Stores v. Qore Inc.

• Decision Date: 19 July 2011
• Docket Number: No. 10–60266.,10–60266.
• Parties: WAL–MART STORES, INCORPORATED, Plaintiff–Appelleev.QORE, INC., Defendant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

647 F.3d 237

WAL–MART STORES, INCORPORATED, Plaintiff–Appellee

v.QORE, INC., Defendant–Appellant.

No. 10–60266.

United States Court of Appeals, Fifth Circuit.

July 19, 2011.

Roy Michael Northrup (argued), Cowles & Thompson, P.C., Dallas, TX, Raymond L. Brown, Brown Buchanan, P.A., Pascagoula, MS, James Edgar Cowles, Sim David Isrealoff, Cowles & Thompson, P.C., Dallas, TX, for Plaintiff–Appellee.Robert O'Neal Fleming, Jr. (argued), Joseph Charles Staak, Smith Currie & Hancock, L.L.P., Atlanta, GA, Dorsey Reese Carson, Jr., Burr & Forman, L.L.P., Jackson, MS, Patrick Patronas, Lloyd, Gray & Whitehead, P.C., Birmingham, AL, for Defendant–Appellant.Appeal from the United States District Court for the Northern District of Mississippi.Before GARZA, STEWART, and HAYNES, Circuit Judges.EMILIO M. GARZA, Circuit Judge:

Qore, Inc. appeals from the district court's award of attorney's fees to Wal–Mart Stores, Inc. The court's $810,000 fee award ordered Qore to reimburse Wal–Mart for nearly all the attorney's fees it incurred in prosecuting this case. The award included reimbursement for those legal fees incurred by Wal–Mart on its unsuccessful claims, as well as Wal–Mart's attorney's fees for claims brought against third parties, one of which was absolved of all liability at trial. This appeal requires us to determine whether, under Mississippi law, the contractual agreement between Wal–Mart and Qore permits for an award of attorney's fees, and if so, whether the district court's $810,000 fee award was an abuse of discretion.

I

Wal–Mart hired three firms to assist with the design and construction of a new store in Starkville, Mississippi. The land on which the store was to be built contained a layer of clay just below the surface that was prone to expand when subjected to moisture. Wal–Mart retained a geotechnical services firm, Qore, Inc., to investigate the land and provide a design that would allow for construction on the site. Under this agreement (“the geotechnical services contract”), Qore furnished a preliminary design for preparation and construction of a subsurface base—a buffer of fill-type material placed between the expansive clay and the surface—that would protect against any problems due to the clay and ensure a minimum design life of twenty years for the buildings and pavement placed on the surface.

At the same time, Wal–Mart retained a civil engineering firm, Sain Associates, Inc. (“Sain”), to provide a critical appraisal of Qore's design and recommendations. If Sain was satisfied with the design, it was to prepare the final plans and specifications to be used for site preparation, including the subsurface grade and base, as well as the final plans to be used in constructing the building and pavement (including the parking areas).

Lastly, Wal–Mart retained a general contractor, Shannon, Strobel & Weaver Construction & Engineers, Inc. (“SSW”), to actually construct the building and pavement as specified by Sain's plans. By separate agreement (“the testing and inspection contract”), Wal–Mart retained Qore to serve as the testing and inspection firm during construction to make sure that the plans and specifications prepared by Sain were followed.

Two and a half years after all parties finished their work and the new store opened, Wal–Mart began observing signs of stress and failure within the building and parking lot. Wal–Mart sued all three contracting firms for breaches of contract and negligence, seeking over $11.8 million in damages—$5.35 million for the cost of repairing the building and parking lot, and $6.5 million for the diminished value of the new building.

After a twelve-day trial, the district court charged the jury with assessing liability and damages in three categories: damage to the building, damage to the parking lot, and diminution in the building's value. On the issue of damage to the building, the jury found Qore and SSW both liable, assigning 10% of fault to Qore and 90% of fault to SSW. The jury awarded damages in the amount of $486,000 on this issue. Qore was responsible for $48,600 of this amount.

For damage to the parking lot, the jury found SSW 50% liable and Wal–Mart 50% liable. The jury awarded Wal–Mart approximately $1.6 million in damages here. Discounting for Wal–Mart's contributory negligence, SSW was responsible for roughly $797,500 of the total damages award on this claim.

And on the issue of diminution in building value, the jury found that none of the three contracting firms were liable, and thus, no damages were awarded in this category.

