Technical Consultant Services, Inc. v. Lakewood Pipe of Texas, Inc.

• Decision Date: 20 December 1988
• Docket Number: No. 87-2947,87-2947
• Citation: 861 F.2d 1357
• Parties: TECHNICAL CONSULTANT SERVICES, INC., and Dr. I.H. Rubaii, Plaintiffs-Appellees, v. LAKEWOOD PIPE OF TEXAS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1357

861 F.2d 1357

TECHNICAL CONSULTANT SERVICES, INC., and Dr. I.H. Rubaii Plaintiffs-Appellees, v. LAKEWOOD PIPE OF TEXAS, INC., Defendant-Appellant.

No. 87-2947.

United States Court of Appeals Fifth Circuit.

Dec. 20, 1988.

Rehearing Denied Jan. 19, 1989.

Donald M. Hunt, Aubrey J. Fouts, Carr, Evans, Fouts & Hunt, Lubbock, Tex., for defendant-appellant.

John R. Ferguson, Elaine R. Lubin, Swidler & Berlin, Washington, D.C., for plaintiffs-appellees.

Appeals from the United States District Court For the Southern District of Texas.

Before GOLDBERG, HIGGINBOTHAM and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Appellant, Lakewood Pipe of Texas, challenges the judgment entered against it on a jury finding that it breached a contract to guarantee commissions appellee Technical Consultant Services earned in arranging a sale in Iraq. We affirm that portion of the judgment predicated on the jury's finding that Lakewood breached its contract. However, we remand to permit the district court to recompute prejudgment interest due on the award.

I.

This dispute arose from a $1.3 million sale of irrigation pipe to Iraq in 1975. The sale's genesis dates to spring 1974, when representatives of Federal Supply, Inc., a Florida-based distributor of plastic irrigation equipment for lawns and golf courses, met Dr. I.H. Rubaii at a trade show. Rubaii, a naturalized American citizen born in Iraq, sought to promote trade between America and oil-rich Iraq through his company, Technical Consultant Services, Inc. (TCS). Rubaii's primary business contact in Iraq was his brother, Abdul Al-Rubaii, an attorney, banker and businessman who ran his own consulting firm in Baghdad called the Arab Bureau.

After several months of informal dealings, during which Rubaii obtained bid specifications for Iraqi government projects through the Arab Bureau and passed them on to Federal, Rubaii signed an agency contract with Federal on September 12, 1974. Rubaii agreed to establish contracts for Federal in return for ten percent of each contract's face value and fifty percent of Federal's gross profit on each contract. Around this time, Rubaii supplied a bid specification for metal irrigation pipe from the Iraqi Ground Water Administration. Federal thought this contract matched its expertise closely enough to make pursuit worthwhile.

Rubaii, the Arab Bureau and Federal spent the next several weeks pursuing the Iraqi irrigation contract together. Rubaii and the Arab Bureau provided visas for Federal's officers; wrote a letter of introduction; and set up an appointment with the Ground Water Administration's chief engineer. Federal's president and vice president spent fourteen days in Iraq in November 1974 but were unable to obtain a signed contract. At trial, Federal's vice president described the trip as a failure; Rubaii described it as the first step toward consummating the contract, before which Federal and Iraqi officials needed to iron out technical differences over the pipe.

Relations between Federal and Rubaii cooled after the first trip. Although Rubaii continued to send inquiries and information about the pipe contract to Federal during December 1974 and January 1975, Federal had stopped communicating with Rubaii by mid-December. Federal, however, continued to pursue a pipe contract with the Iraqi officials. In early December, Federal contacted Lakewood Pipe of Texas, a pipe supplier based in Lubbock, Texas, for price quotations. These were finalized by December 19, 1974.

Federal asserted that in mid-January it received an unsolicited call from Mohammed Hammoud, a commercial broker based in Beirut, who offered to set up a separate pipe deal with Iraq. Rubaii claims that during December 1974 and January 1975, Federal and the Iraqis merely worked out technical and pricing differences involving the same contract they had discussed in November. In any event, Federal's vice president made a second trip to Iraq in mid-January; Federal and the Iraqi Ground Water Administration signed a $1,357,912.70 contract for the sale of irrigation pipe on January 29, 1975.

Federal's financial situation had deteriorated steadily during its pursuit of an Iraqi supply contract. Unable to put up a performance bond--or, according to Federal, pay Hammoud's fee--Federal asked Lakewood on January 20, 1975, to provide letters of credit for these obligations in return for Federal's promise to place its pipe order with Lakewood. Lakewood agreed and the deal was sealed. Federal and Lakewood formalized their arrangement in an "Agreement and Assignment" dated February 8, 1975, under which Federal assigned Iraq's $1.3 million letter of credit to Lakewood and Lakewood guaranteed Federal's performance, expenses and obligations in connection with the pipe contract.

