Villarreal v. Ashley Architecture ( 1999 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-40026
Summary Calendar
JOHNNY VILLARREAL, d/b/a
PAN AMERICAN REALTY & CONSTRUCTION,
Plaintiff-Appellee,
versus
ASHLEY ARCHITECTS, ARCHITECTO GARCIA &
ASSOCIATES, and CRUZ RODRIGUEZ, d/b/a
SATISFACTION HOMES,
Defendants-Appellants.
Appeal from the United States District Court
for the Southern District of Texas
(B-93-CV-140)
February 11, 1999
Before HIGGINBOTHAM, JONES, and DENNIS, Circuit Judges.
By EDITH H. JONES:*
Appellee Johnny Villarreal filed suit in Texas state
court alleging that appellants, the San Benito Public Housing
Authority (the “Authority”) and others1, tortiously interfered with
his contract to repair a public housing project damaged by floods.
After appellants removed the case to federal court, a jury found
them liable for both compensatory and punitive damages totaling
$130,000. The appellants now argue that the federal court lacked
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except for the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
1
The other defendants included the City of San Benito, the above-named appellants and Victor
Trevino, (Executive Director of the Housing Authority).
subject matter jurisdiction. They alternatively contend that there
was insufficient evidence to sustain the jury verdict and that the
district court erred by refusing to credit them for pre-trial
settlements entered into with the public defendants. Finding that
the federal court had jurisdiction but erroneously failed to credit
the appellants for the pre-trial settlement, we affirm in part and
reverse and remand in part.
BACKGROUND
The San Benito Public Housing Authority received a grant
from the United States Department of Housing and Urban Development
to repair a flood-damaged public housing project. After accepting
competitive bids from several contractors, the Authority awarded
Villareal a contract to repair all 54 units. Some time later,
however, the Authority reopened the bidding process and allowed
other contractors to compete against appellee’s bid. As a result,
Villareal's contract was limited to only 14 of the 54 units while
other contractors, including appellant Rodriguez, were awarded
contracts to repair the remaining 40 units.
Villareal sued the appellants, the Authority and its
Executive Director, and the City of San Benito alleging violations
of federal bidding requirements, denial of due process and equal
protection, interference with a contract and prospective contract,
violation of Texas bidding statutes, conversion of trade secrets,
violation of the Texas Free Enterprise and Antitrust Act, and
unfair competition. The defendants removed the case to federal
district court, asserting federal question jurisdiction arising
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from the alleged violation of federal bidding requirements and due
process and equal protection rights. Before trial, Villareal
settled with the public defendants for $62,000. The remaining
parties agreed to try the case before the magistrate judge, and
after a jury trial, the court entered judgment on the jury’s
verdict for $100,000 in compensatory damages and $30,000 in
punitive damages, apportioned among the three remaining defendants.
The court’s amended final judgment did not, however, credit the
appellants for the $62,000 settlement already received by the
appellee.
JURISDICTION
Although they instigated removal, the appellants first
contend that the case was improperly removed to federal court
because the court lacked subject matter jurisdiction. Under the
well pleaded complaint rule, a defendant may not remove a case to
federal court unless the plaintiff’s complaint establishes that the
cause of action arises under the Constitution, laws, or treaties of
the United States. 28 U.S.C. § 1331; see also Franchise Tax Bd. v.
Construction Laborers Vacation Trust, 463 U.S. 1, 103 S. Ct. 2841(1983). In making this determination, federal courts examine the
“complaint as it existed at the time the petition for removal was
filed.” Boelens v. Redman Homes, Inc., 759 F.2d 504, 507 (5th Cir.
1985) (quoting IMFC Prof’l Services, Inc. v. Latin Am. Home Health,
Inc., 676 F.2d 152, 157 (5th Cir. Unit B 1982)). When, as in this
case, a complaint seeks recovery directly under the United States
Constitution, the court must entertain the suit unless 1) the
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federal question “clearly appears to be immaterial and made solely
for the purpose of obtaining jurisdiction”, or 2) the federal
claim “is wholly insubstantial and frivolous.” Bell v. Hood, 327
U.S. 678, 682-83, 66 S. Ct. 773, 776 (1946). Appellants' objection
to removal jurisdiction is silly. At the very least,2 the
appellee’s complaint alleged due process and equal protection
violations, and neither of the Bell exceptions applies.
In particular, Villareal alleged that the Agency
arbitrarily rescinded his construction contract, awarded the
contract to his competitors, and refused to hold a hearing to
resolve the dispute. Appellants never sought clarification whether
this claim was founded on federal or state law. It can hardly be
said at this late date that the constitutional due process claim
was “insubstantial” or “frivolous.”3 It is also too late to
complain that the original removed petition does not specify
whether the Texas or United States constitutional claims were at
issue. In federal practice, “a pleading . . . need not specify in
exact detail every possible theory of recovery—it must only give
the defendant fair notice of what the plaintiff’s claim is and the
grounds upon which it rests.” Thrift v. Hubbard, 44 F.3d 348, 356
2
Because we find that the plaintiff’s due process/equal protection claim justified jurisdiction in this
case at the outset, we need not address whether a violation of the federal bidding requirements
contained in the Code of Federal Regulations creates a federal cause of action justifying jurisdiction
in federal court.
