Mutual Concepts, Incorporated v. First National Ba , 495 F. App'x 514 ( 2012 )

Case: 11-20908 Document: 00512036373 Page: 1 Date Filed: 10/29/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 29, 2012
No. 11-20908 Lyle W. Cayce
Clerk
MUTUAL CONCEPTS, INCORPORATED,
Plaintiff - Appellee
v.
FIRST NATIONAL BANK OF OMAHA,
Defendant - Appellant
Appeal from the United States District Court
for the Southern District of Texas
U.S.D.C. No. 4:08-CV-03470
Before HIGGINBOTHAM, ELROD, and HAYNES, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellee Mutual Concepts, Inc. (“Mutual Concepts”) sued
Defendant-Appellant First National Bank of Omaha (“FNB”) for breach of
contract arising out of an Affinity Marketing Agreement (the “Affinity
Agreement”) to create a branded credit card program. A jury found that FNB
breached the contract with Mutual Concepts by refusing to compensate under
the agreement, and also found that the breach was not excused by FNB’s
inability to perform. The court, applying Texas choice-of-law rules, granted
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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Mutual Concepts’ motion for attorney’s fees, in spite of the fact that Nebraska
law, which disfavors attorney’s fees, governed the contract.
FNB contends first on appeal that an error of law occurred, in that Mutual
Concepts breached the contract first and is thus barred from recovering
damages. FNB also reasserts its claim that it was unable to perform under the
contract, and therefore should be excused. Lastly, FNB argues that the district
court erred in awarding attorney’s fees under Texas law, given the parties’
choice-of-law provision specifying Nebraska law. We AFFIRM the judgment on
the jury verdict, but REVERSE the award of attorney’s fees and RENDER
judgment that Mutual Concepts take nothing in attorney’s fees.
I. Factual Background
This contractual dispute arises out of a business arrangement between
Mutual Concepts and FNB to create and operate a branded credit card program,
known as the Affinity Credit Card Program. Such programs unite a credit card
issuer, here FNB, with an “Affinity Partner,” who represents a group of
individuals with shared interests, and who will assist in marketing the branded
credit card to its members. In this dispute the relevant Affinity Partner is
“Women of Faith,” a Christian-based women’s organization. Affinity Partners
may seek out credit card issuers directly to sponsor a branded credit card, and
vice versa, but in practice they frequently are solicited by a middle-man that
serves as an intermediary. Mutual Concepts acted in this capacity here by
establishing a relationship with Women of Faith whereby it could use Women
of Faith’s logo and membership information. It then entered into the Affinity
Agreement with FNB as the card issuer.
The Affinity Agreement specified that FNB was to compensate Mutual
Concepts based on credit card activity engaged in by the cardholding members.
The Affinity Agreement also included a confidentiality provision. In 2003, the
Sponsorship Agreement between Women of Faith and Mutual Concepts was
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renewed for an additional five-year term. Correspondingly, Mutual Concepts
and FNB entered into a new Affinity Agreement, which superseded the earlier
agreement. Significantly, the 2003 Agreement retained a requirement that FNB
pay Mutual Concepts “so long as this Agreement is in effect,” but deleted an
earlier provision which specified that compensation would terminate at the
cancellation or lapse of an Affinity Partner’s Sponsorship Agreement with
Mutual Concepts. A provision was also included to require that compensation
under the Affinity Agreement would continue for two years beyond the end date
of the agreement if termination resulted from FNB’s material breach, or if FNB
agreed to terminate early for a reason other than Mutual Concepts’ material
breach.
Rather than renewing for a third term with Mutual Concepts, Women of
Faith entered into a direct relationship with FNB to continue the branded credit
card program. In October 2008, FNB informed Mutual Concepts that it intended
to stop payment. Mutual Concepts then filed suit against FNB in Texas state
court asserting breach of contract and related claims arising from FNB’s new
direct agreement with Women of Faith, and claiming that FNB failed to pay the
full compensation owed under the agreement. FNB removed the case to federal
court. At the summary judgment stage, the court dismissed Mutual Concepts’
causes of action for tortious interference with contracts, promissory estoppel and
unjust enrichment, rulings not at issue here, thereby leaving only the breach-of-
contract and anticipatory breach-of-contract claims.
