use in the United States. Generally,
retrofit kits that are authorized in the United States require LED bulbs that can be: 1) snapped into
place easily with no additional wiring or effort; 2) run on independent circuits; and 3) operated
safely using a dimmer switch.
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49. However, Plaintiff’s bulbs were required to be hard wired into the retrofit fits; thus, when
installation was complete, all of the LED light ran on one continuous circuit; in violation of the
National Electric Code. Most notably, Plaintiff’s bulbs were hardwired to retrofits that were
operated by dimmer switches; however the LED bulbs specifically stated, “CAUTION: RISK OF
ELECTRIC SHOCK, DO NOT USE WITH DIMMERS”, clearly indicating that the LED bulbs
were not safe for use with the retrofit kits that were operated with dimmers.
50. In light of the above, it is clear that Plaintiff’s LED lights and the retrofit kits it selected
and installed were unfit for their purpose of making Defendant eligible for an energy incentive
rebate. Inevitably, Defendant was deprived of the benefits for which it bargained for; and thus
suffered substantial.
COUNT 5 – FRAUD & NEGLIGENT MISREPRESENTATION
51. Plaintiff knowingly made material representations that were false in order to gain
Defendant’s business. Defendant relied upon Plaintiff’s deceptive representations to its determent;
resulting in substantial injury to Defendant.
52. Generally fraud occurs where:
1) a material representation was made; 2) the representation was
false; 3) when the representation was made, the speaker knew it was
false or made it recklessly without any knowledge of the truth and
as a positive assertion; 4) the speaker made the representation with
the intent that the other party should act upon it; 5) the party acted
in reliance on the representation; and 6) the party thereby suffered
injury.
Aquaplex, Inc. v. Rancho la Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009).
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53. Material means a reasonable person would attach importance to the representation and
would be induced to act on the information in determining his choice of actions in the transaction
in question. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex.
2011); quoting, Smith v. KNC Optical, Inc., 296 S.W.3d 807, 812 (Tex. App.—Dallas 2009, no
pet.). Special or one-sided knowledge may help lead to the conclusion that a statement is one of
fact, not opinion. Id, citing Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 276 (Tex. 1995).
“When an opinion is based on past or present facts . . . . special knowledge establishes a basis for
fraud.” Id, quoting Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983); see also Faircloth, 898
S.W.2d at 277; and Matis v. Golden, 228 S.W.3d 301, 307 (Tex. App.—Waco 2007, no pet.)
(“When a speaker purports to have special knowledge of the facts, or does have superior
knowledge of the facts—for example, when the facts underlying the opinion are not equally
available to both parties—a party may maintain a fraud action.” (quoting Paull v. Capita
Preview
Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa CAUSE NO. C-5241-16-G ENVIRO-LITE SOLUTIONS, LLC § IN THE DISTRICT COURT OF Plaintiff § § v. § § HIDALGO COUNTY, TEXAS EDINBURG CONSOLIDATED § INDEPENDENT SCHOOL § DISTRICT § Defendant § 370th JUDICIAL DISTRICT DEFENDANTS’ ORIGINAL ANSWER, MOTION TO DISMISS & COUNTERCLAIMS Defendant, Edinburg Consolidated Independent School District, files this Original Answer, Motion to Dismiss and Counterclaims to Plaintiff Enviro-Lite Solutions, LLC’s original petition; and shows the Court the following: GENERAL DENIAL 1. Defendant generally denies each allegation of Plaintiff’s original petition, and demands strict proof thereof as required by the Texas Rules of Civil Procedure. VERIFIED PLEAS 2. Defendant denies Plaintiff’s allegation that all conditions precedent have been performed or have occurred. Specifically, Plaintiff’s request for the Court to determine its questions of construction or validity is moot because it materially breached the contract by knowingly installing LED lights that: 1) did not qualify under Energy Star nor Design Lights Consortium programs, and not eligible for an energy incentive rebate; 2) did not meet the specification of approving authorities; 3) were installed in a manner that violated electrical standards and practices of the National Electrical Code or NFPA70 (NEC); 4) did not follow the standards, practices, lighting Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa levels and measurements of the Illumination Engineering Society of North America; caused immediate danger at five school campuses in Plaintiff’s district; and 5) resulted in fires in one of Defendant’s schools. Moreover, Plaintiff was aware at the time of installation that its LED bulbs could not be installed in accordance with the NEC; and thus should have made necessary efforts to obtain LED bulbs and equipment that would comply with the NEC and the Contact. Therefore, the remainder of the contract, including paragraphs 3 and 6 for which Plaintiff seeks clarification, was nullified due to Plaintiff’s breach; and Defendant’s obligations are discharged. 