Leasehold Expense Recovery v. Mothers Work, Inc., 01-11392.

• Decision Date: 19 May 2003
• Docket Number: No. 01-11392.,01-11392.
• Citation: 331 F.3d 452
• Parties: LEASEHOLD EXPENSE RECOVERY, INC., Plaintiff-Appellant, v. MOTHERS WORK, INC.; Mothers Work (RE) Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

331 F.3d 452

LEASEHOLD EXPENSE RECOVERY, INC., Plaintiff-Appellant, v. MOTHERS WORK, INC.; Mothers Work (RE) Inc., Defendants-Appellees.

No. 01-11392.

United States Court of Appeals, Fifth Circuit.

May 19, 2003.

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Timothy Toyn Mitchell (argued), Donna Kaye Rashti, Rashti & Mitchell, Dallas, TX, for Plaintiff-Appellant.

Eric Thomas Stahl (argued), Vinson & Elkins, Dallas, TX, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before BENAVIDES and DENNIS, Circuit Judges, and WALTER^*, District Judge.

BENAVIDES, Circuit Judge:

This appeal concerns the interpretation of a contingency fee contract under Texas law. The appellant claims that the district court erred in entering judgment for the appellees on its breach of contract claims, conspiracy claim, and claim for recovery in quantum meruit.

I. Background

Appellant Leasehold Expense Recovery, Inc. ("LER") is in the business of reviewing retail leases for overcharges. Appellees Mothers Work, Inc. and Mothers Work (R.E.) Inc. (collectively "Mothers") sell maternity clothing from retail stores operating from shopping malls throughout the country. On March 15, 1994, LER entered into a Contingent Fee Contract (the "Contract") with A Pea in the Pod ("APIP"), which thereafter merged with Mothers, who assumed APIP's rights and responsibilities under the Contract. Under the Contract drafted by LER, LER agreed to review sixty-three of APIP's leases with shopping malls to determine whether landlords were overcharging for rent and operating expenses. The Contract authorized LER to negotiate and collect upon a settlement regarding overcharges with each landlord, within certain limitations, and described the terms of LER's compensation. The Contract also included a provision regarding termination.

In 1994, LER reviewed twenty-one leases and found more than $500,000 in potential overcharges. Mothers eventually authorized LER to proceed with thirteen of the twenty-one audits. From 1996 to 1997, LER contacted landlords and attempted to recoup alleged overcharges on behalf of Mothers. However, all thirteen of the landlords refused to deal with LER without an authorization letter from Mothers. LER maintains that although Mothers repeatedly promised that such authorizations would be forthcoming, they were never provided. LER believes that Mothers used the knowledge of past overcharges to negotiate new, more favorable leases with its landlords on its own. Mothers refused to pay LER for its work, on the grounds that LER was not entitled to compensation under the terms of the Contract.

On January 10, 2000, LER sued Mothers in Texas state court for breach of contract, fraud, negligence, grossly negligent misrepresentation, and conspiracy. Mothers removed the claim to federal court, which has diversity jurisdiction. Mothers moved for summary judgment as to all of LER's causes of action. The magistrate judge prepared a report and order on April 27, 2001, recommending that the motion be granted in part and denied in part. The magistrate judge recommended that summary judgment be denied only with respect to LER's breach of contract claims concerning three stores. On July 26, 2001, the district court adopted the magistrate judge's report and recommendations in full. On August 20, 2001, the district court rejected LER's motion to reconsider the July 27, 2001 Order. Following a short bench trial on LER's remaining claims, the district court awarded Mothers judgment as a matter of law, save a $9,074.46 award concerning an amount that was uncontested.

II. Standard of Review

This court reviews a district court's grant of summary judgment de novo. Rivers v. Cent. and S.W. Corp., 186 F.3d 681, 682 (5th Cir.1999). Summary judgment is appropriate, when, viewing the evidence in the light most favorable to the nonmoving party, the record reflects that no genuine issue of any material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-324, 106 S.Ct. 2548, 91 L.Ed.2d 265, (1986); Sulzer Carbomedics, Inc., 257 F.3d at 456. See also Transitional Learning Cmty. at Galveston, Inc. v. U.S. Office of Pers. Mgmt., 220 F.3d 427, 429 (5th Cir.2000). A material fact is one that "might affect the outcome of the suit under the governing law" and a "dispute about a material fact is `genuine' ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Sulzer Carbomedics, Inc., 257 F.3d at 456 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

