Transverse, LLC v. Iowa Wireless Servs., LLC
| Decision Date | 20 July 2019 |
| Docket Number | A-10-CV-517-LY |
| Parties | TRANSVERSE, LLC v. IOWA WIRELESS SERVICES, LLC |
| Court | U.S. District Court — Western District of Texas |
Before the Court are Plaintiff's Motion for Attorneys' Fees and Costs (Dkt. No. 393); Plaintiff's Motion for Leave to Amend its Complaint to Make Clear It Seeks Attorneys' Fees Under Contracts (Dkt. No. 394); IWS's Application for Attorneys' Fees and Costs (Dkt. No. 395); and all associated Responses and Replies. The undersigned submits this Report and Recommendation to the United States District Court pursuant to 28 U.S.C. § 636(b) and Rule 1(h) of Appendix C of the Local Court Rules.
Iowa Wireless Services, a wireless telephone services provider, hired Transverse, a software development company, to develop customized billing software. Transverse and IWS entered into two agreements: a "Contract for the Supply of: blee(p) Customer Care and Billing System" under which Transverse was to develop software for IWS; and a mutual Non-Disclosure Agreement dated March 3, 2009, under which IWS agreed to maintain the confidentiality of certain proprietary information of Transverse.
The parties' relationship broke down, and Transverse sued in Texas state court asserting IWS breached both the Supply Contract and the NDA, as well as tort claims for misappropriation of trade secrets, conversion, and violation of the Texas Theft Liability Act. On July 9, 2010, IWS removed to federal court on the basis of diversity and countersued for breach of the Supply Contract. The claims related to the breach of the Supply Contract were tried to a jury and the remaining claims1 were tried to the bench.
The jury found in favor of Transverse, determining that IWS breached the Supply Contract both by wrongfully terminating it and by violating an express prohibition to not give "a competitor access to the Service. " The jury awarded Transverse lost profit damages, reliance damages, and lost value damages for the "access to the Service" breach. However, the district court set aside the award for the "access to the Service" breach because it determined that it was not supported by legally sufficient evidence. The district court also ruled against Transverse on its tort claims and on its claim for breach of the NDA. The Final Judgment, awarding Transverse in excess of $11 million in damages, was entered by the district court on September 30, 2013. Dkt. No. 305. On October 15, 2013, both parties separately moved for attorneys' fees, arguing that Texas law applied, and that each was entitled to fees pursuant to Texas Civil Practice and Remedies Code § 38 .001 et seq. Dkt. Nos. 306 & 308. Transverse argued that it was entitled to fees because it prevailed on its Supply Contract claims, and IWS argued that it was entitled to fees because it successfully defended the NDA claim, and the tort claims were "subsumed under" the defense of that claim. Upon motion, the district court stayed execution of its judgment, Dkt. No. 321, and once the parties appealed, Dkt. No. 323, dismissed without prejudice the competing motions for attorneys' fees. Dkt. No. 324.
The parties cross-appealed. In Transverse I, the Fifth Circuit panel affirmed in part, reversed and rendered in part, vacated in part, and remanded. The panel held that: 1) IWS did breach the Supply Contract by wrongfully terminating but not by providing "access to the Service" to a competitor; 2) the district court should not have permitted Transverse to recover lost profits for a twelve-year period for the breach of the Supply Contract claim; 3) Transverse could not recover both lost profits and reliance damages for the same breach; and 4) IWS did breach the non-disclosure agreement. Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C., 617 Fed. Appx. 272 (5th Cir. 2015). The court clarified to the district court the issues remaining on remand:
the proper amount and type of damages that Transverse may collect on its breach-by termination claim; the amount of damages, if any, that Transverse may collect for IWS's breach of the [non-disclosure agreement]; and whether IWS is liable under any of the tort theories pressed by Transverse.
