James Constr. Grp., LLC v. Westlake Chem. Corp.

• Decision Date: 17 December 2019
• Docket Number: NO. 14-18-00083-CV,14-18-00083-CV
• Citation: 594 S.W.3d 722
• Parties: JAMES CONSTRUCTION GROUP, LLC and Primoris Services Corporation, Appellants/Cross-Appellees v. WESTLAKE CHEMICAL CORPORATION, Appellee/Cross-Appellant
• Court: Texas Court of Appeals

594 S.W.3d 722

JAMES CONSTRUCTION GROUP, LLC and Primoris Services Corporation, Appellants/Cross-Appellees

v.WESTLAKE CHEMICAL CORPORATION, Appellee/Cross-Appellant

NO. 14-18-00083-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinions filed December 17, 2019

Kevin Jewell, Justice

James Construction Group, LLC ("James"), Primoris Services Corporation ("Primoris"), and Westlake Chemical Corporation ("Chemical") appeal a judgment adjudicating their respective contract claims, which arose out of a construction agreement between Chemical and James. Following a jury trial, the trial court signed a judgment awarding Chemical $1,157,019.50 in breach-of-contract damages against James and Primoris, jointly and severally, and $2,923,600.50 in attorney's fees against Primoris only. The judgment also awards James $1,270,962.89 in breach-of-contract damages against Chemical on James's counterclaim. Each party raises multiple issues on appeal. For the reasons explained below, we modify the judgment and affirm the judgment as modified.

General Background

Chemical and James signed a construction contract providing for James to perform over $500 million in civil and mechanical construction work at a chlor-alkali chemical plant owned by Westlake Vinyls Company, L.P. ("Vinyls"). Although Chemical signed the contract in its own name, Vinyls authorized Chemical to sign it on Vinyls's behalf, and the jury found that Chemical was acting as Vinyls's agent in entering the contractual relationship. In a separate agreement (the "Guaranty"), James's parent company, Primoris, unconditionally guaranteed James's performance under the construction contract.

Following various disputes during the project Chemical filed this lawsuit, and the parties asserted breach-of-contract claims against each other. We first summarize the general nature of the claims at issue and then detail additional pertinent facts in connection with their related issues.

A. Summary of Chemical's claims

Chemical's claims against James mainly involve allegations that James breached contract provisions requiring it to perform work safely and to compensate Chemical for remedial or termination costs resulting from unsafe work. Chemical contends that due to James's safety violations Chemical intervened and terminated some or all of James's scope of work in accordance with Chemical's contract rights. Chemical sought to recover damages allegedly incurred in exercising those rights and hiring others to complete the job.

Chemical's claims are grounded on two key contract provisions. First, paragraph 17.2, entitled "Inspection and Intervention," provides that Chemical may "intervene in any appropriate way" if, in its reasonable opinion, James performs its contractual duties in an unsafe manner. In that instance, Chemical has the right to require James to take immediate remedial action to Chemical's satisfaction. James is solely accountable for all costs associated with such intervention and remedial action, whether those costs are incurred by Chemical, James, or any third party.

Another section, paragraph 21, applies to "Termination and Substitute Performance." Specifically, paragraph 21.3 enumerates Chemical's right to terminate the contract for James's default, including for serious safety violations. Paragraph 21.3 sets forth the relevant contractual sequence of events as follows: if Chemical determines in its reasonable opinion that James has "serious safety violations," then Chemical may so notify James. Upon notification, James must begin to remedy the defect cited within a certain period. If Chemical is not reasonably satisfied with the pace or quality of the remediation effort, Chemical must notify James of that fact and may elect to terminate the contract or a portion of the work by providing notice to that effect. After providing notice, Chemical has the right to take unrestricted possession of the work or portion terminated and pay for its completion. Any extra cost in excess of the contract price incurred by Chemical in completing the terminated work is at James's expense.

Chemical also asserts a claim under the contract's indemnity provision, paragraph 19.1. Chemical avers that James's employee died while performing work under the contract, that Chemical incurred expenses in defending a wrongful-death claim asserted by the employee's family, and that James breached paragraph 19.1 by failing to indemnify Chemical for its costs resulting from the claim.

At trial, Chemical contended its damages resulting from James's breaches exceeded $8.5 million.

Finally, Chemical sued Primoris for breach of the Guaranty, contending that Primoris was liable for all contract damages owed by James.