3. Defendant denies Plaintiff’s allegation that it is entitled to attorney’s fees pursuant Texas Civil Practice and Remedies Code Chapter 37. Plaintiff’s request for declaratory relief is merely incidental to its central claim for relief under its contract with Defendant; and therefore attorney’s fees are not allowed.1 AFFIRMATIVE DEFENSES 4. Defendants specifically pleads, invokes, and reserves the following rights as guaranteed by Chapter 33, Texas Civil Practice & Remedies Code to the extent they are ultimately applicable to this case: A: the right to elect the application of credit toward any judgment which may be B: The rights to determination by the trier of fact on the issues of the percentage of responsibility of each Plaintiff, each Defendant, each liable Defendant, each responsible obtained in this case; 1 E.g., Jackson v. State Office of Administrative Hearings, 351 S.W.3d 290, 301 (Tex. 2011); and see Dewhurst, 90 S.W.3d at289. Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 2 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa C: The right to a full reduction on limitation or any sums which may be recovered by the plaintiffs; third party, and each settling person or party; and D: The right to contribution from any other person or entity found to be liable to the Plaintiffs or to the Defendants. 5. Defendant invokes all protections afforded to it by the doctrine of sovereign immunity; 6. Defendant asserts that it is immune from Plaintiffs’ claims with the exceptions that fall within the limited waiver of immunity contained in the Texas Local Government Code (TEX. LOC. GOV’T CODE) Ch. 71; 7. Defendant specifically, asserts that Plaintiff seeks monetary damages that are not allowed by TEX. LOC. GOV’T CODE § 271.153. Particularly, Plaintiff’s monetary damages are limited to “balances due and owed” under the contract.2 Plaintiff provides no evidentiary support, and makes no assertion that the monetary damages it seeks equals the balance due and the amount owed by Defendant. 8. Defendant asserts all defenses and limitations on liability and damages set out in Texas Civil Practice & Remedies Code Ann. § 108.002, and any other applicable statutes and law. 9. Pursuant to Texas Civil Practice & Remedies Code Ann. § 37.009, Defendant respectfully requests that the Court award them all costs and reasonable and necessary attorney’s fees incurred in the defense of this action. 2 Cite §271.153 and the Sharyland case. Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 3 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa 10. Defendant is not liable to Plaintiff because Plaintiff’s material breach of the Contract discharged Defendant’s obligations. Specifically, in violation of its contract with Defendant, Plaintiff installed LED lights that: 1) did not qualify under Energy Star nor Design Lights Consortium programs, and not eligible for an energy incentive rebate; 2) did not meet the specification of approving authorities; were installed in a manner that violated electrical standards and practices of the National Electrical Code or the NFPA70 (NEC); 3) did not follow the standards, practices, lighting levels and measurements of the Illumination Engineering Society of North America; 4) caused immediate danger at six school campuses Defendant’s district; and 5) resulted in fires in one of Defendant’s schools. 11. Defendant is not liable to Plaintiff because Plaintiff materially breached multiple express warranties, which Defendant relied upon when deciding to into contract with Plaintiff. As a result, Defendant suffered significant damages to Defendant. 12. Defendant is not liable to Plaintiff because Plaintiff breached its implied warranty of fitness. Defendant relied detrimentally upon Plaintiff’s skill and judgement to furnish and or select suitable goods to meet its obligations under the Contract. However, Plaintiff furnished and supplied goods that were not suitable to meet the requirements of the Contract with Defendant. As a result, the underlining contractual purpose of achieving an energy incentive rebate was obsolete; and Defendant suffered substantial damages. 13. Defendant is not liable to Plaintiff because Plaintiff material breached its implied warranty of merchantability. Specifically, Plaintiff designed, supplied and selected goods that lacked necessary requirements to make them fit for the ordinary purpose to supply LED lighting in the United States. Plaintiff’s breach invalidated the fundamental purpose of the Contract; to ensure Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 4 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa Defendant was eligible for energy rebates by retrofitting and or replacing its existing lighting with LED lighting technology. As a result, Defendant incurred substantial injury. 14. Defendant is not liable to Plaintiff because Plaintiff engaged in fraud by knowingly making material representations that were false in order to gain Defendant’s business. Defendant relied upon Plaintiff’s deceptive representations to its determent; resulting in substantial injury to Defendant. 