Paul Morrell, Incorporated v. Kellogg Brown & Root Services ( 2011 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1253
PAUL MORRELL, INCORPORATED, d/b/a The Event Source,
Plaintiff - Appellee,
v.
KELLOGG BROWN & ROOT SERVICES, INCORPORATED; KELLOGG BROWN &
ROOT INTERNATIONAL, INCORPORATED; KELLOGG BROWN & ROOT,
INCORPORATED; KELLOGG BROWN & ROOT, LLC,
Defendants – Appellants,
and
KBRI TX-1 NEWCO, INCORPORATED; KELLOGG ENERGY SERVICES,
INCORPORATED; KELLOGG BROWN & ROOT (CALIFORNIA),
INCORPORATED,
Defendants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Anthony J. Trenga,
District Judge. (1:08-cv-00072-AJT-JFA)
Argued: September 22, 2011 Decided: November 10, 2011
Before NIEMEYER, KING, and AGEE, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Warren W. Harris, BRACEWELL & GIULIANI, LLP, Houston,
Texas, for Appellants. Mark David Crawford, MCMANUS & DARDEN,
LLP, Washington, D.C., for Appellee. ON BRIEF: Jeffrey L.
Oldham, BRACEWELL & GIULIANI, LLP, Houston, Texas, for
Appellants. Jeanne A. Anderson, MCMANUS & DARDEN, LLP,
Washington, D.C.; Laurence Schor, ASMAR, SCHOR & MCKENNA, PLLC,
Washington, D.C.; Monica Taylor Monday, GENTRY LOCKE RAKES &
MOORE, Roanoke, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Plaintiff/Appellee Paul Morrell, Incorporated, d/b/a The
Event Source (“TES”) brought suit in the United States District
Court for the Eastern District of Virginia against
Defendants/Appellants Kellogg Brown & Root Services,
Incorporated and several related entities (“KBR”), alleging
various common law claims. Prior to trial, a number of the
claims were either dismissed or resolved between the parties.
After a multi-week bench trial on the remaining claims, the
district court ruled against TES on its claims for breach of
contract and tortious interference, 1 but in favor of TES on its
claim for fraudulent inducement, setting forth detailed findings
of fact and conclusions of law in a 47-page written opinion.
The court awarded approximately $12.4 million in fraud damages,
slightly more than $2.5 million in prejudgment interest, and $4
million in punitive damages.
On appeal, KBR challenges the district court’s judgment on
the fraud claim, as well as the award of both compensatory and
punitive damages. For the reasons set forth herein, we affirm
the judgment of the district court.
1
Those rulings are not at issue in this appeal.
3
I.
This case arises out of a contract and subsequent
settlement agreement between KBR and TES. The district court
determined that KBR made material false statements in order to
induce TES to accept a settlement payment that was approximately
$12.4 million less than what KBR had previously acknowledged it
owed TES.
The initial contract between KBR and TES was part of the
effort to provide dining facilities and food services (“DFAC
services”) to American troops in Iraq. That effort began in
December 2001, when KBR contracted with the federal government
to provide logistical support, including DFAC services, to our
armed forces in Iraq. On June 13, 2003, actual work
authorization was awarded to KBR through Task Order 59, and KBR
selected TES as a sub-contractor to provide certain of those
services. TES and KBR entered into a Master Agreement on June
15, 2003, which contained a number of incorporated contractual
documents. TES, in turn, hired a number of sub-contractors to
perform various aspects of the required work, setting up
separate payment arrangements with each of them. The time of
performance under Task Order 59 was modified periodically and
additional funding was provided as the need for DFAC services in
Iraq continued.
4
Toward the end of 2003, KBR came under scrutiny from the
Defense Contract Audit Agency (“DCAA”), which was investigating
the DFAC invoices KBR submitted for payment from its
subcontractors. One of DCAA’s primary concerns was that some
DFAC invoices, including those from TES, billed for more meals
than were actually served to the troops. In early 2004, DCAA
began reviewing its payment of invoices to KBR, and informed KBR
that, pending further discussions, DCAA would withhold payment
on a portion of the invoices. 2 DCAA also instructed KBR to
review all of its DFAC subcontracts.
