Thompson &Wallace of Memphis v. Falconwood Corp.

• Decision Date: 04 December 1996
• Docket Number: No. 95-10884,95-10884
• Citation: 100 F.3d 429
• Parties: THOMPSON AND WALLACE OF MEMPHIS, INC., et al., Plaintiffs-Counter Defendants, Thompson and Wallace of Memphis, Inc., Dawkins Trading, Inc., Jim Dawkins, and Carl G. Nichols, III, Plaintiffs-Counter Defendants-Appellees, v. FALCONWOOD CORPORATION, Defendant-Counter-Claimant, and Falconwood Financial Corporation and Falconwood Cotton Corporation, Defendants-Counter-Claimants-Appellants
• Court: U.S. Court of Appeals — Fifth Circuit

Page 429

100 F.3d 429

THOMPSON AND WALLACE OF MEMPHIS, INC., et al., Plaintiffs-Counter Defendants Thompson and Wallace of Memphis, Inc., Dawkins Trading, Inc., Jim Dawkins, and Carl G. Nichols, III, Plaintiffs-Counter Defendants-Appellees, v. FALCONWOOD CORPORATION, Defendant-Counter-Claimant and Falconwood Financial Corporation and Falconwood Cotton Corporation, Defendants-Counter-Claimants-Appellants.

No. 95-10884

United States Court of Appeals Fifth Circuit

December 4, 1996.

Rehearing Denied Jan. 6, 1997

Donald M Hunt, Lubbock, TX, for Thompson & Wallace of Memphis, Inc, Dawkins Trading, Inc, Jim Dawkins, Carl G Nichols, III.

Ronnie Lynn Agnew, Agnew & Reed, Lubbock, TX, for Falconwood Corp., Falconwood Financial Corp., and Falconwood Cotton Corp.

Cecil C Kuhne, Jr, Crenshaw, Dupree & Milam, Lubbock, TX, for Falconwood Financial Corp.

H Peter Haveles, Jr, Cadwalader, Wickersham & Taft, New York City, for Falconwood Financial Corp., and Falconwood Cotton Corp.

Appeal from the United States District Court for the Northern District of Texas.

Before POLITZ, Chief Judge, and SMITH and DUHE, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Falconwood Financial Corporation ("Falconwood Financial") and Falconwood Cotton Company ("Falconwood Cotton") (collectively "Falconwood") appeal a judgment on an adverse jury verdict for deceptive trade practices, negligence, and breach of fiduciary duty and on their two counterclaims. We affirm as to one counterclaim, reverse as to all other claims, and remand for a new trial.

I.

This litigation stems from a series of loans made by Falconwood to Thompson & Wallace ("T & W") and Dawkins Trading ("Dawkins"). Both Falconwood corporations are financial institutions engaged in cotton financing, with principal places of business in New York and shared offices in Memphis, Tennessee.

T & W and Dawkins are cotton merchants. T & W maintains its offices in Memphis, and Dawkins in Greenville, Mississippi. Falconwood Financial made secured lending available to cotton merchants for 80% to 90% of the value of the underlying collateral. Its agreements with borrowers were governed by Loan and Security Agreements ("LSA's").

Falconwood Cotton advanced funds to customers by depositing money with Falconwood Financial so that a borrowing merchant's loan would be adequately margined. Its agreements with borrowers were governed by Margin Financing Agreements ("MFA's"). Both Falconwood companies did business with T & W and Dawkins, making substantial loans.

T & W, Dawkins, and the Spradlings, a group of nine other persons who are Texas residents, sued Falconwood in Texas state court under the Deceptive Trade Practices Act ("DTPA") and for negligence and breach of fiduciary duty. Falconwood removed to federal court on diversity grounds and filed a counterclaim to recover on the loans it had made to the plaintiffs.

The jury returned a verdict in favor of the plaintiffs on all claims and found against Falconwood on all the counterclaims. The jury awarded T & W $2,562,282, Dawkins $1,875,188, and the Spradlings $2,590,185. Falconwood since has settled with the Spradlings, and the verdict in favor of them is no longer at issue.

II.

A.

Falconwood contends that the district court should have dismissed the DTPA claim because it is a Texas statutory cause of action, and Texas law does not apply to the relationship between Falconwood and the plaintiffs. As a threshold matter, we must decide whether Falconwood preserved this argument before the district court.

Falconwood made a FED.R.CIV.P. 50(a) motion to dismiss the DTPA claim, which was denied, but did not object to the inclusion of the DTPA instructions in the jury charge. The plaintiffs contend that this failure waives appellate review, the rule 50(a) motion notwithstanding.¹

We are guided by Hamman v. Southwestern Gas Pipeline, Inc., 821 F.2d 299 (5th Cir.), modified on other grounds, 832 F.2d 55 (5th Cir.1987) (per curiam), which involved whether the defendant had a right to be on the plaintiffs' property. This legal issue was mentioned in the pretrial order and argued before the district court. The defendant, however, did not object to the jury instruction. We held that where the questions of fact are uncontested and the question of law is brought to the court's attention, an objection to the jury charge is not necessary. 821 F.2d at 303. Although the instant case does not involve an uncontested question of fact, we extend this principle to situations where the appealing party does not challenge the jury's fact finding, only its right to decide the issue altogether.

