Southern Constructors Group, Inc. v. Dynalectric Co. ( 1993 )

United States Court of Appeals,
Fifth Circuit.
No. 93-3252
Summary Calendar.
SOUTHERN CONSTRUCTORS GROUP, INC., Plaintiff-Appellant,
v.
DYNALECTRIC COMPANY, Defendant-Third Party Plaintiff-Appellee,
v.
Allen R. BOUDREAUX, Third Party Defendant-Appellant.
Sept. 27, 1993.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before: JOLLY, WIENER, and EMILIO M. GARZA, Circuit Judges.
WIENER, Circuit Judge:
This case illustrates the preclusive consequences flowing from failure to provide proper notice
of a possible theory of recovery. Plaintiff-Appellant Southern Constructors Group, Inc. ("Southern")
sued Defendant-Appellee Dynalectric Company under various claims that were all predicated on the
existence of a contract. The case was eventually submitted to arbitration. After receiving notice that
the arbitration panel had failed to find a contract, Southern attempted to switch to a quasi-contract
theory of recovery grounded in quantum meruit. The district court held that Southern had waived
these claims by failing to include them within any of its original or amended complaints or even in the
pretrial order. Southern appeals this conclusion. Southern also appeals the district court's refusal to
grant it leave to amend its complaint to add the quasi-contract claim. Concluding that the district
court properly found waiver and did not abuse its discretion in refusing to allow amendment of the
complaint to include the waived claims, we affirm.
I
FACTS AND PROCEEDINGS
This case arises out of events following the bankruptcy of MMR Holding Company, Inc.
("MMR"), a large national electrical and mechanical contractor. MMR's bankruptcy led to default
on all of its bonded work, which in turn placed responsibility for completion of this work on MMR's
surety, Aetna Casualty and Surety Company ("Aetna"). Allen R. Boudreaux, a former vice-president
of MMR and owner and president of Southern, contacted Dynalectric about acquiring the contracts
for completing all of MMR's electrical work from Aetna. What transpired next is the subject matter
of the present suit. Boudreaux claims that his expertise and connections led to the awarding of
approximately $120 million of completion contracts to Dynalectric, and that Southern and Dynalectric
entered into an agreement to split the profits of these contracts 807 to Dynalectric and 207 to
Southern. Disputing that version of the facts, Dynalectric claims that it broke off negotiations with
Southern before a contract was formed because it had learned that several of Boudreaux's
representations were inaccurate and that Southern was merely a shell company without any track
record or employees.
Southern brought suit against Dynalectric in August of 1990. In the second amended
complaint, the operat ive one for this litigation, Southern alleged that Dynalectric breached its
contractual and fiduciary duties, and engaged in unfair trade practices and fraud. Southern's claims
included the standard prayer that it be awarded "any other just and equitable relief this Court may
deem appropriate." All of the claims were apparently predicated on proof of the existence of a
contract between Southern and Dynalectric.1 When extensive discovery was complete it became clear
that the existence of the contract turned on the enforceability of a draft agreement containing an
arbitration provision. Thus Southern faced the prospect of submitting to two separate
proceedings—a jury trial to determine the existence of a contract; and then, only if a contract were
found, an arbitration proceeding to determine whether damages were due under that contract.
Instead of incurring the costs and delays of both a trial and an arbitration proceeding,
1
Although Southern contends that its complaint implicitly includes additional claims of
quasi-contract, it has not disputed Dynalectric's assertion that the breach of contract, breach of
fiduciary duty, unfair trade practices, and fraud claims presuppose the existence of a contract.
Moreover, Southern's actions in conditioning the arbitration of those claims on whether a contract
existed indicates that Southern believed those claims were valid only if there were a contract.