15. Defendant is not liable to Plaintiff because Plaintiff is strictly liable to Defendant because Plaintiff designed, supplied and installed products that were in a defective condition and were unreasonably dangerous due to defects in its design, manufacture, and marketing. 16. Defendant is not liable to Plaintiff because Plaintiff was negligent in the design, manufacture, marketing, distribution and installation of the LED lights in question. Specifically, marketed, designed, ordered and installed LED lights branded as “Enviro-Light Solutions” that: 1) contained self-ballasted T8 LED tubes containing unauthorized Interek Certification Marks; 2) were not UL listed; and 3) were installed in violation of approving authorities. Plaintiff’s negligence caused immediate danger and significate damages at six school campuses in Defendant’s district, including, fires in one of Defendant’s schools. COUNTERCLAIMS FACTUAL BACKGROUND 17. On April 8, 2015, USA Promlite Technology, Inc., by and through Enviro-Lite Solutions, LLC, its authorized agent, contracted with Edinburg Consolidated Independent School District to Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 5 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa “perform a full retrofit and or replacement of all existing lighting into LED light technology” at six of Defendant’s elementary schools.3 The scope of the work was extensive; encompassing nearly every indoor and outdoor light at each school.4 18. Certified (licensed) personnel was required to perform the electrical work, and the LED lights were required to qualify under Energy Star or Design Lights Consortium programs in order to be eligible for an energy incentive rebate; meet the specification of approving authorities; be installed in a manner that was in compliance with electrical standards and practices of the National Electrical Code or NFPA70 (NEC); and follow the standards, practices, lighting levels and measurements of the Illumination Engineering Society of North America.5 19. Plaintiff installed LED bulbs throughout Defendant’s six elementary schools that it specifically designed and had manufactured through Shenzhen Ledision Lighting Technology Co., Ltd., based in China, and were branded with labels containing “Enviro-Lite Solutions, LLC” and its logo. 20. In order to qualify for rebates under the Energy Star or Design Lights Consortium programs, Plaintiff’s LED bulbs were required to be certified by Intertek, which tests, certifies and validates whether lighting is compliant for use in the United States and Canada. Certified LED bulbs would contain either Extract, Transform and Load (ETL) or Underwriters Laboratories (UL) markings and numbers. 3 Defendant attaches a copy of the Contract as Exhibit A and incorporated by reference. Please note that the total agreement between the parties encompassed two contracts. The first agreement allowed Plaintiff’s to updated the lighting at one of Defendant’s school to obtain sample Plaintiff’s work. The major terms of each contract mirrors each other. 4 See Addendum “A” of the Contract. 5 Id ¶ 2 (Expectations” and 3 “(Specifications”). Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 6 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa 21. However, Plaintiff’s LED bulbs display no UL markings and contain fraudulent ETL markings and numbers; deceptively indicating the LED bulbs had been certified by Intertek. In fact, on September 23, 2016, Intertek issued a public notice that Plaintiff’s LED bulbs “bear unauthorized Interek Certification Marks for the United States and Canada” and that the “products have not been evaluated by Intertek”. Moreover, Intertek warned that Plaintiff’s LED bulbs “should not be used” in the United States or Canada. Moreover, Plaintiff’s LED bulbs contained erroneous certification labels form Design Lights Consortium (DLS), falsely indicating Plaintiff’s bulbs were eligible for energy rebates. 24. Further, Plaintiff’s LED bulbs were obviously inadequate to satisfy the contracted purpose of retrofitting and or replacing all existing lighting into LED light technology. Specifically, Plaintiff installed retrofit kits that were not authorized for use in the United States. Generally, retrofit kits that are authorized in the United States require LED bulbs that can be: 1) snapped into place easily with no additional wiring or effort; 2) ran on independent circuits; and 3) operated safely using a dimmer switch. 25. However, Plaintiff’s bulbs were required to be hard wired into the retrofit fits; thus, when installation was complete, all of the LED light ran on one continuous circuit; in violation of the National Electric Code. Most notably, Plaintiff’s bulbs were placed in retrofits with dimmers; however, the bulbs specifically states, “CAUTION: RISK OF ELECTRIC SHOCK, DO NOT USE WITH DIMMERS”, clearly indicating that the LED bulbs were never safe for use with the retrofit kits that were operated with dimmers. 26. As a result of Plaintiff’s fraudulent and substandard LED bulbs and its negligent installation, most, if not all, of the electrical wiring in Defendant’s six elementary schools were Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 7 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa damaged and/or compromised; placing Defendant’s students in imminent danger. In fact, Plaintiff’s negligence resulted in four fires at one of Defendant’s schools; which initiated investigations by local and state officials. 