The jury rejected all claims of liability brought against Sain. The jury also determined that Qore's 10% liability on the building repair claim was attributable entirely to its work performed under the testing and inspection contract. The jury attributed no fault to Qore for its work completed under the geotechnical services contract.

Both of the contracts between Wal–Mart and Qore discussed attorney's fees. The geotechnical services contract provided that: “Each party shall bear its own expenses of litigation (including without limitation attorneys' fees), without regard to which is the prevailing party.” But the testing and inspection contract included an indemnification clause that covered attorney's fees:

The Testing and Inspection Firm [Qore] further agrees to indemnify and hold Wal–Mart free and harmless from any claim, demand, loss, damage, or injury (including Attorney's fees) caused by any negligent act or omission by the Testing and Inspection Firm, its agents, servants, or employees.

This contract provision is the focal point in this appeal.

By post-trial motion, Wal–Mart sought to recover from Qore all its attorney's fees incurred in this litigation—on all claims, successful and unsuccessful, and against all parties—which amounted to $990,000. In ruling on the motion, the district court opined that “[i]t might appear ... [that] attributing the entirety of that $990,000 to Qore, who is only liable for $48,600 in damages is unreasonable. However, attributing the whole of the reasonable attorney's fees to Qore is supported by Fifth Circuit case law.” ¹ The district court granted Wal–Mart's request for attorney's fees, but reduced the award to $810,000 by adjusting the lodestar rate and reducing for some excessive billing. This appeal followed.

II

Qore asks us to vacate the district court's fee award on three grounds. First, it argues that the indemnity provision at issue does not apply in this first-party dispute between Wal–Mart and Qore, but is instead limited to claims brought against Wal–Mart by third parties. Second, Qore claims that Mississippi law precludes an award of attorney's fees because Wal–Mart did not present competent evidence by which to allocate its fee request between successful and unsuccessful claims. Third, Qore maintains that the district court erred in holding it liable for the entirety of Wal–Mart's attorney's fees for all matters related to this litigation.² We note that Qore's second and third assignments of error present the same basic question: whether, under the facts presented here, Wal–Mart's recovery of attorney's fees should be limited to those claims upon which it prevailed against Qore at trial.

A

The district court's interpretation of a contract is a question of law that we review de novo. See A & F Props., LLC v. Madison Cnty. Bd. of Supervisors, 933 So.2d 296, 301 (Miss.2006); Nolan v. Golden Rule Ins. Co., 171 F.3d 990, 992 (5th Cir.1999). In conducting our review, we examine the record independently and under the same standards that guided the district court. See Nolan, 171 F.3d at 992. “This broad standard of review includes the initial determination of whether the contract is ambiguous.” Am. Totalisator Co. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir.1993).

In this diversity case, where Mississippi law supplies the rule of decision, “[s]tate law controls both the award of and the reasonableness of fees awarded.” Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir.2002). Thus, we review the district court's award of attorney's fees for an abuse of discretion, “such as misapplication of the law or an unreasonable decision in light of the alternatives.” Cruse v. Nunley, 699 So.2d 941, 944 (Miss.1997); see also Deer Creek Constr. Co. v. Peterson, 412 So.2d 1169, 1173 (Miss.1982) (“We will not reverse the trial court on the question of attorney's fees unless there is a manifest abuse of discretion in making the allowance.”). The district court's discretion “must be exercised within the bounds of applicable state law, and fee awards which contravene state law cannot be upheld on appeal.” Shelak v. White Motor Co., 636 F.2d 1069, 1072 (5th Cir.1981). The court's conclusions of law underlying the fee award are reviewed de novo. See Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277, 297 (5th Cir.2007).

B

Qore contends that the indemnity provision in the testing and inspection contract only applies to actions brought against Wal–Mart by independent third-parties. Relying on common law indemnity rules, Qore argues that the provision does not authorize an award of attorney's fees in this first-party dispute between Wal–Mart and Qore. Qore acknowledges that in Mississippi parties can contract for broader indemnity rights than those encompassed by common law indemnity rules, but it argues that the parties did not do so here. In response, Wal–Mart maintains that the plain language of the indemnity provision provides for those attorney's fees incurred in any case, whether brought by one of the contracting parties or otherwise, to the extent that Qore's negligence precipitated the underlying suit. The district court applied a plain reading of the testing and inspection contract and found that, as a threshold matter, it allowed for recovery of Wal–Mart's reasonable attorney's fees. We agree.

Under Mississippi law, where the words of a contract are clear and explicit and...