Leasehold Expense v. Mothers Work Inc ( 2003 )


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  •                                                           United States Court of Appeals
    Fifth Circuit
    F I L E D
    Revised May 28, 2003
    May 19, 2003
    IN THE UNITED STATES COURT OF APPEALS
    Charles R. Fulbruge III
    FOR THE FIFTH CIRCUIT                     Clerk
    ___________________
    No. 01-11392
    ___________________
    LEASEHOLD EXPENSE RECOVERY, INC.,
    Plaintiff-Appellant,
    v.
    MOTHERS WORK, INC.; MOTHERS Work (RE) INC.,
    Defendants-Appellees.
    _________________________________________________
    Appeal from the United States District Court
    for the Northern District of Texas
    _________________________________________________
    Before BENAVIDES and DENNIS, Circuit Judges, and WALTER*,
    District Judge.
    BENAVIDES, Circuit Judge:
    This appeal concerns the interpretation of a contingency fee
    contract under Texas law.     The appellant claims that the district
    court erred in entering judgment for the appellees on its breach
    of contract claims, conspiracy claim, and claim for recovery in
    quantum meruit.
    *
    District Judge of the Western District of Louisiana,
    sitting by designation.
    -1-
    I.   Background
    Appellant Leasehold Expense Recovery, Inc. (“LER”) is in the
    business of reviewing retail leases for overcharges.     Appellees
    Mothers Work, Inc. and Mothers Work (R.E.) Inc. (collectively
    “Mothers”) sell maternity clothing from retail stores operating
    from shopping malls throughout the country.     On March 15, 1994,
    LER entered into a Contingent Fee Contract (the “Contract”) with
    A Pea in the Pod (“APIP”), which thereafter merged with Mothers,
    who assumed APIP’s rights and responsibilities under the
    Contract.   Under the Contract drafted by LER, LER agreed to
    review sixty-three of APIP’s leases with shopping malls to
    determine whether landlords were overcharging for rent and
    operating expenses.    The Contract authorized LER to negotiate and
    collect upon a settlement regarding overcharges with each
    landlord, within certain limitations, and described the terms of
    LER’s compensation.    The Contract also included a provision
    regarding termination.
    In 1994, LER reviewed twenty-one leases and found more than
    $500,000 in potential overcharges. Mothers eventually authorized
    LER to proceed with thirteen of the twenty-one audits.     From 1996
    to 1997, LER contacted landlords and attempted to recoup alleged
    overcharges on behalf of Mothers.      However, all thirteen of the
    landlords refused to deal with LER without an authorization
    letter from Mothers.    LER maintains that although Mothers
    repeatedly promised that such authorizations would be
    -2-
    forthcoming, they were never provided.    LER believes that Mothers
    used the knowledge of past overcharges to negotiate new, more
    favorable leases with its landlords on its own.    Mothers refused
    to pay LER for its work, on the grounds that LER was not entitled
    to compensation under the terms of the Contract.
    On January 10, 2000, LER sued Mothers in Texas state court
    for breach of contract, fraud, negligence, grossly negligent
    misrepresentation, and conspiracy.     Mothers removed the claim to
    federal court, which has diversity jurisdiction.    Mothers moved
    for summary judgment as to all of LER’s causes of action.    The
    magistrate judge prepared a report and order on April 27, 2001,
    recommending that the motion be granted in part and denied in
    part.   The magistrate judge recommended that summary judgment be
    denied only with respect to LER’s breach of contract claims
    concerning three stores.    On July 26, 2001, the district court
    adopted the magistrate judge’s report and recommendations in
    full.   On August 20, 2001, the district court rejected LER’s
    motion to reconsider the July 27, 2001 Order.    Following a short
    bench trial on LER’s remaining claims, the district court awarded
    Mothers judgment as a matter of law, save a $9,074.46 award
    concerning an amount that was uncontested.
    II.   Standard of Review
    This court reviews a district court’s grant of summary
    judgment de novo. Rivers v. Cent. and S. W. Corp., 
    186 F.3d 681
    ,
    -3-
    682 (5th Cir. 1999).    Summary judgment is appropriate, when,
    viewing the evidence in the light most favorable to the nonmoving
    party, the record reflects that no genuine issue of any material
    fact exists. Celotex Corp. v. Catrett, 
    477 U.S. 317
    , 322-324,
    (1986); Sulzer Carbomedics, Inc., 257 F.3d at 456.      See also
    Transitional Learning Cmty. at Galveston, Inc. v. U.S. Office of
    Pers. Mgmt., 
    220 F.3d 427
    , 429 (5th Cir. 2000).      A material fact
    is one that “might affect the outcome of the suit under the
    governing law” and a “dispute about a material fact is
    ‘genuine’...if the evidence is such that a reasonable jury could
    return a verdict for the nonmoving party.”      Sulzer Carbomedics,
    Inc., 257 F.3d at 456 (quoting Anderson v. Liberty Lobby, Inc.,
    
