Daniel Intern. Corp. v. Fischbach & Moore, Inc.

• Decision Date: 14 November 1990
• Docket Number: No. 89-6102,89-6102
• Citation: 916 F.2d 1061
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: DANIEL INTERNATIONAL CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. FISCHBACH & MOORE, INC., et al., Defendants-Appellants, Cross-Appellees.

Page 1061

916 F.2d 1061

18 Fed.R.Serv.3d 753

DANIEL INTERNATIONAL CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. FISCHBACH & MOORE, INC., et al., Defendants-Appellants,

Cross-Appellees.

No. 89-6102.

United States Court of Appeals, Fifth Circuit.

Nov. 14, 1990.

Rehearing and Rehearing En Banc

Denied Dec. 14, 1990.

Daniel J. Davis, Keith C. Zagar, Dallas, Tex., for defendants-appellants, cross-appellees.

Jesse C. Belcher, Thomas C. Coker, Jr., Haynsworth, Marion, McKay & Guerard, Greenville, S.C., Mike Hatchell, Ramey, Flock, Hutchins, McClendon & Crawford, PC, Tracy Crawford, Ramey, Flock, Hutchins McClendon & Crawford PC, Tyler, Tex., for plaintiff-appellee, cross-appellant.

Appeals from the United States District Court for the Eastern District of Texas.

Before CLARK, Chief Judge, REAVLEY and KING, Circuit Judges.

CLARK, Chief Judge:

These appeals come from a judgment in a diversity-based contract action which was tried to the court. Finding that the district court abused its discretion in striking this matter from its jury calendar shortly before trial commenced, we vacate the judgment and remand for trial to a jury. Because the issue is one of law likely to recur upon retrial, we also hold that the contractually stipulated profit margin was a valid liquidation of damages, not a penalty.

I.

A. The Substantive Dispute

Daniel International Corporation (Daniel) was the prime contractor on a penitentiary construction project for the State of Texas. Daniel sued Fischbach & Moore (F & M), its electrical subcontractor on the project, and F & M's bonding company, National Union Fire Insurance Company (National Union). The complaint alleged breach of the subcontract, and sought damages and injunctive relief. F & M denied having breached the contract and counterclaimed alleging breach by Daniel.

The prison construction project was to be developed under strict time deadlines pursuant to the order issued in Ruiz v. McCotter, 661 F.Supp. 112 (S.D.Tex.1986). The completion dates were essentially inflexible since failure to meet the deadlines could require release of over 2,000 prisoners. The contract included substantial liquidated damages for failure to complete on schedule.

The subcontract between F & M and Daniel required completion of the electrical work in time to allow the entire project to be substantially complete by the scheduled dates. No extension was allowed for weather delays. Written notice of any event anticipated to cause delay was required to be given within five days of its occurrence. The contract also allowed Daniel to adjust, monitor and enforce F & M's completion schedule. Any dispute concerning delay-related claims for extra time or money did not relieve F & M of the obligation to continue to prosecute its work without delay. Other subcontracts contained similar terms.

The trial court found that F & M breached its contract by failing to perform in a timely and proper manner. The court also found that Daniel incurred reasonable and necessary costs of $5,970,518.12 in completing F & M's subcontract work. However, the court denied Daniel a ten percent mark-up for profit on these expenses. The court found that the mark-up, although provided for in the subcontract, was punitive in nature. The court set off Daniel's expenditures against the unpaid balance due F & M, and awarded Daniel net damages of $2,842,104.06 plus prejudgment interest of $477,567.43. The court also determined that reasonable attorneys' fees and postjudgment interest from the date of award should be fixed later. F & M was ordered to take nothing on its counterclaim.

B. The Procedural Dispute

Daniel filed its amended complaint on March 10, 1987. F & M did not include a jury demand in its answer and counterclaim. But, on July 21, after the court had placed the matter on its non-jury calendar, F & M filed its first jury demand pursuant to FED.R.CIV.PROC. 38 and 39(b). Daniel interposed no objection. The district court made no recorded response to this demand.

On October 2, F & M moved to add Federal Insurance Company (FIC), Daniel's surety under the contract, as counter-defendant. This motion again requested a jury trial pursuant to Rule 38. Daniel's consent to the addition of FIC made no response to the jury demand. On October 9, the district court ordered FIC joined. This order bears the notation "JURY TRIAL DEMANDED." The order also states that the court reviewed F & M's entire motion, and "[a]fter reviewing same, the Court is of the opinion that the Motion is well taken and should be, in all things, granted." F & M filed its amended counterclaim in which it added FIC as a party defendant, and once more demanded a jury trial.