KBR conducted the review of its subcontracts, and informed
DCAA that its review confirmed that its subcontracts were
reasonably priced and structured, and that outstanding invoices
should be paid in full. KBR thus told DCAA that it intended to
2
DCAA had concluded it was not obligated to pay KBR for
invoiced meals that exceeded the actual number of soldiers
served. However, that arrangement between DCAA and KBR was
inconsistent with the terms of the competitively-bid subcontract
between TES and KBR. In the subcontract, KBR agreed that TES
was entitled to charge for a minimum number of meals, regardless
of the number of persons actually served at a site. This
pricing scheme was considered reasonable by both KBR and TES
since it was intended to allow TES to recover, within the
initial performance period, all of its initial expenditures
(such as capital costs for facilities and equipment) which were
considerable and not likely recoverable on an actual per person
charge rate. This ability to recoup capital costs was a
substantial inducement by KBR for TES to enter into the
subcontract.
5
pay outstanding invoices to its subcontractors in full and bill
those amounts to the government.
In response to KBR’s stated intention, DCAA announced in
May 2004 that it would begin to withhold and/or recoup 19.35% of
the total payments made by the government to KBR for DFAC
invoices because of the discrepancy between the actual number of
meals served and the invoiced meal amounts. This “decrement”
caused KBR, in turn, to withhold money from its subcontractors.
Additionally, in response to the imposition of the decrement,
KBR and TES executed Amendment No. 1 to the Master Agreement,
which reflected their agreement as to the proper method to
calculate the amount due and payable to TES, later agreed by
them to be $36,464,644.65. Amendment No. 1 also extended the
time for TES to file contract dispute claims with KBR.
In early 2005, KBR met with the Army Sustainment Command
(“ASC”), to discuss the government’s continued concerns
regarding the alleged overbilling, and they engaged in extensive
renegotiations over the DFAC billing and invoices. ASC and KBR
finally reached a negotiated settlement (“the KBR-ASC
Settlement”), in which KBR agreed to a $55 million decrement
from the invoice amounts it had submitted from its DFAC
subcontractors and released the government from all claims
relating to the DFAC invoices. As a result, KBR no longer had
the ability to assert claims on behalf of its subcontractors for
6
any additional payment for DFAC services, and the sole remedy
for TES and other subcontractors was against KBR. KBR did not
consult with TES or its other sub-contractors regarding the KBR-
ASC Settlement, nor did it disclose any of the settlement
details to TES. In any event, TES never authorized KBR to waive
any of TES’ rights vis a vis the government under its
subcontract with KBR.
Following the KBR-ASC Settlement, KBR scheduled meetings in
Dubai with TES and other subcontractors in order to resolve
their outstanding invoices which had been subject to the
decrement. During the Dubai meetings, KBR convinced TES to
accept a reduced payment from KBR on its invoiced amounts
(approximately $24 million, instead of the $36.4 million agreed
to in Amendment No. 1) and to release KBR from any additional
claim for payment.
TES’ fraud claim was based on the representations made by
KBR before and during the Dubai meetings. The dispute over the
fraud claim at trial focused primarily on whether the Dubai
representations by KBR were knowingly false, and whether TES
justifiably relied on those representations when it accepted the
reduced payment from KBR and released it from further claims.
The district court found that KBR officials made numerous
fraudulent statements to TES in order to induce TES to agree to
the reduced payment and the release. These misrepresentations
7
by KBR included: (1) the characterization of the amount KBR was
going to pay TES as a “Government decision,” that was
“calculated by the Government based on a number of factors,
primarily including actual headcount and the period of
performance”; (2) “that KBR has no ability to increase or
decrease the KBR Holdback,” defined as “that portion of the
amount billed for the Invoiced Work that will not be paid to TES
as determined by the Government”; (3) that KBR had no discretion
to raise or lower the amount offered, which was therefore “non-
negotiable”; and (4) if TES rejected the KBR offer, “TES’ only
legal remedy was to contest the government’s decision by filing
a claim, through KBR, against the government.” (See J.A. 2379-
82.)
Many of KBR’s fraudulent statements were made orally, but
some were incorporated into a written document, Amendment No. 2
to the Master Agreement. Significantly, the district court
expressly found that TES asked KBR to sign Amendment No. 2 in
order to verify that KBR was being truthful about its
representations.
The district court further found that, had KBR not executed
Amendment No. 2, TES would not have agreed to accept the reduced
payment. Instead, it would have sued and could have recovered
from KBR the full amount KBR had previously acknowledged was
due, the $36.4 million. The district court thus found that TES
8
was entitled to damages in the amount it released in the
settlement with KBR, i.e., $12,424,387.