B. Summary of James's claims

James's counterclaims also rest in part on paragraph 21.3. James alleges that Chemical breached paragraph 21.3 by (1) improperly terminating James's work because Chemical's grounds for termination were unreasonable, and (2) failing to provide the notice paragraph 21.3 requires.

James also contends that Chemical violated paragraph 26 of the contract, which is entitled "Waiver of Consequential Damages" and states among other things that neither party shall be liable to the other for any "consequential, incidental, indirect or punitive damages of any kind or character," and "no claim shall be made" by either party against the other for such damages regardless of the legal theory supporting the claim. According to James, all of Chemical's asserted contract damages are consequential in nature and barred by paragraph 26.

C. Summary of the jury findings and judgment

Following a multi-week trial, a jury made the following relevant findings:

1. Chemical entered into the construction contract in its own name but with authority to act on behalf and for the benefit of Vinyls. The jury also found that James was estopped from denying that Chemical entered into the construction contract with Vinyls's authority and on Vinyls's behalf.

2. James failed to comply with paragraph 17.2, the "intervention" provision. The jury awarded Chemical $1,054,251.81 as a result of this breach.

3. James failed to comply with paragraph 21.3, the "termination" provision; and Chemical substantially complied with that paragraph's notice provisions. The jury awarded Chemical $1,054,251.81 as a result of this breach.¹ Due to the jury's findings in Chemical's favor, it did not answer a series of questions on James's counterclaims under paragraph 21.3.

4. James failed to comply with paragraph 19.1, the "indemnity" provision. The jury awarded Chemical $102,767.69 as a result of this breach.

5. Chemical incurred $2,923,600.50 in reasonable and necessary attorney's fees through trial and would incur up to an additional $450,000 in attorney's fees in the event of appeal.

6. Chemical failed to comply with paragraph 26, the waiver of consequential damages provision. The damages awarded for this breach were divided into two categories. The jury awarded James $238,778.26 for attorney's fees incurred in defending against "chlorine costs" asserted by Chemical.² Additionally, the jury awarded James a total of $1,032,184.63 for attorney's fees incurred through trial (plus $62,500 in appellate fees) in defending against "consequential damages other than chlorine costs" asserted by Chemical.

After several post-verdict motions, the trial court signed an amended judgment incorporating the above findings. The judgment grants recovery to Chemical against James and Primoris, jointly and severally, for contract damages of $1,157,019.50, plus interest and taxable court costs. The judgment grants recovery to Chemical for its attorney's fees of $2,923,600.50 against Primoris only, based on the Guaranty, plus conditional appellate attorney's fees.³ The judgment grants recovery to James against Chemical for contract damages of $1,270,962.89, plus conditional attorney's fees on appeal. All parties timely appealed.

Issues Presented

James and Primoris present seven issues for review. Because many of their arguments overlap, we refer to James and Primoris collectively as "appellants" when discussing their joint contentions. In their first three issues, appellants argue that the trial court erred in rendering judgment for Chemical on Chemical's claims under the contract's termination (paragraph 21.3), intervention (paragraph 17.2), and indemnification (paragraph 19.1) provisions. In issues four and five, Primoris challenges the trial court's award of attorney's fees to Chemical. James urges in issue six that the trial court erred in refusing to award it prejudgment interest on its counterclaim for breach of paragraph 26. Finally, in issue seven James complains that the trial court erred in rendering a take-nothing judgment in Chemical's favor on James's counterclaim under paragraph 21.3.

Chemical challenges the judgment in two cross-issues. First, Chemical contends the trial court erred in rendering judgment for James on James's counterclaim for breach of paragraph 26. Second, Chemical argues that the trial court erred in holding only Primoris liable for Chemical's attorney's fees, when James should be liable for the fees as well.

We begin with appellants' complaints.

Analysis

Appellants' Issues

A. Termination — Paragraph 21.3

In issue one, appellants challenge the judgment against them on Chemical's claim for breach of the contract's termination provision. Appellants contend that: (1) no evidence supports the jury's liability finding; (2) Chemical failed to comply with all conditions precedent to its right to terminate the contract for default and recover damages because it did not strictly comply with paragraph 21.3's notice provisions, and alternatively the jury's substantial compliance findings regarding notice are unsupported by evidence or pleading; and (3) the jury's damage awards are either unsupported by evidence or barred by paragraph 26.

1. Standards of review

When reviewing the legal sufficiency of the evidence, we view the evidence in the...