H & W Industries, Inc. v. Formosa Plastics Corp., USA

• Decision Date: 17 November 1988
• Docket Number: Nos. 88-4225,88-4373,J-M,s. 88-4225
• Citation: 860 F.2d 172
• Parties: 1988-2 Trade Cases 68,329, 13 Fed.R.Serv.3d 603, 7 UCC Rep.Serv.2d 380 H & W INDUSTRIES, INC., Plaintiff-Appellant, v. FORMOSA PLASTICS CORP., USA and Formosa Plastics Corp., Texas andManufacturing Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 172

860 F.2d 172

1988-2 Trade Cases 68,329, 13 Fed.R.Serv.3d 603,

7 UCC Rep.Serv.2d 380

H & W INDUSTRIES, INC., Plaintiff-Appellant, v. FORMOSA PLASTICS CORP., USA and Formosa Plastics Corp Texas and J-M Manufacturing Company, Defendants-Appellees.

Nos. 88-4225, 88-4373.

United States Court of Appeals Fifth Circuit.

Nov. 17, 1988.

Rehearing and Rehearing En Banc Denied Dec. 15, 1988.

Ronald L. Holt, John M. Edgar, William D. Beil, Kansas City, Mo., Robert E. Barkley, Jr., New Orleans, La., James R. Moore, Jr., Jackson, Miss., for plaintiff-appellant.

Thomas J. Suszek, Oxford, Miss., William C. Pelster, New York City, James D. Veltrop, Washington, D.C., Thomas J. Schwarz, James W. Kennedy, New York City, for defendants-appellees.

Appeals from the United States District Court for the Northern District of Mississippi.

Before WILLIAMS and GARWOOD, Circuit Judges, and POLOZOLA ^*, District Judge.

JERRE S. WILLIAMS, Circuit Judge:

This appeal arises from the district court's denial of appellant's request for a preliminary injunction and dismissal of a portion of appellant's complaint following the preliminary injunction hearing. We find that the district court erred in disposing of the claims on the merits in the context of a preliminary injunction proceeding without prior notice to the parties. We also conclude that the lower court incorrectly applied Mississippi law in resolving the parties' contract dispute. We therefore reverse the judgment of the district court which dismissed the claims on the merits, reverse the denial of the preliminary injunction, and remand for reconsideration in accordance with this opinion.

I. Facts and Prior Proceedings

Appellant, H & W Industries, Inc. (H & W), is a manufacturer of polyvinyl chloride (PVC) pipe. Appellee, Formosa Plastics Corporation (Formosa), is a supplier of the PVC resin necessary for this manufacturing operation. On August 17, 1983, H & W and Formosa entered into a written contract whereby Formosa agreed to supply H & W with 4 million pounds of PVC resin per month. In 1984, H & W and Formosa agreed in writing to increase the quantity of resin to 8 million pounds per month.

The present contract dispute centers around a meeting of principals of H & W and Formosa on August 22, 1985. H & W contends that the parties reached a new agreement in which H & W agreed to purchase from Formosa 80 percent of the resin requirements for two of H & W's plants, which totalled 11 million pounds per month. H & W also claims that in this new oral contract Formosa agreed that it would not terminate H & W's resin supply during a resin shortage.

Four days later, on August 26, 1985, H & W sent Formosa a letter which confirmed the price and quantity terms of the oral contract. The letter did not mention the alleged agreement regarding continued supplies during time of resin shortage and was also silent as to the duration of the August 22 contract. Formosa made no response to the confirmatory letter.

The relationship between the parties began to deteriorate in late 1986 and early 1987, when Formosa started reducing H & W's resin supply. H & W alleges that the reduction and subsequent cancellation of the contract was in part the result of an industry-wide shortage of PVC resin which developed in early 1987, and is projected to continue until 1989. Formosa argues that the reduction was due to credit problems with H & W.

On August 31, 1987, Formosa sent H & W a written notice of cancellation, purporting to cancel the original 1983 written agreement and seeking renegotiation. H & W alleges that during the subsequent negotiations Formosa advised H & W that it was cutting H & W's resin supply so that Formosa could supply more resin to its subsidiary, J-M, who also manufactures PVC pipe and is a defendant in this lawsuit. On December 16, 1987, Formosa sent H & W a proposed 1988 contract, in which Formosa offered to supply H & W with 4.5 million pounds of resin each month. In response, H & W sued in federal district court for breach of the alleged August 22, 1985 contract, and sought a temporary restraining order to mandate Formosa to deliver the 11 million pounds of resin per month under the terms of this agreement. In addition to its breach of contract claim, H & W also alleges various other grounds for recovery, including fraud, misappropriation of trade secrets, defamation, wrongful interference with business negotiations, and two antitrust violations. ¹

The district court issued an ex parte temporary restraining order on December 30, 1987, directing Formosa to supply H & W with 11 million pounds of PVC resin per month. After a four-day preliminary injunction hearing, the district court entered an order on February 22, 1988, denying the injunction and dismissing counts I and VI of H & W's complaint (the breach of contract and attempted monopolization claims). H & W Industries, Inc. v. Formosa Plastics Corp., U.S.A., 687 F.Supp. 271 (N.D.Miss.1988). Neither party had prior notice that the court would rule on the merits after the preliminary injunction hearing. The district court denied H & W's request for reconsideration of its order, and certified its dismissal of counts I and VI for appeal pursuant to Fed.R.Civ.P. 54(b). Id.