The contrary rule would require a party to object to a charge that it believes is a perfectly accurate statement of the law and that is not confusing to the jury, even though the court already has decided the legal issue. Cf. Pierce v. Ramsey Winch Co., 753 F.2d 416, 425 (5th Cir.1985) (stating that an adequate jury instruction cannot be grounds for reversal). This would be an unwise use of judicial resources.

B.

Falconwood asserts that the choice-of-law provisions in the LSA's and MFA's require the application of New York law, and thus a Texas statutory action cannot be maintained. The contracts state that the choice-of-law provisions apply to the "agreement and its enforcement." The personal jurisdiction and jury trial provisions, on the other hand, are much broader. Narrow choice-of-law provisions are to be construed narrowly. See Caton v. Leach Corp., 896 F.2d 939, 943 (5th Cir.1990). The tort causes of action are separate from the agreement and its enforcement, and thus the choice-of-law provision does not govern them. See id. (same Conclusion under similar choice-of-law clause); Busse v. Pacific Cattle Feeding Fund # 1, Ltd., 896 S.W.2d 807 (Tex.App.--Texarkana 1995, writ denied) (same).

C.

In Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex.1984), the court adopted the Restatement's approach to conflict of law, requiring the use of the "most significant relationship approach." Id. at 420; see RESTATEMENT (SECOND) OF CONFLICT OF LAW'S 145 (1969). Among the relevant considerations are (1) the place of injury; (2) the place of conduct; (3) the domicile of the parties; and (4) the place where the relationship between the parties is centered. See de Aguilar v. Boeing Co., 47 F.3d 1404, 1413 (5th Cir.), cert. denied, U.S. , 116 S. Ct. 180, 133 L. Ed. 2d 119 (1995).

The only suggested contact with Texas is the purchase of Texas cotton. Contrary factors are that (1) the injury occurred in Tennessee and Mississippi (where T & W and Dawkins, respectively, are based); (2) the conduct occurred in New York; (3) the parties are domiciled in New York, Tennessee, and Mississippi; and (4) the relationship was centered outside of Texas. In short, Texas is not the state with the "most significant relationship," and the DTPA cannot apply. The DTPA claim must be dismissed.

III.

A.

Falconwood raises several objections to the jury instructions, protesting the exclusion of some proposed language, the failure to distinguish the two Falconwood legal entities, and the separation of goodwill and lost profits as damage elements. As a threshold matter, we must decide whether Falconwood preserved its right to appellate review by properly objecting under FED.R.CIV.P. 51.

When the district court asked for objections to the charge, the plaintiffs presented their proposed instructions and offered to "go through each one of them, and state what they are, for the record," but the court directed them to submit the objections as a package. The court, however, did allow the plaintiffs to make a specific objection that did not complain of failure to include a proposed instruction. The court then ordered Falconwood to do the same.

Because the court did not allow the parties to make individualized objections to failure to include their proposed language, the parties did not waive their right to appellate review. The contrary rule would require litigants to disregard a court's directive and risk the court's ire. While that might be necessary in other contexts, it was not called for here.

Crist v. Dickson Welding, Inc., 957 F.2d 1281 (5th Cir.), cert. denied, 506 U.S. 864, 113 S. Ct. 187, 121 L. Ed. 2d 132 (1992), is on point. There, a party had made his objection plain at the charge conference but did not object at the close of instructions, because the district court already had ruled against him and had expressed a desire to expedite the proceedings. We found no waiver. 957 F.2d at 1287.

Thus, Falconwood's objection was sufficient to preserve review of its claim that the district court should have included its proposed language. As to the failure to distinguish between the two Falconwood legal entities and the court's separation of goodwill and lost profits as damages elements, Falconwood's proposed instructions were inctions. Thus, Falconwood has waived review of that portion of the instructions.

B.

The court instructed the jury that a joint venture existed between the plaintiffs and Falconwood. Falconwood's proposed instructions plainly stated that the jury should decide whether a joint venture existed. Under Texas law, the existence of a joint venture is a question of fact for the jury. See Norman v. Apache Corp., 19 F.3d 1017, 1023 (5th Cir.1994).² Because the charge instructed the jury that a joint venture existed, the charge effectively was a directed verdict. Thus, we review the decision de novo, viewing the facts in the light most favorable to Falconwood. See Enlow v. Tishomingo County, 45 F.3d 885, 888 (5th Cir.1995) (per curiam).

We have reviewed the relevant portions of the record, and the evidence of a joint venture is not overwhelming. Most of the evidence revolves around the nomenclature of certain accounts that were renamed before the incidents in question. The evidence of profit-sharing is ambiguous. Accordingly, the district court's implicit ruling that a...