The case was submitted to the jury. The jury found that FNB failed to
comply with the agreement when it refused to compensate Mutual Concepts,
that its actions were not excused, and that $911,828.30 would compensate
Mutual Concepts for its damages. Mutual Concepts moved to recover attorney’s
fees under Texas law. The district court heard arguments on the choice-of-law
issue and ultimately determined that Mutual Concepts was entitled to attorney’s
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fees. FNB timely appealed the district court’s final judgment on the jury verdict
and for attorney’s fees.
II. Standard of Review
We review the sufficiency of evidence with great deference to the jury
findings and verdict in the court below. Bagby Elevator Co. v. Schindler Elevator
Corp., 609 F.3d 768, 773 (5th Cir. 2010). As long as there is a “legally sufficient
evidentiary basis for a reasonable jury to find as the jury did,” the jury verdict
must be upheld. Goodner v. Hyundai Motor Co., 650 F.3d 1034, 1039-40 (5th
Cir. 2011) (quoting Foradori v. Harris, 523 F.3d 477, 485 (5th Cir. 2008)). The
court will reverse “only if the evidence points so strongly and overwhelmingly in
favor of one party that the court believes that reasonable jurors could not arrive
at any contrary conclusion.” Bagby, 609 F.3d at 773 (internal quotation marks
and citation omitted).
We review the district court’s choice-of-law analysis de novo. Ellis v.
Trustmark Builders, Inc., 625 F.3d 222, 225 (5th Cir. 2010).
III. Discussion
A. Breach of Contract
We need not spend much time on FNB’s challenge to the judgment on the
jury verdict. FNB argues that, as a “matter of law,” Mutual Concepts “breached
first” by revealing certain allegedly confidential information to someone, citing
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004).
Having “breached first,” FNB argues that Mutual Concepts is unable to recover
for FNB’s breach of contract. Whatever the merits of such an argument in the
abstract—and without reaching the question of whether this argument is waived
by failing to raise it in a Rule 50 motion—we conclude it is inapposite here. The
conduct underlying any alleged “breach” by revealing confidential information
was, at best for FNB, a question of fact that should have been (and was) resolved
by the jury in its determination of the breach and excuse questions. We disagree
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that the evidence is such that no other conclusion can be reached but that the
alleged breach occurred and was material. We decline to conclude “as a matter
of law” that Mutual Concepts is not entitled to recover on the breach of contract
found by the jury.1
B. Attorney’s Fees
The attorney’s fees question is more complex. The Affinity Agreement
contains a choice-of-law provision choosing Nebraska law. Under Nebraska law,
attorney’s fees are not recoverable in a breach-of-contract dispute. GFH Fin.
Servs. Corp. v. Kirk, 437 N.W.2d 453, 459 (Neb. 1989). Texas, on the other hand,
expressly permits recovery of attorney’s fees for breach of contract. See TEX. CIV.
PRAC. & REM. CODE § 38.001(8) (Vernon 2004); Coffel v. Stryker Corp., 284 F.3d
625, 640 (5th Cir. 2002). We thus have a “true conflict” between the law of the
forum state, Texas, and the law to which the contract directs us, Nebraska, and
we must address which state’s law applies to this question.2 See Bailey v. Shell
Western E&P, Inc., 609 F.3d 710, 722-23 (5th Cir. 2010) (citing Vandeventer v.
All Am. Life & Cas. Co., 101 S.W.3d 703, 711-12 (Tex. App.—Fort Worth 2003,
no pet.)).
An added wrinkle here is that Texas treats recovery of attorney’s fees as
substantive law, while Nebraska views it as procedural. Thus, Mutual Concepts
argues, Nebraska courts would look to the law of the forum state for the award
of attorney’s fees; FNB counters that Texas courts would look to the law of the
state that governs the merits of the dispute.