On appeal, KBR assigns error to three rulings by the
district court: (1) the district court’s finding that TES
actually and justifiably relied on KBR’s misrepresentations; (2)
the district court’s award of compensatory damages for the
fraud; and (3) the district court’s determination that punitive
damages were proper. 3 KBR timely filed its appeal and we have
jurisdiction pursuant to 28 U.S.C. § 1291.
II.
A.
When a judgment results from a bench trial, it is reviewed
“under a mixed standard of review—factual findings may be
reversed only if clearly erroneous, while conclusions of law . .
. are examined de novo.” Universal Furniture Int’l v.
Collezione Europa USA, 618 F.3d 417, 427 (4th Cir. 2010)
3
Because KBR has not identified as a separate issue on
appeal or offered any argument in support of a claim that the
district court erred in finding that the false statements were
made or that they were material, we deem any such challenges
abandoned. See Fed. R. App. P. 28(a)(9)(A) (“appellant’s brief
must contain . . . appellant’s contentions and the reasons for
them”); Jones v. Liberty Mut. Ins. Co. (In re The Wallace & Gale
Co.), 385 F.3d 820, 835 (4th Cir. 2004) (where a party does not
comply with Rule 28 and fails to address a claim, the claim is
waived).
9
(quoting Roanoke Cement Co. v. Falk Corp., 413 F.3d 431, 433
(4th Cir. 2005)) (alteration in original). Under the clear
error standard, the court of appeals must affirm factual
findings if they are “plausible” in light of the entire record,
“even though convinced that had it been sitting as the trier of
fact, it would have weighed the evidence differently.” Walton v.
Johnson, 440 F.3d 160, 173 (4th Cir. 2006).
B.
In this diversity jurisdiction case, the parties are in
agreement that Texas law governs the common law claims asserted.
Under Texas law, TES’ fraudulent inducement claim required it
to prove, among other elements, that it justifiably relied on
KBR’s misrepresentations when entering into the settlement
agreement. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51
S.W.3d 573, 577 (Tex. 2001). The district court found that TES
proved its reliance was justifiable. Specifically, the district
court found:
TES’ willingness to enter into Amendment No. 2 was
related directly to KBR’s misrepresentations. KBR’s
representation that the government unilaterally
determined the amount to be paid to TES and its
repeated references to the Disputes Clause caused TES
to conclude that if TES were to seek more than what
KBR was offering, TES’ only remedy would be against
the government. For a variety of reasons, TES was not
willing to litigate against the government . . . .
[But] TES was fully prepared to pursue KBR, including
through litigation, if necessary, over its outstanding
10
DFAC invoices since, among other reasons, KBR had
already acknowledged the amount that was properly
payable to TES. TES questioned the accuracy of KBR’s
representations and, in response, KBR labeled as
inaccurate certain news reports concerning a
“settlement” with the government. KBR also provided
written confirmation of certain of its representations
in order to dispel any misgivings on TES’ part. TES
specifically conditioned its willingness to accept
KBR’s settlement offer and its willingness to release
KBR based on receiving those assurances and entered
into Amendment No. 2 only after receiving KBR’s
representations through KBR’s legal counsel. While
certain of TES’ officers suspected that certain of
KBR’s representations were untrue (while others, such
as its general counsel, did not), TES did not, in
fact, know at the time, and had no means of
determining, that KBR’s representations were untrue
and it took reasonable steps, because of its
suspicions, to ensure that they were true.
(J.A. 2387-88.)
The parties dispute the proper standard of review on this
issue. KBR argues that justifiable reliance in this case is a
legal issue that should be reviewed de novo. Citing Grant
Thornton, LLP v. Prospect High Income Fund, ML CBO IV (Cayman),
Ltd., 314 S.W.3d 913 (Tex. 2010), KBR contends that the issue
should be determined as a matter of law because there were “red
flags” in the case such that TES was alerted to the falsity of
KBR’s representations, thereby rendering its reliance
unjustified. See id. at 923 (“a person may not justifiably rely
on a representation if there are red flags indicating such
reliance is unwarranted.”) (internal quotation marks and
citation omitted). KBR also points to the testimony of some of
11
TES’ agents, involved in the negotiations with KBR, who stated
that they had concerns about the truthfulness of the
representations being made to them. Because of these “red
flags,” KBR argues, TES’ reliance was not justifiable as a
matter of law. KBR thus urges us to review the determination de
novo.
