Interstate Contracting v. City of Dallas, Tex., 02-10138.
| Citation | 407 F.3d 708 |
| Decision Date | 22 April 2005 |
| Docket Number | No. 02-10138.,02-10138. |
| Parties | INTERSTATE CONTRACTING CORPORATION, Plaintiff-Appellee, v. CITY OF DALLAS, TEXAS, Defendant-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Stephen Robert Miller (argued), Michael Ted Metcalf, Miller Law Firm, Kansas City, MO, for Plaintiff-Appellee.
Charles S. Estee, Asst. City Atty. (argued), Dallas, TX, for Defendant-Appellant.
Appeal from the United States District Court for the Northern District of Texas.
Before GARZA and CLEMENT, Circuit Judges, and DAVIS1, District Judge.
In this breach of contract and breach of warranty case, the City of Dallas appeals a jury verdict awarding Interstate Contracting Corporation $3,046,964. Because the contract's unambiguous language bars all of ICC's claims, we reverse the trial court's judgment and render judgment that Interstate Contracting Corporation take nothing.
On September 14, 1994, the City of Dallas, Texas (the "City") and Interstate Contracting Corporation ("ICC") entered into a fixed sum contract for levee construction around a City water treatment plant; the excavation of two areas to create storm water detention lakes; and some miscellaneous work including trash removal, surveying, and linear depth checking. ICC then entered into two written subcontracts with Mine Services, Inc. ("MSI") for the levee construction and the excavation of the storm water detention lake.
To the extent it met specifications, the material excavated for the lakes was to be used as fill material for the levees. In October 1994, MSI began work by mobilizing, surveying, and dewatering the Interior Borrow Lake ("IBL"), one of the "borrow" sites the City designated as a source of fill material. Shortly after work began, MSI discovered that the materials in the IBL were not suitable as fill for the levees, as MSI had expected.
Because the excavation did not yield sufficient quantities of suitable material, MSI manufactured fill material by mixing sand with the limited quantities of clay. This substantially decreased MSI's productivity and increased its costs. The contract did not address manufacturing fill material. The parties discussed using fill from other sites, but MSI believed the contract did not designate those areas as borrow sites. Using those sources was also more expensive than the manufacturing process, and MSI persisted in manufacturing fill.
ICC informed the City of MSI's increased work on March 1, 1995, but the City indicated it would deny ICC's claims. The City, through the claims process, also denied claims for increased costs regarding trash removal, linear depth checking, surveying, removing buried debris, and delay.
ICC filed this suit against the City on MSI's behalf for breach of contract, quantum meruit, breach of implied warranty, and fraudulent inducement.3 After an eleven day trial, the jury found that the City breached its contract with ICC by failing to pay ICC's additional expenses relating to: (1) unanticipated subsoil conditions, (2) trash removal, (3) linear depth checking, (4) survey costs, and (5) delays caused by the City. The jury also found the City breached an implied warranty to provide accurate and suitable plans and specifications in light of subsoil conditions at the project site. In 2002, the City appealed this judgment, raising sixteen legal and evidentiary issues. Because there was no controlling Texas precedent, this court certified two questions to the Supreme Court of Texas regarding whether ICC could bring these claims on MSI's behalf. 320 F.3d at 539. In 2004, the Supreme Court of Texas answered the certified questions by holding that a general contractor can bring claims on a subcontractor's behalf and setting forth the requirements for doing so. 135 S.W.3d at 605. We issue this opinion resolving the remaining issues presented in this appeal.
While we review the trial court's conclusions of law de novo, we uphold a jury's verdict unless it lacks a legally sufficient basis. Hiltgen v. Sumrall, 47 F.3d 695, 699-700 (5th Cir.1995); Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir.1982). We review the evidence and all reasonable inferences in the light most favorable to the jury's verdict. Id. at 700. Sitting as an Erie court, we rule on the issues as the Texas Supreme Court would rule. Hanson Prod. Co. v. Ams. Ins. Co., 108 F.3d 627, 629 (5th Cir.1997).