27. Specifically, on October 7, 2016, the Edinburg Fire Marshal’s Office issued a notice to Defendant’s Superintendent stating the following: “[I]t has been discovered by the Texas Fire Marshal’s Office, Texas Department of Licensing and Regulations, City of Edinburg Code Enforcement and the Edinburg Fire Department Fire Marshal’s Office that the following conditions exist at the above mentioned campuses: The contractor performing the work, Enviro-Lite Solutions, is not licensed by the State of Texas to perform this type of service. The products used by Enviro-Lite Solutions that where purchased from Ledision, a company based out of China, has an ETL label that is unauthorized. ETL has declared that all this equipment should be removed and shouldn’t be used in the United States. No electrical design package with spec sheets and load calculations were submitted to the City of Edinburg for review prior to the installation at the referenced schools and no electrical permit was ever issued for the work performed. Further, no study was done of pre-existing conditions before the equipment was installed. The electrical contractor hired by Enviro-Lite Solutions, 1st Class Electrical Services, installed equipment knowing that is was in violation of manufactured guidelines. There has been four electrical fires at Escandon Elementary and Cavazos Elementary that were contained to the electrical boxes and that were not reported to the fire department when fire occurred. On September 15, 2016, during our inspection at Escandon Elementary, we determined that half of the emergency lights that were installed by 1st Class Electrical Services were not working. No approved UL Retrofit Kit was used in modifying the existing light fixtures. In October 5, 2016, we discovered at Eisenhower Elementary, that inside the components of the tube model bearing the unauthorized ETL Label “4007161”, are burning from the inside causing the smell of smoke and the light to turn off. Several lights at the above mentioned schools are no longer working. Several electrical violations were noticed during our inspections Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 8 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa It is essential that immediate action take place correcting the issues mentioned above. The concerns with these issues was brought to the attention of the school district on August 4, 2016. Although some of the issues have been addressed, it is imperative that we continue to correct the situation especially now that we have determined that LED lamps are beginning to fail.” COUNT 1 – BREACH OF CONTRACT 28. Defendant was excused from complying with the terms of its agreement with Plaintiff (including paragraphs 3 and 6 for which Plaintiff seeks clarification) because, Plaintiff failed to comply with multiple material obligations of the Contract. Plaintiff’s breach, resulted in significant injury to Defendant. 29. Failure to comply with provisions and terms of a bilateral contract may be excused by the unjustifiable failure (material breach) of the other party to comply with provisions binding on it. Jordan Drilling Co. v. Starr, 232 S.W.2d 149, 159 (Tex. Civ. App.—El Paso 1949, writ ref’s n.r.e.). The breach need not be total for rescission to be proper; a partial breach is sufficient if it affects a material part of the agreement. Hausler v. Harding-Gill. Co., 15 S.W.2d 548, 549 (Tex. Comm’n App. 1929, judgm’t adopted); Ennis v. Interstate Distributors, Inc., 598 S.W.2d 903, 906 (Tex. Civ. App.—Dallas 1980, no writ). 30. Here, Plaintiff materially breached the Contract by installing LED lights that 1) did not qualify under Energy Star nor Design Lights Consortium programs, and were not eligible for an energy incentive rebate; 2) did not meet Defendant’s requirements, nor the specifications of approving authorities;6 3) were installed in a manner that violated electrical standards and practices of the National Electrical Code or NFPA70 (NEC), and did not follow the standards, practices, 6 Contract, Addendum “A” ¶ 3(iv). Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 9 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa lighting levels and measurements of the Illumination Engineering Society of North America.7 Moreover, Plaintiff breached its agreement to obtain all governmental permeants, consents, and authorizations”8; and that “all electrical work [would] be performed by certified personnel;9 31. Plaintiff’s material breach caused immediate danger at six elementary school campuses in Defendant’s district; and resulted in fires in one of the schools. As a result, Defendant was required by local and state officials to immediately correct the damage caused by Plaintiff in order to ensure the safety of its students. Consequently, Defendant suffer significant monetary damages. 32. In light of the above, the Contract shall be deemed nullified; thus, Defendant’s obligations discharged. COUNT 2 – BREACH OF EXPRESS WARRANTY 33. Plaintiff made multiple express warranties of which Defendant relied upon when deciding to into contract with Plaintiff. However, Plaintiff breached these express warranties causing significant damages to Defendant. 