Joy Pipe, USA, L.P. v. ISMT Ltd., 071917 FED5, 16-20293

Docket Nº:16-20293
Opinion Judge:PER CURIAM:
Party Name:JOY PIPE, USA, L.P., Plaintiff - Appellant Cross-Appellee v. ISMT LIMITED, Defendant-Appellee Cross-Appellant
Judge Panel:Before STEWART, Chief Judge, and WIENER and PRADO, Circuit Judges.
Case Date:July 19, 2017
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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JOY PIPE, USA, L.P., Plaintiff - Appellant Cross-Appellee

v.

ISMT LIMITED, Defendant-Appellee Cross-Appellant

No. 16-20293

United States Court of Appeals, Fifth Circuit

July 19, 2017

Appeals from the United States District Court for the Southern District of Texas USDC No. 4:13-CV-2153

Before STEWART, Chief Judge, and WIENER and PRADO, Circuit Judges.

PER CURIAM: [*]

The dispute in this case stems from delivery of nonconforming steel bought by Plaintiff-Appellant Joy Pipe USA, L.P. ("Joy Pipe"), manufactured in India by Defendant-Appellee ISMT Limited ("ISMT"), and brokered in the United States by Fremak Industries ("Fremak"). The steel was marked as being of a higher grade than it actually was, and Joy Pipe, not observing any error, sent the steel to be transformed into couplings that were in turn sold to others in Joy Pipe's supply chain. Eventually, these steel couplings were placed deep inside two producing wells. These wells failed due to malfunction caused by the couplings, leading Joy Pipe to incur substantial costs in mitigation. Joy Pipe filed suit against ISMT, and a jury found in favor of Joy Pipe on claims for breach of the implied warranties of merchantability and fitness for a particular purpose. Nevertheless, the district court declined to adjust the award amount to include prejudgment interest, post-judgment interest, or taxable costs. Joy Pipe appeals on these grounds, and ISMT cross-appeals, raising other issues. We AFFIRM in part and REMAND in part.

I. Background

The parties largely agree on the sequence of events culminating in this appeal. Plaintiff-Appellant Joy Pipe is a Texas limited liability company specializing in the business of selling quality steel couplings for use in oilfield drilling operations.1 It purchases the steel for these couplings and ships it to its fabricator, Texas Couplings, L.P., for machining. Defendant-Appellee ISMT is a company registered in India that manufactures tubular steel stock used in fabricating steel couplings. Defendant Fremak is a New York corporation that distributes steel stock to fabricators. On July 29, 2010, Joy Pipe contracted with Fremak to purchase grade P-110 steel coupling stock manufactured by ISMT. The steel was shipped directly to Texas Couplings, machined into couplings, and sold to customers of Joy Pipe. Joy Pipe's customers in turn sold the couplings to other companies in a supply chain that ended with two well owners, Vermilion Resources and NuVista Energy.

Joy Pipe was notified of a well failure at the Vermilion well in August 2012, and was notified of another failure at the NuVista Well in March 2013. After learning of the Vermilion well failure, Joy Pipe, through Texas Couplings, investigated the couplings they had supplied to two of Joy Pipe's customers-Welded Tube and Laguna Tubular. In particular, the entities relied on the conclusions of third-party investigator Acuren Group, Inc. ("Acuren"), which identified the cause of the failure as a defective coupling manufactured from ISMT stock that was represented to be grade P-110, but which in fact displayed a hardness and microstructure typical of a much lower grade. The failure at the NuVista well was also alleged to have resulted from a failed coupling, prompting Joy Pipe to engage in further mitigation efforts at its own expense. In particular, Joy Pipe paid $520, 058 to Texas Couplings for expenses incurred in locating non-conforming steel, and allowed Welded Tube-which incurred losses in repairs, investigation, and removal-to withhold $1, 779, 514.38 on amounts otherwise owed to Joy Pipe.

Joy Pipe filed suit in federal district court against Fremak and ISMT, alleging breach of contract, breach of implied and express warranties, strict liability, negligence, and negligent misrepresentation. It sought damages for mitigation costs incurred by Joy Pipe, the amount Welded Tube withheld from Joy Pipe, the value of the defective steel, loss of business opportunity and lost profits, attorneys' fees, costs, prejudgment interest, and post-judgment interest. All parties agreed on the applicability of Texas law.

On December 8, 2014, the district court dismissed Joy Pipe's claims for strict liability, negligence, and negligent misrepresentation, leaving the breach of warranty claims to proceed. The case proceeded to trial in late October and early November 2015. After trial, the jury returned a verdict finding that ISMT had breached the implied warranty of merchantability and implied warranty of fitness for a particular purpose and was liable for damages totaling $2, 299, 572.38. Joy Pipe filed a motion to enter judgment and included a proposed final judgment providing for prejudgment interest as well as court costs and post-judgment interest, to which ISMT responded. The district court then entered two orders, one summarily denying several motions, and the other entering final judgment pursuant to the jury verdict, without any mention of interest or costs. After denial of its motion to amend the judgment- along with ISMT's motion for judgment as a matter of law or for a new trial- Joy Pipe filed this appeal. ISMT then filed a cross-appeal.

II. Discussion

A. Prejudgment Interest

This court reviews a district court's ruling on prejudgment interest for abuse of discretion. Reyes-Mata v. IBP, Inc., 299 F.3d 504, 507 (5th Cir. 2002) (per curiam).

1. Legal Standard

"Prejudgment interest is 'compensation allowed by law as additional damages for lost use of the money due as damages during the lapse of time between the accrual of the claim and the date of judgment.'" Johnson & Higgins of Tex., Inc., v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998) (quoting Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 552 (Tex. 1985)). "The Texas Supreme Court has recognized two separate bases for the award of prejudgment interest: (1) an enabling statute; and (2) general principles of equity." Int'l Turbine Servs. v. VASP Brazilian Airlines, 278 F.3d 494, 499 (5th Cir. 2002). Statutory prejudgment interest is available only with respect to judgments in wrongful death, personal injury, property damage, and condemnation cases. Id. On the other hand, equitable prejudgment interest, which focuses on the need to compensate a plaintiff for the defendant's beneficial use of the damage funds between the time the injury occurred and the time the judgment was rendered, is available as a matter of course, absent exceptional circumstances. See Concorde Limousines, Inc. v. Moloney Coachbuilders, Inc., 835 F.2d 541, 549 (5th Cir. 1987); see also Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 75 F.3d 1048, 1057 (5th Cir. 1996); Am. Int'l Trading Corp v. Petroleos Mexicanos, 835 F.2d 536, 541 (5th Cir. 1987).

Although the precise contours of what constitutes an exceptional circumstance have not been wholly defined, our cases applying Texas law clarify the following rules: (1) exceptional circumstances exist for reducing an award of interest, "even to the point of elimination, " only if "the trial court cannot address through other means any equitable concerns that favor the defendant"; and (2) "[i]f a trial court finds such exceptional circumstances, it should explain them." Concorde Limousines, 835 F.2d at 549 (citing Cavnar...

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