    477 U.S. 242
    , 248 (1986)).
    Challenges to the district court’s determinations of fact
    following a bench trial are reviewed for clear error, and
    conclusions of law are reviewed de novo.      Kona Tech. Corp. v. S.
    Pac. Transp. Co., 
    225 F.3d 595
    , 601 (5th Cir. 2000).      Since this
    case comes to the court through diversity jurisdiction, the
    substantive law of Texas applies.      Id.; See Erie R.R. v.
    Tompkins, 
    304 U.S. 64
    , 78-79 (1938).
    III.    Breach of Contract Claims
    “Under Texas law, the interpretation of an unambiguous
    contract, as well as the determination of whether or not a
    -4-
    contract is ambiguous, is a legal question.”     Steuber Co. v.
    Hercules Inc., 
    646 F.2d 1093
    , 1098 (5th Cir. 1981).     If the
    contract terms are susceptible to only one reasonable
    construction, the contract is unambiguous and will be enforced as
    written.   Guaranty Nat. Ins. Co. v. Azrock Industries Inc., 
    211 F.3d 239
    , 243 (5th Cir. 2000).
    In contract disputes, the court’s primary concern is to give
    effect to the written expression of the parties’ intent.     Nat’l
    Union Fire Ins. Co. v. Care Flight Air Ambulance Service, Inc.,
    