II. Jurisdiction

As a threshold matter, we must determine whether this Court has jurisdiction to hear H & W's entire appeal. Formosa contends that the district court erred in certifying for appeal under Fed.R.Civ.P. 54(b) the dismissal of count VI, the attempted monopolization claim. If this contention is valid, it deprives this Court of jurisdiction over that portion of the appeal. ² Formosa has moved to dismiss H & W's appeal of count VI on this ground.

Rule 54(b) permits the immediate appeal, upon appropriate certification by the district court, of a judgment in a case involving multiple claims or multiple parties, even when other claims or parties remain before the lower court. Formosa contends that Rule 54(b) certification is improper whenever a claim remains before the lower court which is "essentially similar" to the one certified for appeal. As applied in this case, Formosa's argument is that H & W's appeal of the dismissal of the attempted monopolization claim under Rule 54(b) is inappropriate because another antitrust claim remains before the district court. Formosa focuses on the fact that the market power of Formosa and its subsidiary, J-M, is an important factor in resolving both antitrust claims.

It is true, as Formosa notes, that the use of Rule 54(b) is tempered by an historic federal policy against piecemeal appeals. Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 438, 76 S.Ct. 895, 901, 100 L.Ed. 1297 (1956); Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 8, 100 S.Ct. 1460, 1465, 64 L.Ed.2d 1 (1980). Thus, a district court is to exercise its authority to certify claims for appeal under 54(b) "in the sound interest of judicial administration", taking into account such factors as "whether the claims under review were separable from others remaining to be adjudicated and whether the nature of the claims to be determined was such that no appellate court would have to decide the same issues more than once even if there were subsequent appeals." Curtiss-Wright, 446 U.S. at 8, 100 S.Ct. at 1465. Formosa is incorrect, however, in arguing that this cautionary language directed to the district court strips this Court of the jurisdiction to hear any appeal certified under Rule 54(b) whenever similar claims remain before the lower court.

A district court decision to certify its judgment on some portion of a multiple claim as an appealable final judgment under Rule 54(b) is a discretionary act, which is not subject to second-guessing by this Court. Instead, the decision is reviewed for abuse of discretion. Curtiss-Wright, 446 U.S. at 8, 100 S.Ct. at 1465; DeMelo v. Woolsey Marine Industries, Inc., 677 F.2d 1030, 1034 (5th Cir.1982); Skinner v. W. T. Grant Co., 642 F.2d 981, 983-84 (5th Cir.1981). In delineating the scope of this discretionary authority, the Supreme Court has explicitly recognized that the fact that a similar claim remains before the district court does not necessarily preclude Rule 54(b) certification. Curtiss-Wright, 446 U.S. at 8, n. 2, 100 S.Ct. at 1465. Indeed, contrary to Formosa's argument, the Supreme Court and this Court have long recognized that claims arising out of the same transaction or sharing certain factual elements may be appealed separately under Rule 54(b). Sears, Roebuck & Co., 351 U.S. at 436 n. 9, 76 S.Ct. at 900; Cold Metal Process Co. v. United Engineering and Foundry Co., 351 U.S. 445, 452, 76 S.Ct. 904, 909, 100 L.Ed. 1311 (1956); Piney Woods Country Life School v. Shell Oil Co., 726 F.2d 225, 230 (5th Cir.1984), cert. denied, 471 U.S. 1005, 105 S.Ct. 1868, 85 L.Ed.2d 161 (1985). In view of these precedents, we find no abuse of discretion in the district court's decision to certify the attempted monopolization claim for appeal while retaining jurisdiction over another but different antitrust allegation.

There must also be consideration of a non-discretionary aspect of a district court's decision to certify a judgment for appeal under Rule 54(b). By its terms, Rule 54(b) only applies when multiple parties or multiple claims are involved. ³ When a complaint alleges mere variations in legal theory which are pleaded in the alternative or give rise to a single liability, true multiplicity is not present and Rule 54(b) cannot be employed to appeal a lower court judgment on one of the claims. Schexnaydre v. Travelers Insurance Co., 527 F.2d 855, 856 (5th Cir.1976); United States v. Crow, Pope and Land Enterprises, Inc., 474 F.2d 200, 202 (5th Cir.1973). In contrast, when the facts give rise to more than one legal right or cause of action, and the two grounds of recovery are not mutually exclusive, there are multiple claims which can be separately appealed upon certification under Rule 54(...