On remand, the district court held a bench trial. Dkt. No. 355. This go around, Transverse elected reliance damages instead of lost profits, and the district court awarded Transverse $1.7 million in reliance damages for IWS's breach of the Supply Contract and determined that Transverse had "no cognizable damages" for IWS's breach of the non-disclosure agreement "as a matter of law." Dkt. No. 358 at 7. Having determined that IWS's conduct resulted in no lost value to Transverse, the district court also rejected Transverse's misappropriation of trade secrets, conversion, and Texas Theft Liability Act claims. Id. at 7-9. The district court ordered that IWS take nothing on its counterclaim for breach of the Supply Contract and that Transverse take nothing on its claims against IWS for breach of the NDA. The district court also found, regarding attorneys' fees and costs: 1) IWS was not a prevailing party under the Texas Theft Liability Act (); and 2) IWS was not entitled to costs for the supersedeas bond premiums on the first appeal. Dkt. No. 359.
The parties once again both moved for attorneys' fees. Transverse argued that it was once again entitled to fees pursuant to the Texas Civil Practice and Remedies Code § 38 .001 et seq., this time arguing it was the prevailing party on both the Supply Contract and the NDA. Dkt. No. 360. IWS also moved for attorneys' fees under the mandatory fee provision of the TTLA, arguing that "Transverses's claims for misappropriation of trade secrets, conversion, violation of the TTLA, and breach of contract based on disclosure, were all premised on the same facts and legal arguments," and that therefore, it was entitled to its fees for all of these claims. Dkt. No. 365-1 at 6. The parties again cross-appealed and the district court again dismissed the motions for fees without prejudice. Dkt. No. 367 & 375.
On the second appeal to the Fifth Circuit, Transverse II, the court found as follows:
The district court correctly awarded damages. It also correctly determined that IWS is not entitled to the costs of the premiums for its supersedeas bond. Accordingly, we now AFFIRM in part, VACATE the district court's judgment only as to Transverse's take-nothing judgment on its Texas Theft Liability Act claim because IWS is the prevailing party, and REMAND because IWS is entitled to a mandatory award of costs and attorney's fees on this claim.
Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C., 753 F. App'x 184, 185 (5th Cir. 2018) (per curium). In a lengthy footnote, the Fifth Circuit discussed, and did not determine, whether Iowa law or Texas law was applicable to the fees issue. Id. at 5 n.2.2
On remand, the district court entered a scheduling order setting briefing deadlines for motions for attorneys' fees and costs. Fully briefed, these motions are now before the undersigned. Additionally. Transverse, fearing it has not properly pled a basis for a fee award for its claims under the Supply Contract under Iowa law, has moved to amend its complaint " Dkt. No. 394 at 2.
Traditionally, under the American rule, "each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." Baker Botts LLP. v. ASARCO LLC, - U.S.-, 135 S. Ct. 2158, 2160 (2015). Accordingly, "[a] district court may not award attorneys' fees 'unless a statute or contract provides' the basis for such an award." Spear Mktg., Inc. v. BancorpSouth Bank, 844 F.3d 464, 470 (5th Cir. 2016) (quoting Baker Botts, 135 S.Ct. at 2164). Federal Rule of Civil Procedure Rule 54(d)(1) states that "costs—other than attorneys' fees—should be allowed to the prevailing party." Local Rule CV-54 also states that unless a court determines costs at an earlier point, "costs will be assessed in the final judgment in a case," and that a "party awarded costs shall prepare and file a proposed bill of costs no later than 14 days after the entry of judgment." Unless a party objects, the clerk of court shall tax costs without further intervention from the Court. Id.
When requested prior to trial, leave to amend "shall be freely given when justice so requires." FED. R. CIV. P. 15(a). Rule 15(a) evinces a bias in favor of amendment and requires that leave be granted "freely." Chitimacha Tribe of La. v. Harry L. Laws Co., Inc., 690 F.2d 1157, 1162 (5th Cir. 1982). Leave to amend should not be denied unless there is a substantial reason to do so. Jacobsen v. Osbourne, 133 F.3d 315, 318 (5th Cir. 1998). There is a substantial reason to deny leave if the proposed amendment would cause undue delay or prejudice to the non-movant, if it is motivated by bad faith or dilatory motives, if there have been repeated failures to cure deficiencies with prior amendment, or if the amendment is futile. Foman v. Davis, 371 U.S. 178, 182 (1962); see also Martin's Herend Imps., Inc. v. Diamond & Gem Trading, 195 F.3d 765, 770 (5th Cir. 1999); Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1993). However, the 6 Charles Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1488.
II. ANALYSIS
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