    18 F.3d 323
    , 328-39 (5th Cir. 1994).     In doing so, the court
    reads all parts of the contract together to ascertain the
    agreement of the parties, ensuring that each provision of the
    contract is given effect.      
    Id. at 329
    ; Kona Tech. Corp., 225 F.3d
    at 610; Sulzer Carbomedics, Inc., 
    257 F.3d 449
     (5th Cir. 2001).
    A.   Under the Contract, is LER entitled to compensation for
    overcharges discovered, but not recovered?
    1.    Substantive Claim
    LER contends that, by the plain terms of the Contract, the
    district court erred in granting summary judgment to Mothers
    regarding eighteen stores, and judgment as a matter of law
    following a bench trial regarding three stores, with respect to
    overpaid charges that it discovered regarding all of the twenty-
    one stores.   LER contends that the plain terms of the Contract
    entitle it to compensation for discovered overcharges, regardless
    -5-
    of whether Mothers actually recovered any of the overpayments.
    Mothers responds that the district court properly held that the
    Contract unambiguously assigns LER a 50% interest only in those
    overpaid charges that are actually recovered.   Two sections of
    the Contract are particularly relevant to this dispute:
    Article 1, Section 1.2, FEES. In consideration of the
    services rendered and to be rendered to the Client by LER,
    the Client does hereby assign, transfer and convey to LER as
    compensation herein, a fifty percent (50%) undivided
    interest in all overpaid Charges relating to each and every
    lease, including any other amounts recovered relating
    thereto, that:
    (a)   are actually recovered in cash, check or the like
    by Client;
    (b)   are recovered in the form of a credit to Client’s
    account with any landlord pursuant to any lease;
    and,
    (c)   are otherwise recovered by Client.
    All compensation herein as stated in Sections 1.2(a) through
    1.2(c) shall herein together constitute “LER Fees.” LER
    Fees shall be paid to LER by Client within ten (10) days of
    Client’s receipt of overpaid Charges on any lease, or the
    credit thereof.
    ...
    Article 2, Section 2.1, TERMINATION. LER or Client may
    terminate this Agreement upon fifteen (15) days prior
    written notice by delivering said notice to Client. Said
    termination shall not affect the right of LER to collect LER
    Fees for any overpaid Charges either discovered or recovered
    as of the date of termination of this Agreement. Under all
    circumstances LER’s right to collect LER Fees shall survive
    the expiration or termination of this Agreement.
    The terms of the Contract unambiguously entitle LER to
    compensation only for those overpayments discovered by LER that
    -6-
    Mothers actually recovers.   While Article 1, Section 1.2
    (hereinafter “Compensation Provision”) states that LER is
    entitled to a fifty percent interest in all overpaid Charges,
    that right is subject to the satisfaction of subsections (a),
    (b), or (c), each of which require the Charges to be “recovered.”
    We find without merit LER’s contention that the three subsections
    were intended to relate solely to the phrase “including any other
    amounts recovered relating thereto,” particularly given the
    placement of a comma (inserted by LER itself, as the drafter),
    following the word “thereto.”    The presence of the comma
    indicates that both the phrase “including any other amounts
    recovered relating thereto” and the earlier phrase “all overpaid
    Charges relating to each and every lease” are subject to the
    condition of recovery noted in subsections (a), (b) and (c).
    Nor does Article II, Section 2.1 (hereinafter “Termination
    Provision”), support LER’s argument that it is entitled to
    compensation for charges that Mothers has not recovered.      The
    Termination Provision was clearly intended to preserve LER’s
    right to compensation as described in the Compensation Provision,
    as reflected by its use of the term “LER Fees.”    The Compensation
    Provision unambiguously requires that Mothers actually recover on
    the discovered overpayments.    By implication, the parties
    intended the Termination Provision to protect LER’s right to
    compensation upon termination to the same degree.    The phrase
    -7-
    “discovered or recovered” in the Termination Provision was merely
    intended to protect LER’s entitlement to compensation for
    overpaid charges that it discovered before termination, but were
    not recovered until after termination.   LER’s proposed
    interpretation of the Termination Provision, which would entitle
    it to compensation upon termination for overcharges merely
    discovered or recovered, is not only contrary to the plain
    meaning of the Contract, but would create a perverse incentive
    for LER to prematurely terminate the contract in order to avoid
    the recovery requirement under the Compensation Provision.    The
    district court properly granted Mothers judgment on this issue.1
    2.   Procedural Claim
    LER contends that the district court’s decision to enter
    summary judgment on its breach of contract claims regarding
    eighteen stores was based on improperly considered evidence.    The
    magistrate judge struck the appendix that Mothers attached to its
    reply brief to LER’s response to Mothers’s motion for summary
    judgment as an impermissible attempt to introduce new evidence at
    the reply stage.   The magistrate judge also struck the
    Declaration of Eric Stahl for failure to include a date, as
    required by 
    28 U.S.C. § 1746
    . LER argues that the district court
    1
    Our resolution of this issue renders LER’s contention that
    the district court erred in refusing to entertain its assertion
    that the Contract was terminated by operation of a letter dated
    August 9, 2001, moot.
    -8-
    improperly relied upon this excluded evidence in granting summary
    judgment for Mothers.
    LER’s assertion is groundless.   Following the district
    court’s grant of summary judgment, LER, by motion, asked the
    district court to reconsider its judgment on the grounds that the
    district court had improperly taken into account the excluded
    evidence.   Judge Solis, in denying the motion, stated that his
    decision did not implicitly or explicitly rely upon the excluded
    appendix or affidavit, and reemphasized that with or without the
    excluded evidence, LER failed to demonstrate genuine issues of
    material fact that any savings on the stores in question met the
    criteria for recovery set out in the Contract.   Given this
    unequivocal denial and the ample support in the record for his
    conclusion in the absence of the excluded evidence, we see no
    reason to further question Judge Solis’s ability to properly
    consider evidence.
    B.   Under the Contract, Is LER entitled to compensation for
    future savings?
    LER argued at trial that it was entitled under the Contract
    to be compensated for prospective overcharges that its efforts
    enabled Mothers to avoid in relation to three of its stores.
    LER’s argument is premised upon a portion of the Compensation
    Provision, specifically Article 1, Section 1.2(c), which entitles
    LER to a fifty percent interest in “all overpaid Charges relating
    -9-
    to each and every lease, including any other amounts recovered
    relating thereto, that:...(c) are otherwise recovered by Client.”
    LER contends that this language can reasonably be interpreted as
    entitling LER to compensation for future overcharges that its
    efforts prevented.   LER contends that the district court’s
    determination that the Contract unambiguously did not provide for
    compensation for such savings was erroneous, and parol evidence
    should not have been permitted to clear up the ambiguity in the
    Contract.
    Mothers argued, and the district court agreed, that the
    Compensation Provision entitles LER to recover only when two
    things occur: (1) Mothers actually overpaid a charge to the
    landlord; and (2) the overpaid charge was recovered.    We agree
    that this the only reasonable interpretation of the Contract.
    “[A] contract is ambiguous only when the application of the
    applicable rules of interpretation to the instrument leave it
    genuinely uncertain which one of the two meanings is the proper
    meaning...”.   R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc.,
    
