Strickland Tower Maintenance, Inc. v. AT & T Communications, Inc.

• Decision Date: 04 November 1997
• Docket Number: 96-5167,Nos. 96-5150,s. 96-5150
• Citation: 128 F.3d 1422
• Parties: 97 CJ C.A.R. 2693, 97 CJ C.A.R. 2975 STRICKLAND TOWER MAINTENANCE, INC., an Oklahoma Corporation, Plaintiff-Appellee, Cross-Appellant, v. AT&T COMMUNICATIONS, INC., a Delaware Corporation, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1422

128 F.3d 1422

97 CJ C.A.R. 2693, 97 CJ C.A.R. 2975

STRICKLAND TOWER MAINTENANCE, INC., an Oklahoma Corporation Plaintiff-Appellee, Cross-Appellant, v. AT&T COMMUNICATIONS, INC., a Delaware Corporation Defendant-Appellant, Cross-Appellee.

Nos. 96-5150, 96-5167.

United States Court of Appeals Tenth Circuit.

Nov. 4, 1997.

Jonathan C. Neff (Kenneth L. Brune with him on the briefs), Brune & Neff, P.C., Tulsa, OK, for Defendant-Appellant.

Craig W. Hoster (Barbara J. Eden with him on the briefs), Baker & Hoster, Tulsa, OK, for Plaintiff-Appellee.

Before PORFILIO, ANDERSON, and TACHA, Circuit Judges.

TACHA, Circuit Judge.

Defendant AT&T Communications, Inc. appeals from an adverse jury verdict and award of attorney's fees in this contract action. Plaintiff Strickland Tower Management ("STM") cross appeals for, among other things, prejudgment interest on its damages. We take jurisdiction of this matter pursuant to 28 U.S.C. § 1291. We now affirm in part and reverse in part.

Background

For 25 years preceding this dispute, STM performed services for AT&T on a number of different contracts. These contracts were STM's largest source of revenue. From 1988-91, payments from AT&T constituted 90 percent of STM's total income.

In the summer or fall of 1990, STM and AT&T discussed the possibility of STM's overseeing the burying of a 46-mile-long fiber-optic cable in the St. Louis, Missouri area. As part of its work on the project--known as the Florissant-Hillsboro Lightguide Project--STM would be required to provide many services, including oversight of the project's construction crews. During the preliminary discussions, an AT&T representative informed STM that STM could use "recorders" instead of "inspectors" to supervise the crews. Recorders are a less skilled, and consequently less expensive, class of laborers than inspectors. STM relied on AT&T's comment about recorders in submitting its proposal for the project.

In December of 1990, the parties signed a contract for STM's services on the Lightguide Project. The contract set STM's compensation at 23.5 percent of the "total project cost." The contract did not define "total project cost" but did place responsibility for calculating the total cost with AT&T. The contract also contained an incentive; STM would receive an additional 1 percent of the total project cost if STM kept that cost at less than 2 percent above the "bid price."

In 1991, after the project had begun, AT&T representatives met with STM authorities. At that meeting, AT&T declared that they wanted inspectors to be used on the job, not recorders. AT&T also demanded that an AT&T representative manage the project from that time forward. This demand conflicted with the terms of the contract, which gave STM management responsibility over the project. According to Clyde Strickland, owner of STM, AT&T assured STM at the meeting that STM would receive future work to cover any losses resulting from the proposed changes. ¹ STM officials interpreted this comment as a threat that if STM did not make the changes, AT&T would not give them future work. STM then agreed to the changes.

The parties met in Tulsa in August 1992 after STM had completed the project. There, AT&T informed STM that the total project cost was $6,514,891. AT&T subsequently compensated STM based on that figure. Later, STM discovered an internal AT&T accounting record, known as the "FD-10," which indicated that the total cost of the Lightguide Project was actually $7,229,874. AT&T accounts for the difference between the figure it gave at the Tulsa meeting and the higher one in the FD-10 by noting that the FD-10 includes many of AT&T's internal expenses that the parties did not intend to include in the contract's "total project costs."

STM filed suit against AT&T based on a variety of contract, fraud, and tort claims. The district court granted AT&T summary judgment on all but three of STM's claims, which went to trial. First, STM asserted that AT&T committed actual fraud by misrepresenting the "total project cost." Second, STM asserted that AT&T breached the written contract by paying STM 23.5 percent of $6,514,891 rather than 23.5 percent of $7,229,874, the real "total project cost." Finally, STM asserted that AT&T used economic duress to force STM to agree to use inspectors and hand control over the project to AT&T.

The jury found against STM on actual fraud but awarded it $470,601 in restitutionary damages on the economic duress claim and $172,973 for AT&T's breach of the written contract. The district court then denied AT&T's motion for judgment as a matter of law on economic duress and breach of contract. The district court also granted STM $118,690 in attorney's fees relating to the breach of contract claim but denied STM's request for prejudgment interest.