1
FNB’s claim that it was unable to perform its contract with Mutual Concepts is
factually inaccurate. It continued the relationship with Women of Faith directly and,
therefore, was “able to perform.”
2
The parties do not dispute, and we agree, that the choice-of-law provision governing
the contract is enforceable here.
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While this situation presents a seeming conundrum, we have previously
held that “[t]he award of attorney’s fees is part of the substantive right of a suit,”
and that “the award of attorney’s fees in a diversity case depends on the law of
the state whose rules govern the substantive claims.” Kucel v. Heller, 813 F.2d
67, 73 (5th Cir. 1987) (citing Mo. State Ins. Co. v. Jones, 290 U.S. 199 (1933) and
Prudential Ins. Co. v. Carlson, 126 F.2d 607, 611 (10th Cir. 1942)). Kucel
examined the question of whether attorneys’ fees were substantive or procedural
under the forum’s law—that of Texas. We determined that Texas treated
attorneys’ fees as substantive and, thus, enforcing the choice of law provision,
we turned to the law of the governing state—there, it was Illinois. 813 F.2d at
73-74.
Using Kucel’s framework here, we look at Nebraska’s substantive law, the
law that controls the dispute, and analyze whether it provides for attorney’s fees.
Mutual Concepts’ argument that we should then engage in an endless loop with
Nebraska looking to Texas and back again (known as renvoi) has been rejected
by the Second Restatement and disfavored by our court. RESTATEMENT (SECOND)
OF CONFLICT OF LAWS § 187(3) (“In the absence of a contrary indication of
intention, the reference is to the local law of the state of the chosen law.”); see
also RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 8 (directing the court to the
“local law” of the governing state, i.e., the law of the governing state without
regard to its choice-of-law doctrine); Brandon v. S.S. Denton, 302 F.2d 404, 409
n.1 (5th Cir. 1962)(admiralty case declining to apply renvoi); Nailen v. Ford
Motor Co., 873 F.2d 94, 96-97 (5th Cir. 1989) (declining to adopt renvoi in the
absence of a clear indication that the state in question would require it).
Thus, if we examine Nebraska local law, exclusive of its choice-of-law
rules, we find that Nebraska has a strong policy against fee-shifting by refusing
to honor in its courts choice-of-law agreements for the law of sister states
providing for attorney’s fees. The “procedural” characterization of attorney’s fees
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under Nebraska law, then, is simply in support of this public policy. Absent a
Nebraska statute awarding attorney’s fees, attorney’s fees are not recoverable.
We recently examined a similar situation in Provident Financial, Inc. v.
Strategic Energy L.L.C., determining whether Texas or Pennsylvania law
applied to the award of attorney’s fees in a breach-of-contract dispute under
Pennsylvania law. 404 F. App’x 835, 839 (5th Cir. 2010) (unpublished). The
difference between the jurisdiction’s laws was the same: Pennsylvania does not
have a statute providing for attorney’s fees in a breach-of-contract case, while
Texas does. We agreed with the district court, which denied the request for
attorney’s fees under the Texas statute. Id. at 839; see also Smith v. EMC Corp.,
393 F.3d 590, 598 (5th Cir. 2004) (finding that while Texas law statutorily
provides for attorney’s fees, they are not required by public policy).
Following the guidance of the Second Restatement and our decisions in
Kucel and Strategic Energy, we conclude that the district court erred in applying
Texas law to the attorney’s fees issue; it should have applied Nebraska law.3
Because attorney’s fees are not recoverable under Nebraska law, we REVERSE
the award of attorney’s fees and RENDER judgment that Mutual Concepts take
nothing on its claim for attorney’s fees; in all other respects, the district court’s
judgment is AFFIRMED.
3
As a result, we decline to follow Mutual of Omaha Ins. Co. v. Halsell, No. SA-08-CV-
785-XR, 2010 WL 638452, at *1-2 (W.D. Tex. Feb. 19, 2010).
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