    596 S.W.2d 517
    , 519 (Tex. 1980).      While LER concedes that the
    phrase “overpaid Charges” does not encompass future savings on
    rent or other charges, it contends that future savings are
    nonetheless recoverable as “other amounts relating thereto.”
    Such an interpretation, however, ignores the requirement of
    subsections (a),(b), and (c), all of which require “other
    -10-
    amounts” to be recovered.   A landlord’s decision to charge
    Mothers the proper amount of rent in the future does not
    constitute a “recovery” for prior overcharges paid.    If a
    landlord were to give Mothers a discount on the proper amount of
    rent, or provide free utilities for a year as repayment for the
    prior overcharges, this would constitute a recovery, and LER
    would be entitled to 50% of the value of the discount.
    The Contract simply does not contemplate the situation where
    Mothers may be unable to recover past overpayments, but benefits
    from LER’s work nonetheless in the sense that it does not overpay
    in the future.   “The failure to include more express language of
    the parties’ intent does not create an ambiguity when only one
    reasonable interpretation exists.     Columbia Gas Transmission
    Corp. V. New Ulm Gas, Ltd., 
    940 S.W.2d 587
    , 591 (Tex. 1996). Nor
    is parol evidence of the parties’ intent permitted to create an
    ambiguity.   Constitution State Ins. Co. v. Iso-Tex Inc. 
    61 F.3d 405
    , 408 (5th Cir. 1995).   Read as a whole, the Compensation
    Provision clearly entitles LER to compensation only for charges
    that Mothers overpaid and actually recovered.    This is the only
    reasonable interpretation of the Contract, as the district court
    correctly found.
    C.   Did Mothers breach the Contract by settling overcharges with
    the landlords without the knowledge of LER?
    -11-
    LER contends that with respect to eight2 store locations
    where overcharges were discovered, Mothers engaged in secret
    “side deals” with each landlord by executing lease amendments by
    which it recovered the overcharges in the form of credits and
    lower future rents.   LER alleges that Mothers engaged in these
    quid pro quo settlements in explicit violation of Article I,
    Section 1.1 which bars settlements in the absence of LER’s
    consent, in an attempt to avoid compensating LER under the
    Contract.
    Mothers does not dispute that if it had entered into the
    settlements alleged by LER, it would indeed have breached the
    Contract.   However, it contends, and we agree, that in order to
    prove that a lease amendment was executed as a form of quid pro
    quo transaction, LER needs to demonstrate two things:   (1) that
    the new lease terms were more favorable to Mothers than the
    previous terms; and (2) that the new, more favorable terms were
    obtained in exchange for the release of an Overcharge Claim.    In
    other words, LER, to prevail on any one of its eight quid pro quo
    claims, needs demonstrate that Mothers successfully used
    knowledge of overcharges, obtained as a result of LER’s efforts,
    2
    One of the stores cited by LER, as Mothers points out, was
    not subject to the Contract. The Albany (Crossgates) store was
    not included in the addendum to the Contract, which listed the
    stores whose leases LER was granted authority to review. There
    was therefore no possible breach of contract regarding any lease
    alterations to this store location.
    -12-
    as leverage to negotiate improved lease terms with a landlord.
    LER’s evidence on appeal suffers from the same defect as
    that noted by the magistrate judge:
    With respect to most of these leases, LER has done
    nothing more than include the amendments in its
    appendix. There is no evidence that the terms of the
    amendments are more favorable to Mothers Work than
    those of the prior leases. The court is neither
    required nor inclined to come [sic] through LER’s 687
    page appendix in search of evidence to support these
    claims.
    Though equally disinclined to comb through the disorganized
    and ill explained documents provided by LER, a thorough review of
    the record reveals that the evidence submitted regarding the
    stores located in Beverly Hills, California, Pasadena,
    California, Palo Alto, California, Dallas, Texas, Buffalo, New
    York, and Syracuse, New York, do not create an issue of material
    fact regarding whether the amended terms are more favorable to
    Mothers than those that preceded them.   We are simply not
    provided with any standard of comparison that would allow us to
    determine that the above mentioned leases were either modified or
    terminated to Mothers’s benefit.
    Moreover, we are unable to link any benefits that Mothers
    may have gained through modifications or terminations to any of
    the leases to a promise on the part of Mothers to relinquish an
    Overcharge Claim discovered by LER.   LER’s bald assertion that
    Mothers must have used overcharge information gleaned from LER’s
    -13-
    reviews as leverage to obtain better lease terms is insufficient
    to withstand judgment as a matter of law.    The district court
    therefore correctly granted Mothers summary judgment on LER’s
