Intrastate Gas v. Dow Chemical Company ( 2001 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________________
No. 99-20603
_______________________________
INTRASTATE GAS GATHERING COMPANY; ET AL.,
Plaintiffs,
GRAYSON COUNTY JOINT VENTURE NO. 1
Plaintiff-Appellant,
v.
DOW CHEMICAL COMPANY; ET AL.,
Defendants,
DOW CHEMICAL COMPANY,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
Houston Division
(C.A. No. H-92-1828)
_________________________________________________________________
January 26, 2001
Before BARKSDALE AND BENAVIDES, Circuit Judges and VELA1,
District Judge.
PER CURIAM2:
This case is a dispute between Grayson County Joint Venture
No. 1 (“appellant”) and Dow Chemical Company (“appellee”) over a
1
District Judge of the Southern District of Texas, sitting
by designation.
2
Pursuant to 5th Cir. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5th Cir. R. 47.5.4.
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natural gas transportation agreement. In 1980, appellant’s
predecessor-in-interest, South Texas Gas Gathering Company, Inc.
(“South Texas”), entered into a contract with appellee titled the
Gas Transportation Agreement. This agreement was amended in
November of 1982. Under the agreement, South Texas was to pipe
gas from the area described in the contract to an interconnect
with another pipeline belonging to Texas Utilities Fuels Company
(“Tufco”). In return, appellee agreed to pay a fee based on the
amount of gas South Texas delivered to the interconnect from the
area described in the agreement.
In 1992, appellant, as successor-in-interest of South Texas,
brought suit against appellee for failure to pay a transportation
fee on some of the gas delivered to the interconnect. The
parties stipulated to the amount of gas on which no fee was paid,
but they disagree on whether a fee was actually owed on this gas.
Appellee argued that no fee was owed because it was delivered
from an area outside that described in the agreement. Appellee
also asserted, as an affirmative defense, that appellant had
waived any right to the fee.
The case was tried to a jury and, during the trial, the
district court made several decisions relevant to this appeal.
The district court excluded five of appellant’s exhibits on the
ground that they were irrelevant, included a question in the
charge that asked whether a “reasonable person” would understand
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the agreement to apply to the disputed gas, submitted a second
question asking whether appellant waived its right to the fee,
and sent charts and graphs, not admitted into evidence, to the
jury room during deliberations.
The jury found that a “reasonable person” would not
understand the fee to apply to the disputed gas and that
appellant waived any right it had to the fee. Based on the
jury’s findings, the district court entered judgment that
appellant take nothing.
In this court, appellant argues that the contract
unambiguously applies to the disputed gas and therefore the
district court erred by failing to render judgment as a matter of
law in appellant’s favor. Further, appellant argues that there
was no evidence to support submission of the waiver question,
that the district court erred by sending charts and graphs not
admitted into evidence to the jury room during deliberations,
that the district court erred by excluding five of its exhibits
on the ground they were irrelevant, and that submission of the
question asking whether a “reasonable person” would find the
agreement to apply to the disputed gas was error.
I.
The first issue is whether the district court erred by
failing to render judgment as a matter of law in appellant’s
favor. Appellant argues that the transportation agreement
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unambiguously applies to the disputed gas and, therefore, the
district court should not have submitted this issue to the jury.
The district court may grant a motion for judgment as a matter of
law where there is no legally sufficient basis for the jury to
find against the movant on that issue. See Fed R. Civ. P.
50(a)(1). However, the party seeking judgment as a matter of law
must move for judgment “before submission of the case to the
jury.” Id. at 50(a)(2). “Where a party has failed to preserve
the issue of sufficiency of the evidence for appellate review by
moving for judgment as a matter of law,” we must limit our
inquiry to “whether there was any evidence to support the jury's
verdict, irrespective of its sufficiency.” Great Plains
Equipment, Inc. v. Koch Gathering Systems, 45 F.3d 962, 968 (5th
Cir. 1995). There was ample evidence in the record on which the
jury could base its decision that appellant had waived its right
to the fee and that the agreement did not apply to the gas on
which no fee was paid.
