Acadian Diagnostic Labs., L. L.C. v. Quality Toxicology, L. L.C.

• Citation: 965 F.3d 404
• Decision Date: 13 July 2020
• Docket Number: No. 19-30320,19-30320
• Parties: ACADIAN DIAGNOSTIC LABORATORIES, L.L.C., Plaintiff-Appellee / Cross-Appellant, v. QUALITY TOXICOLOGY, L.L.C., Defendant-Appellant / Cross-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

965 F.3d 404

ACADIAN DIAGNOSTIC LABORATORIES, L.L.C., Plaintiff-Appellee / Cross-Appellant,

v.QUALITY TOXICOLOGY, L.L.C., Defendant-Appellant / Cross-Appellee.

No. 19-30320

United States Court of Appeals, Fifth Circuit.

FILED July 13, 2020

Mark Lanier Barbre, Esq., James Wendell Clark, Long Law Firm, L.L.P., Baton Rouge, LA, for Plaintiff - Appellee/Cross-Appellant.

James William Carter, IV, Kennedy Sutherland, L.L.P., San Antonio, TX, for Defendant - Appellant/Cross-Appellee.

Before KING, GRAVES, and OLDHAM, Circuit Judges.

ANDREW S. OLDHAM, Circuit Judge:

Acadian Diagnostic Laboratories, L.L.C. ("Acadian") entered into two contracts with Quality Toxicology, L.L.C. ("QT") to perform lab testing. Their business relationship soon unraveled, and Acadian filed this lawsuit. The jury awarded damages to Acadian, and both sides appealed. QT says it didn't get to present its full case, so we should remand. And Acadian says it didn't get enough money, so we should vacate the judgment and replace it. They're both wrong. We affirm.

I.

This case involves two agreements between two labs in two States. Acadian operated its lab in Baton Rouge, Louisiana. QT operated its lab in Longview, Texas. Between 2013 and 2015, the labs made two agreements to create a reciprocal testing arrangement. Under the Acadian Referred Specimens Agreement, Acadian referred urine specimens to QT for testing. QT, in turn, agreed to pay Acadian 50% of all amounts collected for those services, after deducting a charge from Medcross, QT's billing contractor. Medcross would do all the billing, collect the funds, and deposit them in QT's account. Then QT would remit to Acadian its share of the funds. Under a second agreement, the QT Referred Specimens Agreement, the referral role flipped: QT agreed to refer specimens to Acadian for testing. As with the first agreement, Medcross billed and collected the funds. And, as with the first agreement, Medcross deposited the collected funds into QT's account. QT agreed to deduct a charge for Medcross's services and then remit 65% to Acadian.

QT and Acadian performed thousands of tests under these Agreements. But QT refused to send Acadian most of its agreed-to share of the collected funds. For example, Acadian performed lab services under the QT Referred Specimens Agreement on 2,679 specimens. QT collected at least $1,565,428 in payments for those specimens. But QT sent Acadian only $73,134.34—far less than the 65% it owed under that Agreement.

QT faced other business difficulties during this time too, which culminated in a "business divorce." Several of QT's partners left and new management came in. But the new management still did not remit the funds owed to Acadian. So Acadian sent a demand letter. When QT didn't respond, Acadian filed this lawsuit, alleging, among other things, that QT breached both Agreements.¹

The district court granted Acadian partial summary judgment on its breach-of-contract claims. Specifically, the district court found that QT was indisputably liable for breaching both Agreements. But Acadian's damages were another matter. The district court could not determine the effective date of the Acadian Referred Specimens Agreement, and thus could not determine when Acadian's damages began to accrue. The court left that question for the jury. As for the QT Referred Specimens Agreement, the court appears to have found no dispute about the damages for 2,027 specimens for which QT failed to pay Acadian. As to those specimens, the district court concluded "that QT owes Acadian the balance due on the QT Referred Specimens [Agreement] of $1,017,528.20, less the $73,134.34 ... payment." The court appears to have left for the jury the question of damages for the remaining 652 specimens.

The district court also granted Acadian's motion in limine regarding a joint venture named ToxNet Diagnostic Laboratory Services, L.L.C. QT wanted to present testimony about ToxNet to the jury. But the district court said that evidence would be a "waste of time." Later, QT attempted to introduce evidence regarding Acadian's partner in the ToxNet venture. The district court again excluded it.

The jury awarded Acadian damages for QT's breach of both Agreements. For the Acadian Referred Services Agreement, QT owed $635,032.23. And for the QT Referred Services Agreement, QT owed $269,706.50. Notably, the jury instructions and the verdict form said nothing about whether the QT Referred Services Agreement damages were for all specimens or just the 652 specimens on which the district court denied summary judgment.