    quid pro quo claims.
    D.   Did Mothers have an implied duty to cooperate under the
    Contract?
    Next, LER contends that the district court erred in granting
    summary judgment on its claim that Mothers violated an implied
    duty in the Contract to cooperate.    Specifically, LER asserts
    that after it made initial contact with thirteen landlords,
    pursuant to Mothers’s approval, these landlords refused to
    negotiate with LER in the absence of a letter on Mothers
    letterhead confirming that LER was authorized to act on Mothers’s
    behalf.   LER made several requests, both oral and written, to at
    least three different Mothers employees for such letters.    LER
    contends that Mothers employees repeatedly informed LER that they
    wished LER to continue its work pursuant to the Contract and that
    the necessary authorization letters would be forthcoming.
    Because it never received the letters, LER alleges that it was
    unable to recover discovered overcharges with respect to those
    thirteen stores and was thus denied compensation under the
    Contract.
    The court predicated its grant of summary judgment on this
    claim upon the language of the Contract, which it interpreted as
    -14-
    unambiguously giving Mothers the authority to withhold its
    cooperation.    The court referred to Article 1, Section 1.1, which
    proceeds as follows:
    1.1 Services. Concerning all sixty-three (63) leases,
    Client hereby employs LER to review the leases and the
    terms thereof and certain books and records relating to
    the Charges, and collect overpaid Charges from the
    landlords, if any. LER is fully authorized to
    negotiate a settlement thereof; but it is distinctly
    understood that no settlement shall be made by LER
    without the approval of Client, and Client hereby
    agrees to make no settlement or offer of settlement
    without the consent of LER. LER may determine the
    order of review of the sixty-three (63) leases. Prior
    to LER contacting any landlord, Client shall approve
    all potential contact and action by LER, it being
    understood that LER shall have no right to sue the
    landlord or otherwise harass the landlord, without
    Client’s express written instructions. (emphasis
    added).
    Relying on Bank One, Texas, N.A. v. Stewart, 
    967 S.W.2d 419
    ,
    434 (Tex. Ct. App. 1998), the district court adopted the
    magistrate judge’s finding that “under Texas law, implied
    covenants are disfavored and grafted onto contracts, ‘only if
    necessary to effectuate the intention of the parties as disclosed
    by the contract as a whole, but not to make the contract fair,
    wise or just...[and] [t]here can be no implied covenant as to a
    matter specifically covered by the written terms of the
    contract.’”    We disagree, however, with the district court’s
    application of this rule of law.    It appears to us that the above
    portion of the Contract does not address the question of
    cooperation as clearly as the court presumed.    Section 1.1 states
    -15-
    that “LER is fully authorized to negotiate a settlement
    [regarding overpaid Charges].”    The section requires LER to
    receive the approval of Mothers prior to (1) posing an offer of
    settlement to a landlord; (2) contacting a landlord; or (3) suing
    or harassing a landlord.   Mothers’s failure to provide
    authorization letters, an assertion that it does not dispute,
    does not constitute a valid exercise of its right to approve or
    disapprove contact between LER and a landlord.    Nor can Mothers
    legitimately claim that it withheld the authorization letters
    because of a fear that simply confirming LER’s authority to
    negotiate would disrupt its relationships with its landlords.
    Otherwise, it would not have contractually granted LER the
    authority to negotiate on its behalf in the first place.      In
    failing to supply the needed authorization, Mothers did not
    merely determine that a good relationship with a particular
    landlord superceded recovering overcharges by vetoing a
    particular contact.   Instead, it ended negotiations altogether
    with thirteen landlords, and thus made it impossible for LER to
    perform under the Contract.   A duty on the part of Mothers to
    cooperate by providing LER with authorization letters was so
    clearly in the contemplation of the parties that they deemed it
    unnecessary to immortalize it in the contract.    A duty to
    cooperate must necessarily be implied to enable LER to negotiate
    pursuant to the limited powers granted to it in the Contract.
    -16-
    There is ample support in the case law for implying a duty
    to cooperate in the circumstances of this case.    This court held
    in Citizens Nat’l Bank of Orlando v. Vitt, that:
    ‘in every contract between a contractor and a
    subcontractor, an implied promise exists on the part of
    the contractor that he will do nothing to prevent,
    interfere or hinder the subcontractor in his
    performance or increase the cost thereof’...[w]henever
    the cooperation of a promisee is necessary for the
    performance of a contract, there is an implied
    condition of the contract that the cooperation will be
    given.
    
