## Facts

- A 1973 license agreement allowed a pipeline company to construct and maintain a pipeline across a railroad right-of-way in exchange for an annual fee.
- Through later transactions, CFS became the party responsible for paying the annual fee, and Union Pacific became the party entitled to receive it.
- Strong Capital (acting through its agent, Railroad Management) asserted that Union Pacific assigned to Strong in 2001 the right to receive the annual license payments.
- Strong invoiced CFS for the annual fee and demanded payment or removal of the pipeline; CFS did neither.
- Strong sued CFS for breach of contract, relying on the alleged assignment and, alternatively, claiming CFS’s continued use created an implied contract with Strong.
- During discovery, CFS requested the written assignment; the district court ordered production of a redacted version after Strong objected on proprietary-information grounds.
- Strong failed to produce the redacted assignment as ordered; the district court excluded the assignment from the summary judgment record as a sanction.

## Issues

1. Whether the district court abused its discretion by excluding the assignment agreement as a discovery sanction for failure to comply with a production order.
2. Whether, under Texas law, CFS’s continued pipeline use after receiving invoices could establish an implied-in-fact contract with Strong.

## Decision

- The Fifth Circuit affirmed.
- The district court did not abuse its discretion in excluding the assignment agreement after Strong failed to comply with a clear discovery order and warning.
- Without admissible evidence of assignment, Strong failed to create a genuine dispute that it held contractual rights against CFS under the 1973 license.
- Strong’s implied-contract theory failed as a matter of law because the record did not show mutual assent by CFS to contract with Strong.

## Legal Principles

- District courts have broad discretion to impose discovery sanctions, including exclusion of evidence, when a party fails to comply with discovery orders after notice and an opportunity to comply.
- On summary judgment, a party asserting contract rights derived from an assignment must produce admissible evidence proving the assignment.
- Under Texas law, an implied-in-fact contract requires the same elements as an express contract, including objective manifestations of mutual assent; unilateral billing and continued use, without more, does not establish a meeting of the minds.
- Receipt of a benefit alone does not create an implied-in-fact contract; implied-in-fact liability cannot be imposed without conduct showing agreement.

## Conclusion

The Fifth Circuit upheld an evidentiary sanction excluding a key assignment document due to discovery noncompliance and affirmed summary judgment because the plaintiffs lacked admissible proof of assignment and could not show mutual assent necessary for an implied-in-fact contract.


R.R. Mgmt. Co., L.L.C. v. CFS La. Midstream Co., 428 F.3d 214 (5th Cir. 2005)