Shortly after the jury verdict, Judge Brady, who had presided over the case, passed away. The case remained open on the docket for fifteen more months until then-Chief Judge Jackson entered final judgment for Acadian. The final judgment said nothing about Judge Brady's earlier summary judgment opinion or his damages calculation. Instead, the judgment only reflected the jury's verdict. Acadian's counsel filed for his attorney's fees but did not file any post-trial motions about this apparent inconsistency. QT filed a motion for a new trial, but it was denied.

Both parties timely appealed.

II.

We start with QT. First, QT argues the district court incorrectly granted summary judgment on its liability for breaching the Agreements. Second, QT argues the district court erroneously stopped it from introducing evidence about Acadian's business dealings. Neither contention merits a new trial.

A.

We review the district court's grant of partial summary judgment de novo . Smith v. Reg'l Transit Auth. , 827 F.3d 412, 417 (5th Cir. 2016). As this case implicates our diversity jurisdiction, we apply Louisiana law to review QT's liability for breaching both Agreements. Am. Elec. Power Co. Inc. v. Affiliated FM Ins. Co. , 556 F.3d 282, 285 & n.2 (5th Cir. 2009).

QT Referred Specimens Agreement . QT argues that the QT Referred Specimens Agreement does not obligate it to remit any money at all. Although QT, through Medcross, in fact collected funds for these services, QT says the Agreement actually required Acadian to collect its own bills. And hence, QT contends, it did not breach the Agreement by failing to remit Acadian's money.

The disputed provision required Acadian to use "its customary billing practices." To interpret this provision under Louisiana law, we must "determin[e] ... the common intent of the parties." LA. CIV. CODE ANN. art. 2045. And "[t]he language of the [contract] is the starting point for determining that common intent." Six Flags, Inc. v. Westchester Surplus Lines Ins. Co. , 565 F.3d 948, 954 (5th Cir. 2009). "The words of a contract must be given their generally prevailing meaning." LA. CIV. CODE ANN. art. 2047. "When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties’ intent." Id. art. 2046.

The generally prevailing meaning of "customary" appears to be "[a]greeing with, or established by, custom; established by common usage; habitual." Customary , WEBSTER'S NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE (2d ed. 1941); Customary , THE AMERICAN HERITAGE COLLEGE DICTIONARY (4th ed. 2002) ("Commonly practiced, used, or encountered, usual"); accord Fullilove v. U.S. Cas. Co. of N.Y. , 240 La. 859, 125 So. 2d 389, 394 (1960) (defining "usual" as synonymous with "customary"). So, Acadian agreed to use its "habitual" or "usual" billing practices. QT appears to argue that Acadian agreed to use the billing practices that it habitually or usually used with its customers in general . By contrast, Acadian asserts that it agreed to use the billing practices that it habitually or usually used with QT —that is, to use QT and Medcross for all billing and collections. We are thus faced with two seemingly permissible interpretations.

When the meaning of a contract provision is "doubtful," Louisiana law says that such provisions "must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties." LA. CIV. CODE ANN. art. 2053 (emphasis added); see also McCarroll v. McCarroll , 701 So. 2d 1280, 1286 (La. 1997) ("[W]hen the terms of a written contract are susceptible to more than one interpretation ... parol evidence is admissible to clarify the ambiguity and to show the intention of the parties."); WH Holdings, L.L.C. v. Ace Am. Ins. Co. , 481 F. App'x 894, 898 (5th Cir. 2012) (per curiam). Since the "clause in question"—customary billing practices—"does not itself clearly disclose what the parties had in mind, their intention may and can be determined by the manner in which operations under the agreement were conducted." Book v. Schoonmaker , 210 La. 94, 26 So. 2d 366, 369 (1946) ; accord Nelson v. Nelson , 985 So. 2d 1285, 1291 (La. Ct. App. 2008).

Here, the record is entirely one-sided: It shows that QT, through Medcross, conducted all the billing and collections for these specimens. That's the agreement Acadian and QT orally made before reducing the QT Referred Services Agreement to writing. That's what QT did under the parties’ other agreement, the Acadian Referred Services Agreement. And that's what QT did under this Agreement before failing to remit Acadian's share of those funds. This conduct "before and after the formation of the contract," LA. CIV. CODE ANN. art. 2053, sheds light on the bargained-for exchange between the parties and evinces an intention to have QT manage the billing and collecting before remitting the funds to Acadian. See Nelson , 985 So. 2d at 1292 ; WH Holdings , 481 F. App'x at 898 & n.3.

QT points to no evidence to dispute any of this. And "a party cannot defeat summary judgment with conclusory allegations, unsubstantiated assertions, or ‘only a scintilla of evidence.’ " Turner v. Baylor Richardson Med. Ctr. , 476 F.3d 337, 343 (5th Cir. 2007) (quoting Little v....