    367 F.2d 541
    , 544-45 (5th Cir. 1966)(citations omitted).     The
    relationship between LER and Mothers can be analogized to that of
    a contractor and a subcontractor, or that of any other principal
    and agent.    Similarly, in Levine v. Bayne, Snell & Krause, Ltd.,
    Justice Owens, in her concurrence, noted that a client may be
    subject to an implied covenant to cooperate with the attorney
    whom he hired on a contingency basis.   
    40 S.W.3d 92
    , 99 (Tex.
    2000).   Perhaps most analogously, in an unpublished opinion a
    Texas Court of Appeals affirmed a trial court’s judgment against
    a homeowner for violating an implied duty to cooperate in a
    contract conveying the plaintiff an option to purchase the
    defendant’s home.    Elliott v. Lewis, 
    1994 WL 709333
     (Tex. Ct.
    App. 1994).   The defendant homeowner had refused to sell her home
    to the plaintiff after the expiration of the option.   The
    plaintiffs had been unable to arrange financing before the option
    expired, and the court held that the defendant had a duty to
    -17-
    cooperate with their attempts to obtain financing within the
    option period.   
    Id.
       The trial court had instructed the jury that
    “whenever cooperation is necessary for performance of a contract,
    there is an implied condition of contract that cooperation will
    be given.”   Id. at *9.3
    We therefore find that the district court erred in granting
    summary judgment to Mothers as a matter of law on LER’s breach of
    an implied duty to cooperate claim.    Neither the rule of law in
    this jurisdiction or the terms of the Contract bar the court from
    finding an implied duty to cooperate, and LER has presented
    sufficient evidence to raise a genuine issue of fact as to
    whether this duty was breached.   The grant of summary judgment is
    therefore vacated, and we remand the claim to the district court
    for trial.
    E.   Can LER recover in quantum meruit?
    LER claims that the district court erred in dismissing its
    request for relief in quantum meruit.   Quantum meruit is an
    equitable theory which permits a “right to recover...based upon a
    promise implied by law to pay for beneficial services rendered
    3
    But c.f. Bank One, 
    967 S.W.2d at 434
     (refusing to imply
    that a bank has a duty to cooperate with its client when the
    parties specifically contracted the extent of their bailment
    relationship; Chapman Children’s Trust v. Porter & Hedges,
    L.L.P., 
    32 S.W.3d 429
     (Tex. Ct. App. 2000) (declining to imply a
    duty to cooperate on the grounds that the parties purposefully
    determined during the course of negotiations not to subject the
    defendant to an express contractual duty to cooperate).
    -18-
    and knowingly accepted.”     Black Lake Pipeline v. Union Const.
    Co., Inc., 
    538 S.W.2d 80
    , 86 (Tex. 1976).    “As a general rule, a
    plaintiff who seeks to recover the reasonable value of services
    rendered or materials supplied will be permitted to recover in
    quantum meruit only when there is no express contract covering
    those services or materials.”     Black Lake Pipeline, 538 S.W.2d at
    86.   See Jhaver v. Zapata Off-Shore Co., 
    903 F.3d 381
    , 385 (5th
    Cir. 1990).
    A review of the Contract reveals that the terms of LER’s
    compensation was indeed dealt with under the Compensation
    Provision of the Contract.    The mere fact that the Contract does
    not particularly address LER’s out-of-pocket expenses does not
    imply that such expenses fall beyond the scope of the Contract,
    as LER contends, because the services for which the out-of-pocket
    expenses were incurred were covered by the Contract.     Had the
    parties contemplated that LER would be reimbursed for its out-of-
    pocket expenses, such compensation would have been included in
    the Compensation Provision.    Instead, the parties intentionally
    structured the Contract as a contingency fee arrangement, whereby
    LER would risk its out-of-pocket expenses for the promise of a
    fifty percent interest in any recovered overcharge.
    There is, however, a clear exception to the general rule
    which LER may take advantage of if it successfully demonstrates
    at trial that Mothers breached an implied duty to cooperate.       In
    -19-
    1988, the Texas Supreme Court held that "recovery in quantum
    meruit is allowed when a plaintiff has partially performed an
    express contract but, because of the defendant's breach, the
    plaintiff is prevented from completing the contract."    Truly v.
    Austin, 
    744 S.W.2d 934
    , 936 (Tex. 1988)(emphasis in original).
    See McFarland v. Sanders, 
    932 S.W.2d 640
    , 646 (Tex. Ct. App.
    1996).   If Mothers violated the duty to cooperate implied in the
    Contract, then LER was unable to recover any potential
    overcharges on Mothers’s behalf because Mothers breached the
    contract.   We must therefore also vacate the district court’s
    grant of summary judgment for Mothers on LER’s claim that it is
    entitled to recover in quantum meruit insofar as it relates to
    LER’s implied duty to cooperate claim.4
    4
    LER did not challenge on appeal the district court’s
    determination that the benefit-of-the-bargain damages that it
    claimed were the result of Mothers’s non-cooperation were too
    speculative to be given credence. Failure to raise an issue on
    appeal constitutes a waiver of that argument, and thus LER may