In April 1975, Lakewood sent $35,000 to Federal as "an advance against profit." Federal's vice president testified that Federal's president told Lakewood the money was for payment of an unnamed agent in Florida. When Federal made no move to ship the pipe to Iraq after Lakewood delivered it in June 1975, Lakewood assumed performance of the January 29, 1975 contract, shipped the pipe to Iraq, and collected Iraq's payment. Lakewood remitted nothing further to Federal, claiming that shipping and other expenses had consumed the entire difference between Iraq's letter of credit and Lakewood's own $1 million bill for supplying the pipe. Federal ultimately went bankrupt in early 1976.

Rubaii badgered Federal unsuccessfully throughout 1975 to pay him a commission on the Iraqi pipe sale, and later pursued claims in bankruptcy court. Rubaii first learned of Lakewood and the guaranty contract when he met with Lakewood officials, ostensibly on unrelated business, in March 1976. He then sought payment of Federal's commission from Lakewood under the February 8, 1975 guaranty contract. Rubaii sued Lakewood for payment of the commission in Florida state court on April 5, 1979.

The parties tried the case to a federal jury in the Southern District of Texas in March 1987. The jury found that (1) Rubaii performed his obligations under the Federal-Rubaii brokerage contract in arranging the Iraqi pipe sale; (2) Rubaii was a third party beneficiary under the Federal-Lakewood guaranty contract; and (3) Lakewood owed Rubaii $135,791.27 for his ten percent commission. The district court held that the Federal-Rubaii brokerage contract entitled Rubaii to attorney's fees and eighteen percent annual prejudgment interest dating to September 23, 1975, for a total recovery of $587,066.24.

II.

A.

In its initial attack, Lakewood argues that the statute of limitations bars Rubaii's claim. Under the Federal-Rubaii brokerage contract, Rubaii's cause of action accrued September 23, 1975. Rubaii filed the present suit in the Southern District of Texas in 1983--long after Texas' four-year statute of limitations ran. However, we affirm the district court's conclusion that the Texas "wrong court" saving statute, which stops the clock for parties who file unintentionally in a court without jurisdiction, defeats Lakewood's statute of limitations defense.

This case owes much of its thirteen-year lifespan to a dispute about Florida courts' personal jurisdiction over Lakewood, a Texas corporation. Rubaii--whose TCS corporation is based in Florida, as was Federal--has filed three suits against Lakewood. He filed the first in April 1979 in Florida state court. A Florida appellate court affirmed dismissal for lack of personal jurisdiction over Lakewood in December 1979. However, the appellate court permitted Rubaii to submit supplemental proof of jurisdiction; it affirmed dismissal on appeal after remand in January 1981.

Rubaii filed his second suit on August 8, 1980, in U.S. District Court in Florida. On February 14, 1983, the Eleventh Circuit upheld dismissal of this suit for lack of personal jurisdiction. The Eleventh Circuit treated the state court's jurisdictional ruling on Rubaii's contract claims as res judicata. The court also dismissed Rubaii's newly raised tort claims for lack of personal jurisdiction over Lakewood. On February 17, 1983, Rubaii filed his third suit, now on appeal to us, in the Southern District of Texas.

To avoid the statute of limitations bar, Rubaii must show that his delay comes under the Texas saving statute. Tex.Rev.Civ.Stat.Ann. art. 5539a (Vernon 1958), which was in effect when the trial court ruled on this issue, provides:

When an action shall be dismissed in any way ... because of a want of jurisdiction of the Trial Court ... and within sixty (60) days after such dismissal or other disposition becomes final, such action shall be commenced in a Court of Proper Jurisdiction, the period between the date of first filing and that of commencement in the second court shall not be counted as a part of the period of limitation unless ... the first filing [was] in intentional disregard of jurisdiction.

Lakewood argues that 5539a does not apply because Rubaii filed his second suit in a court of improper jurisdiction, the Middle District of Florida. We know of no Texas cases that have resolved the application of 5539a to a trilogy of suits such as this. Lakewood points to several opinions--none from Texas or the Fifth Circuit--involving other saving statutes for the proposition that plaintiffs get only one extra chance to file.

However, in resolving other 5539a questions the Texas courts and Fifth Circuit generally have stressed that the provision's remedial nature requires liberal construction. See Griffen v. Big Spring Indep. School Dist., 706 F.2d 645, 651 (5th Cir.), cert. denied, 464 U.S. 1008, 104 S.Ct. 525, 78 L.Ed.2d 709 (1983); Republic National Bank v. Rogers, 575 S.W.2d 643, 647 (Tex.Civ.App.--Waco 1978, writ ref'd n.r.e.); Burford v. Sun Oil Co., 186 S.W.2d 306, 310 (Tex.Civ.App.--Austin 1944, writ ref'd w.m.). "[5539a] should therefore be given a liberal construction with a view of...