AT&T presents three major issues on appeal and STM raises one major issue on cross appeal. AT&T appeals the district court's refusal to grant it judgment as a matter of law on STM's claims of economic duress and breach of written contract. Also, if we do not grant AT&T judgment as a matter of law for breach of contract, AT&T urges this court to reverse the award of attorney's fees related to that claim. In its cross appeal, STM asks us to award it prejudgment interest on the jury verdicts for economic duress and breach of contract. The parties presented several additional arguments in their appeals. We address those arguments after discussing the four issues noted above.

Discussion

The district court applied Oklahoma law to this case and neither party challenges that finding on appeal. Therefore, we accept the view of the district court that Oklahoma law applies. See Jordan v. Bowen, 808 F.2d 733, 736 (10th Cir.1987) ("Appellants who fail to argue [an] issue in their brief are deemed to have waived [it] on appeal.").

I. AT & T's Appeals for Judgment as a Matter of Law

A. Standard of Review

First, we address AT&T's appeal of the district court's denial of judgment as a matter of law on both the economic duress claim and the breach of written contract claim. "We review de novo the district court's determination of a motion for judgment as a matter of law, applying the same standard as the district court." Mason v. Oklahoma Turnpike Authority, 115 F.3d 1442, 1450 (10th Cir.1997). A party can obtain judgment as a matter of law in its favor "only if the proof is all one way or so overwhelmingly preponderant in favor of the movant as to permit no other rational conclusion." Conoco Inc. v. ONEOK, Inc., 91 F.3d 1405, 1407 (10th Cir.1996) (quotations omitted). Using this standard, a court will not substitute its conclusions for that of a jury but must enter judgment as a matter of law "if 'there is no legally sufficient evidentiary basis ... with respect to a claim or defense ... under the controlling law.' " Mason, 115 F.3d at 1450 (quoting Harolds Stores, Inc. v. Dillard Dep't Stores, Inc., 82 F.3d 1533, 1546-47 (10th Cir.1996)).

B. Economic Duress

We hold that under the controlling Oklahoma law, STM failed to provide legally sufficient evidence of economic duress. The doctrine of economic duress grew from a narrow band of cases that provided relief from contracts secured through actual imprisonment or threats to the reluctant contracting party's life or limb. See John D. Calamari & Joseph M. Perillo, CONTRACTS § 9-2 (3d ed.1987). The doctrine has evolved into one that seeks to "impos[e] ... certain minimal standards of business ethics in the market place." Centric Corp. v. Morrison-Knudsen Co., 731 P.2d 411, 413 (Okla.1986). One must read this statement in light of the doctrine's historically limited scope and the fact that ordinary "[h]ard bargaining ... [is] acceptable, even desirable, in our economic system" and should not be discouraged by the courts. Id. 731 P.2d at 413-14.

In Oklahoma, economic duress allows a party to avoid a contract that it has entered if a "wrongful act [of the other party was] sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative to succumb to the perpetrator's pressure." Id. 731 P.2d at 416. As that rule suggests, a party seeking to prove economic duress must prove that the defendant committed a wrongful act. More importantly, however, the plaintiff must also show a causal relationship between the bad act and the contract at issue. The defendant's bad act, not something else, must have forced the plaintiff to sign the burdensome contract. As the Centric court stated, "the coercing party has been subjected to legal sanctions if ... its actions or threats caused impaired bargaining power...." Id. (emphasis added).

A litigant cannot, therefore, make out a claim of economic duress by alleging merely that the opposing party took advantage of her weak negotiating position or because of "business necessities." Id. at 417; accord Bell v. United States, 380 F.2d 682, 686 (10th Cir.1967) (" 'The assertion of duress must be proven by evidence that the duress resulted from defendant's wrongful and oppressive conduct and not by plaintiff's necessities.' " (quoting W.R. Grimshaw Co. v. Nevil C. Withrow Co., 248 F.2d 896, 904 (8th Cir.1957))). An independent contractor's dependence on one particular source of employment is just such a business necessity. That dependence may allow the employer to squeeze uncomfortable concessions out of the contractor during business negotiations. It does not, however, result from any wrongful act of the employer. Therefore, it is not the basis for avoiding any resulting contracts.

In Sinclair Refining Co. v. Roberts, 201 Okla. 358, 206 P.2d 193 (1949), cited by the Centric court, 731 P.2d at 416 n. 16, a distributor had continually agreed to decrease its contract prices for one wholesaler whenever the wholesaler threatened to remove its business. The court found that the distributor's weak bargaining position did not justify recision of the modified contracts. See ...