    not recover expectation damages if it prevails on its duty to
    cooperate claim. See United States v. Thibodeaux, 
    211 F.3d 910
    ,
    912 (5th Cir. 2000); Yohey v. Collins, 
    985 F.2d 222
    , 224-25 (5th
    Cir.1993). However, LER did dispute the district court’s
    conclusion that it had failed to include damages in the form of
    out-of-pocket expenses in its pleadings or in its response to
    Mothers’s motion for summary judgment. Because LER did indeed
    assert out-of-pocket damages in its “Appendix to Plaintiff’s
    Response to Defendants’ Motion For Summary Judgment,” this
    finding of the district court was clearly erroneous. LER may
    thus seek to recover the value of its time and the out-of-pocket
    expenses it incurred in investigating the billing practices of
    the thirteen stores for whom an authorization letter was
    requested but never received. See McFarland v. Sanders, 
    932 S.W.2d 640
    , 645-46 (Tex. Ct. App. 1996).
    -20-
    IV.   Conspiracy Claim
    LER asserts that the district court erred in granting
    summary judgment to Mothers on LER’s claim that Mothers conspired
    with its counsel, Graham Miles, to enter secret “side deals” with
    its landlords in an attempt to avoid compensating LER under the
    Contract.    The district court concluded that LER had waived this
    argument by failing to present evidence of a “Miles conspiracy”
    to the magistrate judge, and in the alternative, had failed to
    create a genuine issue of material fact as to the existence of a
    conspiracy.
    We agree with the district court that LER’s allegations
    regarding a “Miles conspiracy” were legally insufficient.      First,
    a conspiracy to breach a contract is not actionable under Texas
    law.    Grizzle v. Texas Comm. Bank, 
    38 S.W.3d 265
    , 285 (Tex. Ct.
    App. 2001), pet. granted on other grounds, 45 Tex. S. Ct. J. 358
    (Feb. 9, 2002).    LER, however, has not alleged that Miles
    conspired with Mothers to commit any tort, nor did it appeal the
    district court’s dismissal of its tort claims as a matter of law.
    See Carmon v. Lubrizol Corp., 
    17 F.3d 791
    , 794 (5th Cir.
    1994)(“[I]ssues not raised at all [on appeal] are waived.”).
    Second, it is established that a corporation cannot conspire
    with itself, no matter how many of its agents participated in the
    wrongful action.    13 Tex. Jr. 3d Civil Conspiracy § 3.   Graham
    Miles, as Mothers’s lawyer, is an agent.     See Restatement (2d) of
    -21-
    Agency §§ 1,2.   LER has not alleged that Miles has any
    independent interest that would make it possible for him, under
    Texas law, to conspire with Mothers.    The district court
    therefore properly granted Mothers summary judgment on this
    claim.
    V.   Rule 60 Claim
    LER alleges that Mothers improperly withheld documents at
    the summary judgment stage, thereby denying LER of procedural and
    substantive due process and requiring that summary judgment be
    vacated.   In support of its contention, LER points to Mothers’s
    belated production of documents at trial, and alleges that by
    implication, Mothers probably withheld documents at the summary
    judgment stage as well.
    LER’s claim is properly styled as one to set aside the
    district court’s grants of summary judgment pursuant to Fed. R.
    Civ. P. 60(b)(3).   Rule 60(b)(3) reads: “...On motion and upon
    such terms as are just, the court may relieve a party or a
    party’s legal representative from a final judgment...for the
    following reasons...(3) fraud,...misrepresentation, or other
    misconduct of an adverse party;....”    LER, however, does not deny
    that it failed to file a 60(b)(3) motion in the district court.
    Instead, it contends that its motion for sanctions regarding the
    production of documents at the trial stage can be construed also
    as a motion to set aside summary judgment.
    -22-
    The broadest reading of LER’s motion for sanctions does not
    permit us to construe it as a motion to set aside summary
    judgment.   LER’s Rule 60(b)(3) motion is therefore not properly
    before this court.   City of Waco, Texas v. Bridges, 
    710 F.2d 220
    ,
    227 (5th Cir. 1983) (“As a general rule, an appellate court will
    not consider a new issue raised for the first time on appeal for
    the purpose of reversing the lower court’s judgment.”).
    Exceptions are made typically only in exceptional circumstances.
    LER has not attempted to explain its failure to make this motion
    to the district court.   The trial court is the forum charged with
    the duty of determining questions of fact, and fairness requires
    that the motion be sent back to the district court in order to
    permit Mothers to present evidence to rebut LER’s assertions.
    See Wilson v. Johns-Malville Sales Corp., 
    873 F.2d 869
    , 871
    (1989).
    VI.   Conclusion
    We conclude that the district court improperly granted
    Mothers summary judgment regarding LER’s claim that Mothers
    breached an implied duty to cooperate.   The district court’s
    dismissal of LER’s claim for recovery in quantum meruit was also
    erroneous, insofar as it precludes LER from recovering its out-
    of-pocket expenses in the event that it is able to prove that
    Mothers breached an implied duty to cooperate at trial.   Those
    judgments are therefore VACATED and the claims REMANDED to the
    -23-
    district court for further proceedings.   The district court’s
    judgments regarding all other claims are AFFIRMED.
    -24-
    