We review the district court's contract interpretation de novo. T.L. James & Co. v. Traylor Bros. Inc., 294 F.3d 743, 746 (5th Cir.2002) (citing Musser Davis Land Co. v. Union Pac. Res., 201 F.3d 561, 563 (5th Cir.2000)). Accordingly, we "review the record independently and under the same standard that guided the district court." Id. (quoting Am. Totalisator Co. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir.1993)). Under Texas law, determining whether a contract is unambiguous and interpreting an unambiguous contract are questions of law. Leasehold Expense Recovery, Inc. v. Mothers Work, Inc., 331 F.3d 452, 456 (5th Cir.2003). The court's primary concern is to enforce the parties' intent as contractually expressed, and an unambiguous contract will be enforced as written. Id. If a question relating to a contract's construction or ambiguity arises, the court examines the contract's wording in context of the surrounding circumstances. Watkins, 689 F.2d at 538. If the contract is then susceptible to only one interpretation, it is unambiguous. Id. Determining the parties' intent when expressed in an ambiguous contract is a question of fact. Id.
Although MSI and the City did not have privity of contract, ICC brought claims against the City on MSI's behalf. The City argues that privity of contract is an essential element to any contract-based action. ICC argues that the district court was correct in allowing ICC to present MSI's claims on a pass-through basis.4
Because there was no controlling precedent to determine whether a general contractor could bring pass-through claims against an owner on a subcontractor's behalf, we certified the following questions to the Supreme Court of Texas:
(1) Does Texas law recognize pass-through claims, i.e., may a contractor assert a claim on behalf of its subcontractor against the owner when there is no privity of contract between the subcontractor and the owner?
If the first question is answered in the negative, then the remaining question need not be reached. However, if the first question is answered in the affirmative, the following question must be reached:
(2) What are the requirements, if any, that need to be satisfied for a contractor to assert a claim on behalf of its subcontractor when there is no privity of contract between the subcontractor and the owner and who holds the appropriate burden of proof?
The Texas Supreme Court answered that Texas law does recognize pass-through claims. 135 S.W.3d at 610-19. In order to bring a pass-through claim, the contractor must still be liable to the subcontractor for the subcontractor's damages:
In accordance with federal practice and the practice in most states recognizing pass-through claims, we hold that Texas requires that the contractor remain liable to the subcontractor for damages sustained by the subcontractor. If the owner disputes that this requirement has been met, it bears the burden of proving, as an affirmative defense, that the pass-through arrangement negates the contractor's responsibility for the costs incurred by the subcontractor.
....
The contractor need not reduce its liability to a binding settlement agreement, however. Conditional liability as expressed in a subcontract, liquidating agreement, or some other type of claims-presentment arrangement is sufficient to prove liability, even when the agreement provides that the contractor has no obligation to pay the subcontractor unless and until it recovers from the owner. The owner disproves the contractor's continuing liability only if it can show that the contractor is not obligated to remit any recovery to the subcontractor.
Id. at 619-20 (citations omitted).
The subcontract agreements between ICC and MSI state that ICC is liable to MSI only if the City pays ICC or to the extent ICC is able to recover against the City. In those agreements, ICC was given the sole discretion to bring a claim against the City on behalf of MSI at MSI's expense. If such a suit was brought, MSI agreed to release ICC from further liability in exchange for ICC's recovery from the City. ICC's and MSI's "Claims Presentation and Prosecution Agreement" requires ICC to remit any recovery or payment from the City for MSI's claims to MSI. This satisfies the requirements for ICC to bring MSI's claims against the City.5 We reject the City's argument.
In its first breach of contract claim, ICC contends the plans and specifications the City provided describing the project were defective because they represented that ICC would be able to obtain sufficient levee-fill material from on-site locations. ICC contends the City breached its contract by failing to pay ICC for the additional expenses it incurred because it was unable to obtain sufficient fill from designated borrow areas and was forced to manufacture the fill material. The jury found the City breached the contract by:
the City's decision not to pay for costs Interstate Contracting claims to have incurred in connection with the provisions of Plan Sheet 10, Section 00220 of the Contract Technical Specifications, Section S-19 of the Information to Bidders, Plan Sheet 14, and/or Items 1.29 and 1.37.2 of the General Provisions of the Contract
and awarded ICC $1,700,000 for this claim.
Plan Sheet 10...
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...but in order to overcome a dificulty that would otherwise impede construction of 1. Interstate Contracting Corp. v. City of Dallas, Texas, 407 F.3d 708, 712 (5th Cir. 2005). 2. Wisch & vaughan Constr. Co. v. Melrose Properties, 21 S.W. 3d 36, 40 (Mo. App. S.D. 2000). 3. Courts use the terms......
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