While there are cases in which justifiable reliance can be
determined as a matter of law, this is not one of them. See
1001 McKinney Ltd. v. Credit Suisse First Boston Mortg. Capital,
192 S.W.3d 20, 30 (Tex. App. 2005) (collecting authority and
noting that Texas state and federal “courts have uniformly
treated the issue of justifiable reliance as a question for the
factfinder”); id. at 35 (Frost, J., concurring and dissenting)
(noting that reliance may be determined as a matter of law, but
also recognizing that “i[f] there is a genuine issue of material
fact as to whether reliance was justifiable in a common-law
fraud case, then, of course, the factfinder should determine
this issue”). Instead, in this case, there are facts that could
support a conclusion either way. Thus, which version of events
to credit here was determined by the district court as a factual
matter based on its first-hand knowledge of the evidence and its
credibility determinations of the witnesses. We therefore agree
with TES that the justifiability of its reliance in this case is
a factual finding that we review only for clear error.
12
The district court’s finding was not clearly erroneous.
Although KBR argues the existence of any “red flags” should end
the inquiry, the district court concluded that it was precisely
because of the purported “red flags,” i.e., TES’ concerns, that
TES sought additional reassurances and particularly why it
sought assurances from KBR in writing. The record contains
ample support for the factual finding that TES justifiably
relied on KBR’s misrepresentations. For example, members of
TES’ Dubai team testified regarding the importance of KBR’s
representations in TES’ decision-making process. They also
emphasized that both KBR’s lead negotiator, retired three-star
Army General Paul Cerjan, and KBR’s lawyer, told TES that any
dispute over the payments would be with the government, and that
KBR did not know how site-specific numbers were reached.
Additionally, KBR denied it had negotiated with the government
and told TES that media reports to the contrary were inaccurate.
There was also testimony from TES that it would not have settled
without KBR’s written assurances of its representations.
Particularly in light of the district court’s opportunity
to observe the witnesses and assess credibility, we conclude
that the district court’s finding of reliance here is certainly
“plausible” in light of the entire record. Cf. Walton, 440 F.3d
at 173. Thus, we find no clear error.
13
C.
KBR’s second assignment of error is that the district court
erred in finding that TES was entitled to damages in the amount
of $12,424,387. We review the district court’s legal rulings as
to the damages award de novo and its factual finding as to the
amount of damages for clear error. Universal Furniture Int’l,
618 F.3d at 427.
In order to recover damages on its fraud claim, TES was
required to prove that KBR’s acts or omissions were a cause-in-
fact of TES’ foreseeable losses. Prospect High Income Fund, ML
CBO IV (Cayman), Ltd. v. Grant Thornton, LLP, 203 S.W.3d 602,
618 (Tex. App. 2006), rev’d on other grounds, Grant Thornton,
LLP, supra, 314 S.W.3d 913. KBR advances several theories
challenging the damages award. We have reviewed them and do not
find any persuasive.
KBR’s primary argument is that TES could not have recovered
any more than what it received in exchange for the release, due
to the “pay-when-paid” clause in Paragraph 3.1.4 of the General
Conditions of the Master Agreement:
Notwithstanding any other provision hereof, payment by
[the government] to [KBR] is a condition precedent to
any obligation of [KBR] to make payment hereunder.
[KBR] shall have no obligation to make payment to
[TES] for any portion of the Sublet Work for which
[KBR] has not received payment from [the government].
14
(J.A. 107.) Additionally, Amendment No. 1 to the Master
Agreement between KBR and TES acknowledged the continuing
validity of the pay-when-paid clause.
It is not entirely clear from the district court’s opinion
whether it was treating the provision merely as a timing of
payment provision or as a condition precedent. In any event, we
need not decide either (1) whether the provision was a condition
precedent; 4 or (2) if so, whether that condition was satisfied by
the partial payment to KBR pursuant to the KBR-ASC Settlement. 5
4
The contract itself describes the provision as a
“condition precedent.” (J.A. 107.) Additionally, in Amendment
No. 1, the language used is that payment is “conditioned on”
payment to KBR by the government. (J.A. 123.) See Gulf Constr.