Challenges to the district court's determinations of fact following a bench trial are reviewed for clear error, and conclusions of law are reviewed de novo. Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir.2000). Since this case comes to the court through diversity jurisdiction, the substantive law of Texas applies. Id.; See Erie R.R. v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

III. Breach of Contract Claims

"Under Texas law, the interpretation of an unambiguous contract, as well as the determination of whether or not a contract is ambiguous, is a legal question." Steuber Co. v. Hercules Inc., 646 F.2d 1093, 1098 (5th Cir.1981). If the contract terms are susceptible to only one reasonable construction, the contract is unambiguous and will be enforced as written. Guaranty Nat. Ins. Co. v. Azrock Industries Inc., 211 F.3d 239, 243 (5th Cir.2000).

In contract disputes, the court's primary concern is to give effect to the written expression of the parties' intent. Nat'l Union Fire Ins. Co. v. Care Flight Air Ambulance Service, Inc., 18 F.3d 323, 328-29 (5th Cir.1994). In doing so, the court reads all parts of the contract together to ascertain the agreement of the parties, ensuring that each provision of the contract is given effect. Id. at 329; Kona Tech. Corp., 225 F.3d at 610; Sulzer Carbomedics, Inc. v. Oregon Cardio-Devices, Inc., 257 F.3d 449 (5th Cir.2001).

A. Under the Contract, is LER entitled to compensation for overcharges discovered, but not recovered?

1. Substantive Claim

LER contends that, by the plain terms of the Contract, the district court erred in granting summary judgment to Mothers regarding eighteen stores, and judgment as a matter of law following a bench trial regarding three stores, with respect to overpaid charges that it discovered regarding all of the twenty-one stores. LER contends that the plain terms of the Contract entitle it to compensation for discovered overcharges, regardless of whether Mothers actually recovered any of the overpayments. Mothers responds that the district court properly held that the Contract unambiguously assigns LER a 50% interest only in those overpaid charges that are actually recovered. Two sections of the Contract are particularly relevant to this dispute:

Article 1, Section 1.2, FEES. In consideration of the services rendered and to be rendered to the Client by LER, the Client does hereby assign, transfer and convey to LER as compensation herein, a fifty percent (50%) undivided interest in all overpaid Charges relating to each and every lease, including any other amounts recovered relating thereto, that:

(a) are actually recovered in cash, check or the like by Client;

(b) are recovered in the form of a credit to Client's account with any landlord pursuant to any lease; and (c) are otherwise recovered by Client. All compensation herein as stated in Sections 1.2(a) through 1.2(c) shall herein together constitute "LER Fees." LER Fees shall be paid to LER by Client within ten (10) days of Client's receipt of overpaid Charges on any lease, or the credit thereof.

. . .

Article 2, Section 2.1, TERMINATION. LER or Client may terminate this Agreement upon fifteen (15) days prior written notice by delivering said notice to Client. Said termination shall not affect the right of LER to collect LER Fees for any overpaid Charges either discovered or recovered as of the date of termination of this Agreement. Under all circumstances LER's right to collect LER Fees shall survive the expiration or termination of this Agreement.

The terms of the Contract unambiguously entitle LER to compensation only for those overpayments discovered by LER that Mothers actually recovers. While Article 1, Section 1.2 (hereinafter "Compensation Provision") states that LER is entitled to a fifty percent interest in all overpaid Charges, that right is subject to the satisfaction of subsections (a), (b), or (c), each of which require the Charges to be "recovered." We find without merit LER's contention that the three subsections were intended to relate solely to the phrase "including any other amounts recovered relating thereto," particularly given the placement of a comma (inserted by LER itself, as the drafter), following the word "thereto." The presence of the comma indicates that both the phrase "including any other amounts recovered relating thereto" and the earlier phrase "all overpaid Charges relating to each and every lease" are subject to the condition of recovery noted in subsections (a), (b) and (c).

Nor does Article II, Section 2.1 (hereinafter "Termination Provision"), support LER's argument that it is entitled to compensation for charges that Mothers has not recovered. The Termination Provision was clearly intended to preserve LER's right to compensation as described in the Compensation Provision, as reflected by its use of the term "LER Fees." The Compensation Provision unambiguously requires that Mothers actually recover on the discovered overpayments. By implication, the parties intended the Termination Provision to protect LER's right to compensation upon termination to the same degree. The phrase "discovered or recovered" in the Termination Provision was merely intended to protect LER's entitlement to compensation for overpaid charges that it discovered before termination, but were not recovered...