Document Info

Docket Number: 01-11392

Filed Date: 5/29/2003

Precedential Status: Precedential

Modified Date: 3/3/2016

Authorities (20)

Patsy Elaine CARMON, Plaintiff-Appellant, v. LUBRIZOL ... , 17 F.3d 791 ( 1994 )

Clarence J. Wilson v. Johns-Manville Sales Corp., Armstrong ... , 873 F.2d 869 ( 1989 )

Rivers v. Central & South West Corp. , 186 F.3d 681 ( 1999 )

Guaranty National Insurance v. Azrock Industries Inc. , 211 F.3d 239 ( 2000 )

Steuber Company, Inc. v. Hercules, Incorporated and ... , 646 F.2d 1093 ( 1981 )

Sulzer Carbomedics, Inc. v. Oregon Cardio-Devices, Inc. , 257 F.3d 449 ( 2001 )

Citizens National Bank of Orlando and West Construction ... , 367 F.2d 541 ( 1966 )

the-constitution-state-insurance-company , 61 F.3d 405 ( 1995 )

United States v. Thibodeaux , 211 F.3d 910 ( 2000 )

National Union Fire Ins. Co. of Pittsburgh, Pa. v. Care ... , 18 F.3d 323 ( 1994 )

Leslie Wayne Yohey v. James A. Collins, Director Department ... , 985 F.2d 222 ( 1993 )

Transitional Learnin v. US OPM , 220 F.3d 427 ( 2000 )

City of Waco, Texas v. James Dean Bridges, James Dean ... , 710 F.2d 220 ( 1983 )

Erie Railroad v. Tompkins , 58 S. Ct. 817 ( 1938 )

Bank One, Texas, N.A. v. Stewart , 967 S.W.2d 419 ( 1998 )

Chapman Children's Trust v. Porter & Hedges, L.L.P. , 32 S.W.3d 429 ( 2000 )

McFarland v. Sanders , 932 S.W.2d 640 ( 1996 )

Grizzle Ex Rel. Grizzle v. Texas Commerce Bank, N.A. , 38 S.W.3d 265 ( 2001 )

Anderson v. Liberty Lobby, Inc. , 106 S. Ct. 2505 ( 1986 )

Celotex Corp. v. Catrett, Administratrix of the Estate of ... , 106 S. Ct. 2548 ( 1986 )

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