II.
The district court’s charge asked whether appellant had
waived its right to the fee. Appellant argues that there was no
evidence to support submission of this question. In a diversity
case involving a dispute over a contract, this Court must apply
the substantive law in which the district court sits. See
Godchaux v. Conveying Techniques, Inc., 846 F.2d 306, 314 (5th
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Cir. 1988). Under this rule, Texas contract law applies to the
instant case. However, this Court applies a federal standard for
determining whether the evidence is sufficient to create a jury
question. See Atchison, Topeka and Santa Fe Railway Company v.
Sherwin-Williams Company, 963 F.2d 746, 749 (5th Cir. 1992).
Evidence is sufficient to support a jury’s finding if taking all
the evidence and reasonable inferences that can be drawn from
that evidence, “a reasonable person could have made such a
finding.” Id. So, while Texas law defines the defense of
waiver, federal law determines whether the evidence is legally
sufficient to support a finding of waiver.
Waiver is an affirmative defense and can be asserted against
“a party who intentionally relinquishes a known right or engages
in intentional conduct inconsistent with claiming that right.”
Tenneco Inc. v. Enterprise Products Co., 925 S.W.2d 640, 643
(Tex. 1996). Silence or inaction for a long period of time can
constitute waiver. See id. For example, in Tenneco Inc. v.
Enterprise Products Co., the plaintiff waived his right to daily
delivery of the amount of gas specified under a contract because
for three years the plaintiff failed to complain about shortages
in the supply. Id. In the instant case, appellee offered
evidence that appellant failed to bill appellee for fees on the
disputed gas from 1984 to 1992. Also, appellee offered evidence
that Jack Wiewall, owner of appellant’s principal partner, was
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aware the fees were not being billed and did not object to lack
of payment for several years. Therefore, there was some evidence
to support submission of a jury question on the affirmative
defense of waiver.
III.
Over appellant’s objection, the district court sent charts
and overlays that were not admitted into evidence to the jury
room during deliberations. This court reviews the decision to
send such demonstrative aids to the jury room for an abuse of
discretion. See Big John v. Indian Head Grain Co., 718 F.2d 143,
148 (5th Cir. 1983). The submission of materials, “whether or
not admitted in evidence,” to the jury during deliberations is
not error so long as the district court instructs the jury on the
proper use of the materials. Id. For example, in Big John v.
Indian Head Grain Co., the district court did not commit
reversible error where it submitted charts used in argument and
instructed the jury that “the chart is not the evidence . . . and
you will treat the chart just as you would treat the argument.”
Id. at 149. Here, the district court submitted charts and
overlays used as demonstrative aids during the trial with the
instruction that “those are not additional evidence,” and
“they’re like arguments, they’re just an illustration, and
they’re certainly not additional evidence of whatever they
represent.” Because the district court instructed the jury on
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the proper use of the demonstrative aids, it did not commit
reversible error by sending them to the jury room during
deliberations.
IV.
The district court excluded appellant’s exhibits numbered 5,
10, 17, 27, and 28 on the ground they were irrelevant. We review
a district court’s decision to exclude evidence “under the
deferential abuse-of-discretion standard.” Kelly v. Boeing
Petroleum Services, Inc., 61 F.3d 350, 356 (5th Cir. 1995). We
will reverse a judgment based on the improper exclusion of
evidence “only where the challenged ruling affects a substantial
right of a party.” Johnson v. Ford Motor Co., 988 F.2d 573, 578
(5th Cir. 1993). An error does not affect a substantial right
“if the court is sure, after reviewing the entire record, that
the error did not influence the jury or had but a very slight
effect on its verdict.” EEOC v. Manville Sales Corp., 27 F.3d
1089, 1094 (5th Cir. 1994). After reviewing each excluded
exhibit and the record in this case, we are satisfied that the
exclusion of the exhibits did not affect a substantial right of
appellant.