Co. v. Self, 676 S.W.2d 624, 627 (Tex. App. 1984) (“While no
particular words are necessary for the existence of a condition,
such terms as ‘if,’ ‘provide that,’ ‘on condition that,’ or some
other phrase that conditions performance usually connote an
intent for a condition rather than a promise.”).
5
KBR argues that because it was not paid by the government
for the $12 million that TES now seeks, the condition precedent
was not satisfied. That is, of course, a simplistic view. As
pointed out by TES, the KBR-ASC Settlement was a global one for
all of KBR’s invoices, and did not dictate that any sub-
contractor be paid any specific amount. Moreover, TES as a
subcontractor, was not a party to the agreement between KBR and
the government in the KBR-ASC Settlement. Indeed, KBR’s
internal documents discussing how to negotiate with TES and
other subcontractors clearly recognized that
[i]f vendors [such as TES] don’t accept the settlement
and sue for recovery, we will probably have to turn
over USG documents and the vendors will see the
different settlement per [Task Order] . . . If they
prevail, we may have to pay them the ‘over recovery’
(Continued)
15
Even if the pay-when-paid clause was a condition precedent and
it was not satisfied by the partial payment by the government to
KBR, we agree with the district court that the prevention
doctrine would not allow KBR to rely on that condition to avoid
payment to TES of the amounts due.
The prevention doctrine, an equitable principle, bars a
party from relying on a condition precedent where that party’s
own wrongful conduct has prevented the condition from being met.
See Sanderson v. Sanderson, 109 S.W.2d 744, 749 (Tex. Comm’n
App. 1937) (referring to the “universal maxim that, where the
obligation of a party depends upon a certain condition being
performed, and the fulfillment of that condition is prevented by
the act of the other party, the condition is considered as
fulfilled”) (quotation marks and citation omitted).
As explained by the district court, “the KBR-ASC
[S]ettlement did not limit TES’ recovery against KBR on its DFAC
invoices given the manner in which KBR chose to enter into that
settlement.” (J.A. 2399.) In particular, by entering into the
settlement with ASC, KBR essentially preempted any government
decision and, further, could not have pursued TES' claims
and will have no way to recover it from other vendors
who haven’t sued us.”
(J.A. 2597.)
16
against the government on TES' behalf. Despite this, KBR led
TES to believe that a "decision" had been made as to the amounts
payable to TES, even going so far as to reference Section 3.0 in
its letter notifying TES of a government "decision." (See J.A.
2607.) 6 KBR’s general counsel also testified at trial that the
reference to Section 3.0 in that letter conveyed that any remedy
by TES was against the government, not KBR, and the district
court so found.
The district court thus reasoned:
The “pay when paid” provision of the Master Agreement
was inextricably bound up with TES’ rights against the
government in the event of a dispute. KBR’s actions
eliminated TES’ rights to seek additional payments on
its outstanding DFAC invoices and now prevent KBR from
relying on the “pay when paid” provision of the Master
Agreement.
(J.A. 2400-01.)
We find no error in the district court’s application of the
prevention doctrine. That is, KBR acted wrongfully because,
while agreeing the government did not have to pay KBR for the
6
Section 3.0 of the Special Conditions, titled “Disputes,”
states that “Notwithstanding any other provision in this
SUBCONTRACT,” any decision of the government is binding on TES
only if KBR notifies TES of the decision and, if requested by
TES, “appeals the decision in accordance with the Disputes
clause of the Prime Contract.” (J.A. 118.) According to the
contract documents, in the event of a conflict between contract
provisions, the Special Conditions, where Section 3.0 falls,
"take precedence" over the General Conditions, where the pay-
when-paid clause appears. (J.A. 114.)
17
full amount TES invoiced, it also gave away, without notice,
TES’ rights to pursue further payment against the government
through KBR, thereby preventing occurrence of the condition
precedent. It then falsely represented to TES that TES had no
remedy against KBR. As TES succinctly argues: “KBR was not at
liberty to fundamentally alter the contractual disputes and
payment process and then still rely upon a contractual defense
that presupposes the existence of that process.” (Br. of
Appellee at 48.) Accordingly, KBR’s own conduct prevented it
from relying on the pay-when-paid clause. See Moore Bros. Co.