34. Any affirmation of fact or promise made which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. TEX. BUS. COM. CODE § 2.313(a). Also, any description of the goods, which is made part of the basis of the bargain, creates an express warranty that the goods shall conform to the description. Id. Moreover, any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model. Id. 7 Id ¶ 3(ii) and (iii). 8 Contract, p.4 ¶ 14. 9 Id, Addendum “A” ¶ 2(i). Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 10 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa 35. It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty. Id § 2.313(b). Particularly, if the seller has knowledge superior to that of the consumer, an affirmation of the value of the goods or the opinion of the seller may create a warranty. Valley Datsun v. Martinez, 578 S.W.2d 485, 490 (Tex. Civ. App.—Corpus Christi 1979, no writ). 36. Here, Plaintiff materially breached its express covenant and agreement that: 1) it “has experience and technical management capabilities to identify and evaluate energy cost saving opportunities, and provide for engineering, packaging, procurement, installation, maintenance and measurement of cost effective cost saving measures;10 2) “all equipment installed … [would] be in good and proper working condition”;11 and 3) equipment and products installed would qualify under Energy Star or Design Lights Consortium programs making Defendant eligible for an energy incentive rebate. 37. Particularly, Plaintiff was not licensed as an electrical contractor to subcontract the electrical work necessary to execute its contract with Defendant; and the LED bulbs and equipment Plaintiff provided were subpar, fraudulent and incapable of fulfilling the requirements and purpose of its contract with Defendant. As a result, Defendant incurred significant damages. COUNT 3 – BREACH OF IMPLIED WARRANTY OF MERCHANTABILITY 38. Plaintiff supplied and selected goods that lacked necessary requirements to make them fit for the ordinary purpose to supply LED lighting in the United States. Plaintiff’s breach invalidated the fundamental purpose of the Contract; to ensure Defendant was eligible for energy rebates by 10 Contract p. 1, Recital 3. 11 Id, p. 2 ¶ 5. Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 11 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa retrofitting and or replacing its existing lighting with LED lighting technology. As a result, Defendant incurred substantial injury. 39. A warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. TEX. BUS. & COM. CODE § 2.314(a). Goods to be merchantable must be at least such as (1) pass without objection in the trade under the contract description; and (2) in the case of fungible goods, are of fair average quality within the description; and (3) are fit for the ordinary purposes for which such goods are used; and (4) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and (5) are adequately contained, packaged, and labeled as the agreement may require; and(6) conform to the promises or affirmations of fact made on the container or label if any. TEX. BUS. & COM. CODE § 2.314(b). “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill. Id § 2.104(a). 40. Here, Plaintiff’s held itself out to have “experience and technical management capabilities to identify and evaluate energy cost saving opportunities, and provide for engineering, packaging, procurement, installation, maintenance and measurement of effective cost saving measures”.12 The LED bulbs and the retrofits (collectively the “equipment”) Plaintiff supplied and selected to fulfill its Contract with Defendant were not approved for used in the United States, and therefore unacceptable in the “trade” of retrofitting and or replacing existing lighting into LED light technology. And because the equipment was not in compliance with National Electrical Coded 12 Contract p. 1, Recital 3. Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 12 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa standards for the United States, it was clearly not commercially fungible (interchangeable) with other equipment of the same kind; nor fit for the ordinary purposes for which the equipment is used. 41. Furthermore, Plaintiff’s LED bulbs were labeled with fraudulent Extract, Transform and Load (ETL) certification markings and numbers, and determined to be unfit for use in the United States by Intertek, which tests, certifies and validates whether lighting is compliant for use in the United States and Canada. Moreover, Plaintiff’s LED bulbs contained erroneous certification labels from Design Lights Consortium (DLS), falsely indicating Plaintiff’s bulbs were eligible for energy rebates. These fraudulent markings, clearly indicated Plaintiff’s bulbs were inadequately contained, packaged and labeled as required by the agreement to fulfill the purpose of the Contract. 