A. Exhibit #5
Exhibit #5 is a note written by one of appellee’s employees
describing the “intent of the 11-4-82 Amendment” to the original
agreement. The exhibit states that the amendment changes the
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calculation of the fee and describes the basis for its
calculation. This exhibit states only what is included in the
amendment itself. Since the amendment, and therefore the
information contained in exhibit #5, was admitted in evidence for
the jury to consider, the exhibit’s exclusion could not have
affected the jury’s verdict. Therefore, the trial court did not
abuse its discretion and reversal is not warranted based on the
exclusion of exhibit #5.
B. Exhibit #10
Exhibit #10 is a hand-written exchange between two of
appellee’s employees. In the note, one employee explains that
Tufco reimburses appellee for certain transportation fees. The
information contained in exhibit #10 was also included in the Gas
Purchase and Exchange Agreement which was admitted as a joint
exhibit for the jury to consider. Since the jury could consider
the information contained in exhibit #10, exclusion of the
exhibit could not have affected its verdict. The trial court did
not abuse its discretion and reversal of the judgment is not
warranted by exclusion of exhibit #10.
C. Exhibit #17
Exhibit #17 is a letter from appellee’s gas supply manager
to one of appellant’s owners that asks when a particular well can
be connected to the pipeline. This letter shows that appellant
piped certain gas for appellee, but this fact was never disputed.
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The central issue in the case is whether appellee owed a fee on
that gas, not whether appellant piped gas for appellee. Since
exhibit #17 has nothing to do with the relevant issue, its
exclusion could not have affected the jury’s verdict. Thus, the
trial court did not abuse its discretion by excluding the
evidence and reversal is not warranted.
D. Exhibit #27 and exhibit #28
These two exhibits are letters between appellee, Tufco, and
a company called Enmark regarding the construction of a new
interconnect with Tufco’s pipeline. Appellant offered these
letters to prove that appellee had been wrongfully using
appellant’s interconnect with the Tufco pipeline. However, the
issue in the case is whether appellee owed a fee on gas appellant
delivered. The issue was not whether appellee owed money for
wrongfully using appellant’s interconnect. Because exclusion of
this evidence did not affect the jury’s verdict, the district
court did not abuse its discretion and reversal is not warranted.
V.
The first question in the charge asks whether a “reasonable
person would understand the agreement to apply to gas delivered
to Tufco from the areas outside the original dedicated area?”
Appellant objected to the wording of this question on the ground
that use of an objective, third person standard was
inappropriate. This court reviews the wording of jury questions
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“with deference and will only reverse a judgment when the charge
as a whole leaves us with substantial and ineradicable doubt
whether the jury has been properly guided in its deliberations.”
Concise Oil and Gas Partnership v. Louisiana Intrastate Gas
Corp., 986 F.2d 1463, 1474 (1993). However, the charge should
submit “the ultimate questions of fact” to the jury. Id. By
asking how a reasonable person would understand the agreement,
the question embraces an objective legal standard rather than a
factual question on whether the parties agreed that the fee would
apply to certain gas. The question does, however, embrace the
relevant issue and certainly does not leave us with “substantial
and ineradicable doubt” about whether the jury has been properly
guided. The use of an objective standard in the question is a
technical error that does not constitute reversible error.
CONCLUSION
Appellant has failed to move for judgment as a matter of law
so he cannot now seek rendition of judgment in its favor on the
contract. There was evidence to support submission of the waiver
question to the jury. The district court did not commit error by
submitting demonstrative aids to the jury during deliberations
along with appropriate instructions. The exclusion of the
exhibits because they were irrelevant did not affect a
substantial right of appellant. Finally, although technically
incorrect, the use of an objective legal standard in the first
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question to the jury regarding the applicability of the agreement
does not constitute reversible error. Accordingly, we affirm the
judgment of the district court.
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