v. Brown & Root, Inc., 207 F.3d 717, 725 (4th Cir. 2000) (where
the general contractor’s wrongful actions “‘contributed
materially’ to the non-occurrence of the condition precedent,”
the contractor could not rely on the pay-when-paid defense to
bar the plaintiff’s recovery) (citing Restatement (Second) of
Contracts § 245 (1981) cmt. b); 7 Urban Masonry Corp. v. N&N
7
KBR argues that Virginia law, applicable in Moore Bros. is
materially different law, but the prevention doctrine appears
substantially similar in Virginia and Texas. Compare, e.g.,
Moore Bros., 207 F.3d at 725 (setting forth Virginia law and
relying on Restatement (Second) of Contracts § 245) with
Sanderson, 109 S.W.2d at 749 (referring to the “universal maxim
that, where the obligation of a party depends upon a certain
condition being performed, and the fulfillment of that condition
is prevented by the act of the other party, the condition is
considered as fulfilled”) (quotation marks and citation
omitted); Heritage Life Ins. Co. v. Heritage Grp. Holding Corp.,
751 S.W.2d 229, 234 (Tex. App. 1988) (citing Restatement
(Second) of Contracts § 245 for same). Cf. Clear Lake City Water
(Continued)
18
Contractors, Inc., 676 A.2d 26, 36 (D.C. 1996) (in dispute
between subcontractor and general contractor, a walk-away
settlement between the owner and general contractor either
satisfied condition of “pay if paid” clause (because it
constituted sufficient “payment”), or, by settling without
securing outstanding payments for the sub-contractor, the
general contractor willfully hindered satisfaction of the
condition precedent and could not rely on it).
Having found that KBR could not rely on the pay-when-paid
clause to bar TES’ recovery, we conclude that the amount of
damages determined by the district court was not clearly
erroneous. The KBR-TES Settlement induced by fraud reduced the
agreed-upon amount KBR owed TES by $12,424,387 and an award in
that amount as compensatory damages was not error. We therefore
affirm the district court’s award of damages to TES on its fraud
claim.
Auth. v. Friendswood Dev. Co., 344 S.W.3d 514, 520 (Tex. App.
2011) (noting that Section 245 of the Restatement has not been
adopted by the Texas Supreme Court, but citing the general rule
that “a party who ‘prevents or makes impossible’ the occurrence
of a condition precedent upon which its liability under a
contract depends cannot rely on the nonoccurrence to escape
liability”).
19
D.
In addition to awarding TES compensatory damages on its
fraud claim, the district court also awarded punitive damages in
the amount of $4 million. KBR does not challenge the amount of
punitive damages, but instead contends that TES failed to prove
its fraud claim by the stringent “clear and convincing evidence”
standard, as required to award punitive damages under Texas law.
See Tex. Civ. Prac. & Rem. Code Ann. § 41.003 (West 2010)
(punitive damages permitted where each element of a plaintiff’s
fraud claim is proved by clear and convincing evidence); Foley
v. Parlier, 68 S.W.3d 870, 879-80 (Tex. App. 2002). Clear and
convincing evidence is a “degree of proof that will produce in
the mind of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established.” Tex.
Civ. Prac. & Rem. Code Ann. § 41.001(2) (West 2003).
As an initial matter, we note that the district court
applied the proper standard and recited that it found each
element of the fraud claim had been proven by clear and
convincing evidence. It also described KBR’s conduct as
part of a well orchestrated and thought-out plan,
reviewed by its management before being implemented,
in order to eliminate KBR’s legal exposure for tens of
millions of dollars in additional liability . . . .
Organizationally, KBR devised a scheme that was
intended to conceal accurate information from TES,
even to the point of concealing accurate information
from certain of its own employees who were selected
because of their professional stature to convey false
20
information to TES. . . . Having made the decision to
resolve its contractual dispute with the government
without the knowledge or participation of TES, KBR was
then not free to misrepresent what had happened in
order to eliminate its own remaining legal exposure to
TES.
(J.A. 2403-04.)
This direct language from the district judge, who observed
the witnesses at trial, shows that the court was not merely
giving lip service to the clear and convincing standard, but in
fact held “a firm belief or conviction” that TES proved its
fraud claim against KBR. Cf. Tex. Civ. Prac. & Rem. Code Ann.
§ 41.001(2). Accordingly, the district court’s award of
punitive damages is affirmed.
III.
For the foregoing reasons, we affirm the judgment of the
district court.
AFFIRMED
21