42. It is clear Plaintiff furnished goods and equipment that were inadequate to serve its ordinary purpose; and incapable of complying with the Contract with Defendant. This breach caused Defendant extensive damages. COUNT 4 – BREACH OF IMPLIED WARRANTY OF FITNESS 43. Defendant relied detrimentally upon Plaintiff’s skill and judgement to furnish and or select suitable goods to meet its obligations under the Contract. However, Plaintiff furnished and supplied goods that were not suitable to meet the requirements of the Contract with Defendant. As a result, the underlining contractual purpose of achieving an energy incentive rebate was obsolete; and Defendant suffered significant damages. 44. When a seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 13 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa or furnish suitable goods, there is an implied warranty that the goods shall be fit for such purpose. TEX. BUS. COM. CODE § 2.315. 45. Here, Plaintiff materially breached its implied warranty that the LED bulbs and equipment it designed and selected were fit for the particular purpose to be qualified under Energy Star or Design Lights Consortium programs making Defendant eligible for an energy incentive rebate. 46. In order to qualify for rebates under the Energy Star or Design Lights Consortium programs, Plaintiff’s LED bulbs were required to be certified by Intertek, which tests, certifies and validates whether lighting is compliant for use in the United States and Canada. Certified LED bulbs would contain either Extract, Transform and Load (ETL) or Underwriters Laboratories (UL) markings and numbers. 47. However, Plaintiff’s LED bulbs display no UL markings and contain fraudulent ETL markings and numbers; deceptively indicating the LED bulbs had been certified by Intertek who warned that Plaintiff’s LED bulbs “should not be used” in the United States or Canada. Moreover, Plaintiff’s LED bulbs contained erroneous certification labels form Design Lights Consortium (DLS), falsely indicating Plaintiff’s bulbs were eligible for energy rebates. 48. Further, Plaintiff’s LED bulbs were obviously inadequate to satisfy the contracted purpose of retrofitting and or replacing all existing lighting into LED light technology. Specifically, Plaintiff installed retrofit kits that were not authorized for use in the United States. Generally, retrofit kits that are authorized in the United States require LED bulbs that can be: 1) snapped into place easily with no additional wiring or effort; 2) run on independent circuits; and 3) operated safely using a dimmer switch. Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 14 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa 49. However, Plaintiff’s bulbs were required to be hard wired into the retrofit fits; thus, when installation was complete, all of the LED light ran on one continuous circuit; in violation of the National Electric Code. Most notably, Plaintiff’s bulbs were hardwired to retrofits that were operated by dimmer switches; however the LED bulbs specifically stated, “CAUTION: RISK OF ELECTRIC SHOCK, DO NOT USE WITH DIMMERS”, clearly indicating that the LED bulbs were not safe for use with the retrofit kits that were operated with dimmers. 50. In light of the above, it is clear that Plaintiff’s LED lights and the retrofit kits it selected and installed were unfit for their purpose of making Defendant eligible for an energy incentive rebate. Inevitably, Defendant was deprived of the benefits for which it bargained for; and thus suffered substantial. COUNT 5 – FRAUD & NEGLIGENT MISREPRESENTATION 51. Plaintiff knowingly made material representations that were false in order to gain Defendant’s business. Defendant relied upon Plaintiff’s deceptive representations to its determent; resulting in substantial injury to Defendant. 52. Generally fraud occurs where: 1) a material representation was made; 2) the representation was false; 3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; 4) the speaker made the representation with the intent that the other party should act upon it; 5) the party acted in reliance on the representation; and 6) the party thereby suffered injury. Aquaplex, Inc. v. Rancho la Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009). Defendant’s Original Answer, Motion to Dismiss & Counterclaims Page 15 of 23 Electronically Filed 1/17/2017 12:00:26 AM Hidalgo County District Clerks Reviewed By: Kim Hinojosa 53. Material means a reasonable person would attach importance to the representation and would be induced to act on the information in determining his choice of actions in the transaction in question. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011); quoting, Smith v. KNC Optical, Inc., 296 S.W.3d 807, 812 (Tex. App.—Dallas 2009, no pet.). Special or one-sided knowledge may help lead to the conclusion that a statement is one of fact, not opinion. Id, citing Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 276 (Tex. 1995). “When an opinion is based on past or present facts . . . . special knowledge establishes a basis for fraud.” Id, quoting Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983); see also Faircloth, 898 S.W.2d at 277; and Matis v. Golden, 228 S.W.3d 301, 307 (Tex. App.—Waco 2007, no pet.) (“When a speaker purports to have special knowledge of the facts, or does have superior knowledge of the facts—for example, when the facts underlying the opinion are not equally available to both parties—a party may maintain a fraud action.” (quoting Paull v. Capita