3
Although Villareal did not pursue its due process and equal protection claims at trial because, the
Authority had settled with him, this did not deprive the federal court of jurisdiction. "[A] plaintiff’s
voluntary amendment to a complaint after removal to eliminate the federal claim upon which removal
was based will not defeat federal jurisdiction.” Boelens v. Redman Homes, Inc., 759 F.2d 504, 507
(5th Cir. 1985).
4
(5th Cir. 1995) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.
Ct. 99, 103 (1957)) (internal quotations omitted). The federal
court therefore properly exercised jurisdiction.
SUFFICIENCY OF THE EVIDENCE
The appellants next argue that there was insufficient
evidence to support the jury’s verdict. Villareal asserts that
they did not properly comply with Federal Rule of Civil Procedure
50(b) and failed to preserve this issue for appeal. Assuming
arguendo that the appellants properly preserved error, there was
sufficient evidence to support the jury’s verdict. When a party
preserves error, this court will not overturn the jury’s verdict
“[u]nless the evidence is of such quality and weight that
reasonable and impartial jurors could not arrive at such a verdict
. . . .” Ham Marine, Inc. v. Dresser Indus. Inc., 72 F.3d 454,
459 (5th Cir. 1995). On appeal, we view the evidence presented at
trial and all reasonable inferences in the light most favorable to
the verdict, even though we might have reached a different
conclusion as the trier of fact. See Hiltgen v. Sumrall, 47 F.3d
695, 700 (5th Cir. 1995).
Appellants contend that there was no evidence proving the
existence of a contract between the appellee and the Agency for
repair of all 54 units. This is inaccurate. Several witnesses
testified that Villareal was initially the lowest bidder, that the
Authority mailed a certified letter to the appellee informing it
that it had been awarded the contract (which letter was introduced
into evidence), and the Authority instructed the appellee to
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execute the construction contract. The jury could have reasonably
concluded that a contract or prospective contract existed between
the appellee and the Authority. The appellants also argue that the
evidence was insufficient to justify an award of punitive damages.
However, after reviewing the record and trial transcript, we find
that the jury could have reasonably concluded that the Authority
and the appellants maliciously interfered with appellee’s contract.
CREDIT FOR PRE-JUDGMENT SETTLEMENT
Finally, the appellants argue that the district court
erred by failing to credit them with the $62,000 pre-trial
settlement Villareal received. Under Texas law, “after the trier
of fact has determined the total amount of damages that the
plaintiff is entitled to recover, the district court must reduce
this amount to offset the benefit that the plaintiff has received
from prior settlements.” Hardy v. Gulf Oil Corp., 949 F.2d 826,
832 (5th Cir. 1992); see also Tex. Civ. Prac. & Rem. Code Ann. §
33.012. The defendant has the option to reduce the judgment by the
dollar amount of the settlement or by a sliding scale percentage of
the damages awarded by the jury. See § 33.012(b). If the defendant
elects a dollar-for-dollar credit, Texas law requires that the
defendant make a written election of the credit before the case is
submitted to the jury, see § 33.014, and prove the settlement
amount by admitting the settlement agreement or some other proof
showing the settlement amount. See Mobil Oil Corp. v. Ellender,
968 S.W.2d 917, 927 (Tex. 1998) (stating that the announcement, in
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open court, of the settlement amount satisfies the defendant’s
burden).
As the appellants satisfied the statutory requirements
necessary to receive a dollar-for-dollar credit, the magistrate
judge should have credited them for the prior settlement. Before
the case went to the jury, the defendants filed a statutory
“Election of Settlement Credits”, opting for the dollar-for-dollar
credit. Villareal's only response is that the appellants never
themselves presented evidence of the dollar amount of the
settlement and thus waived their right to a credit. This argument
is meritless. First, the Texas Supreme Court requires only that
the settlement amount be contained somewhere in the record. See
Mobil Oil, 968 S.W.2d at 927. Second, the record shows that the
settlement amount was known by all, was placed of record by
Villareal, and the magistrate judge initially entered judgment and
ordered a remittitur totaling $62,000 due to the settlement.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of
liability, but REVERSE the magistrate judge's decision not to
credit appellants for pre-trial settlements, and REMAND the case
with instructions to enter a new final judgment crediting each
appellant for its share of the $62,000 settlement obtained by the
appellee.
AFFIRMED in Part, REVERSED and REMANDED in Part.
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