The case originally appeared on the court's non-jury calendar for November 30, 1987. Following a joint motion for continuance, on February 23, 1988 the matter next appeared on the court's May jury calendar. Following another joint motion for continuance, the case was rescheduled on July 25, where it appeared on the December non-jury calendar. On August 4, the court sua sponte placed the case on the jury calendar. On September 27, Daniel filed a motion to strike F & M's jury demands, its first record objection to any of the preceding jury demands. On November 14, the court granted the motion, removed the case from the jury calendar and placed it once again on its non-jury calendar. The court denied F & M's request to reconsider the matter or to certify the issue for interlocutory appeal. The action was tried without a jury.

II.

F & M appeals. Daniel cross-appeals. F & M attacks the court's ruling that Daniel followed contractually required procedures when terminating F & M, and the award of prejudgment interest. Daniel argues that the district court erred in computing judgment interest, denying the ten percent contractual mark-up, and reducing Daniel's damages under other contract provisions. Our analysis begins with the issue of whether the court abused its discretion in striking F & M's jury demands and removing the case from the jury docket three months before commencement of trial.

A. Rule 38

F & M argues that it was entitled to a jury trial as of right pursuant to demands made under FED.R.CIV.PROC. 38(b). Rule 38(b) provides in full:

Any party may demand a trial by jury of any issue triable of right by a jury by serving upon the other parties a demand therefor in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed to such issue. Such demand may be indorsed upon a pleading of the party.

This rule embodies the right conferred by the seventh amendment. FED.R.CIV.PROC. 38(a). However, this right may be waived by failure to make the demand within the ten day period. Id. 38(d).

The ten day period runs from filing of the last pleading addressing the issue upon which trial is demanded. Here, all issues were joined upon Daniel's reply and counterclaim of April 16, 1987. F & M's jury demand was not timely. F & M waived its right to demand a jury trial under Rule 38(b).

F & M argues that its tardiness was excused because Daniel served only its "local" counsel and not its "lead" counsel. F & M calls attention to the fact that Daniel mistakenly certified it had served all counsel of record. We agree with Daniel that its mistaken certificate does not excuse F & M's duty to comply with Rule 38(b).

F & M argues that Rules 5(a) and (b) require that pleadings be served on all counsel of record. We disagree. The burden is to serve all other parties. This does not require service on each of several counsel appearing on behalf of a party. F & M does not contend that its local counsel failed to keep it advised of pleadings served on him. We note that F & M's pleadings both before and after the joinder of issues were signed by local counsel. In the absence of any assertions that Daniel somehow succeeded in deliberately misleading F & M, service upon one, but not all, of its counsel is effective service. See Cooper v. Lewis, 644 F.2d 1077, 1082 (5th Cir.1981) (each party considered to have notice of all facts of which its attorney may be charged with notice).

F & M also argues that the jury demand it made was sufficient under Rule 38(b). However, the only pleading on which a demand was endorsed merely added a party to its counterclaim. At most this added only an additional right to recover against FIC, Daniel's surety. It did not plead any new issues of fact or raise a new issue of law. An amendment not introducing a new issue will not give rise to a right to demand for a jury trial. Guajardo v. Estelle, 580 F.2d 748, 753 (5th Cir.1978). The amendment must introduce a new issue and not merely add a new theory of recovery. Fredieu v. Rowan Companies, Inc., 738 F.2d 651, 653 (5th Cir.1984). All issues were joined when F & M filed its reply and counterclaim.

B. Rule 39

Determining that F & M failed to comply with the time requirements of Rule 38 does not end our inquiry. Rule 39(b) states:

Issues not demanded for trial by jury as provided in Rule 38 shall be tried by the court; but, notwithstanding the failure of a party to demand a jury in an action in which such a demand might have been made of right, the court in its discretion upon motion may order a trial by a jury of any or all issues.

FED.R.CIV.P. 39(b). This rule grants the district court discretion to relieve a party from waiver of a jury trial under Rule 38. Swofford v. B & W, Inc., 336 F.2d 406, 408 (5th Cir.), cert. denied, 379 U.S. 962, 85 S.Ct. 653, 13 L.Ed.2d 557 (1964). However, the seventh amendment confers a fundamental right. This modifies the usual approach to review of abuse of discretion. "[W]hen the discretion of the court is invoked under Rule 39(b), the court should grant a jury trial in the absence of strong and compelling reasons to the contrary." Id. at 409. A motion for trial by jury under this rule "should be favorably received unless...