Southern and Dynalectric agreed to submit all issues in this dispute to arbitration.2 The agreement
to arbitrate provided, inter alia, that an earlier pretrial order confected by Southern and Dynalectric
would control the arbitration "to the extent practicable," and that the first stage of the arbitration
would consider only whether a contract existed. If no contract were found the arbitration would be
over and either party could seek to confirm or appeal the decision of the arbitration panel. Only if
a contract were found to exist would the arbitration proceed to the second stage, determining whether
and to whom damages were owed under the various contractual claims.
The arbitration panel conducted four days of formal hearings at which the parties presented
numerous witnesses, depositions, and exhibits. In its initial decision the majority of the arbitration
panel found that no contract existed between Southern and Dynalectric. Only after it learned of this
decision did Southern raise the issue of its entitlement to recover under a quasi-contract theory.
Southern raised that issue by filing a Motion to Reconsider with the arbitration panel. The majority
of the panel concluded that this motion raised issues beyond the scope of the panel's authority and
accordingly refused to reconsider the decision.3 Dynalectric filed a Motion to Confirm the Arbitration
Award, which was granted by the district court.
Southern filed a timely motion with the district court to reconsider its decision confirming the
arbitration award. In its motion Southern contended that the district court should hear the
quasi-contract issues because the arbitration panel refused to resolve those claims. The district court
reviewed the amended co mplaint and pretrial order, but concluded that Southern had waived the
quasi-contract claims by failing to raise them in a timely manner. The district court subsequently
entered judgment for Dynalectric confirming the arbitration award.
After entry of judgement Southern filed a timely motion pursuant to FED.R.CIV.P. 59(e) to
vacate the judgment and to grant leave to Southern t o file a third amended complaint under
2
Dynalectric filed a counterclaim against Southern and a third party complaint against
Southern's owner, Boudreaux. Dynalectric has not appealed the judgment by the district court
dismissing those complaints with prejudice.
3
Southern does not directly challenge on appeal the arbitrators' conclusion that the quantum
meruit and quasi-contract claims were beyond the scope of the agreement to arbitrate.
FED.R.CIV.P. 15. The third amended complaint would have added Boudreaux as a party plaintiff and
would have included quasi-contractual claims. The district court denied this motion concluding that:
1) it was correct in finding that Southern had waived the quasi-contract claims by failing to raise them
until after it lost its case at arbitration; and 2) granting the motion would be unfairly prejudicial to
Dynalectric in subjecting it to renewed litigation when Dynalectric had a reasonable and justifiable
expectation that the arbitration had conclusively resolved its dispute with Southern. Southern timely
appealed.
II
ANALYSIS
Southern advances two arguments to challenge the district court 's entry of judgment and
refusal to allow Southern to amend its complaint. First, Southern argues that the district court erred
when it found that the quasi-contract claims had been waived. In short, Southern argues that the
claims were implicitly included (and thus not waived) within the relevant pleadings. Second,
Southern contends that the district court abused its discretion in refusing to grant Southern leave to
amend its complaint to add the quasi-contract claims. We analyze each of these arguments in turn.
A. Waiver and Notice Pleading
Southern argues that its claims in quasi-contract were included within the second amended
complaint because this complaint contained allegations of facts that would lead to recovery under this
theory, coupled with a prayer for relief that included a request for "any other just and equitable relief
this Court may deem appropriate." According to Southern, this entitles it to relief under
FED.R.CIV.P. 54(c), which provides in pertinent part that "every final judgment shall grant the relief
to which the party in whose favor it is rendered is entitled, even if the party has not demanded such
relief in the party's pleadings."4
Southern's argument is based on a misapprehension of how notice pleading operates under
the federal rules. Under one version of this argument Southern is positing that quasi-contract is
merely a form of relief, such as equitable relief in an Age Discrimination in Employment Act claim
4
FED.R.CIV.P. 54(c).
or a declaratory judgment in a damages action.5 Such analogies are clearly inapposite. At least in
Louisiana,6 quasi-contract is one of four general categories of obligations: contract; delict (tort);
quasi-contract; and quasi-delict.7 Each imposes liability based on a party's proof that he or she has
satisfied the requisite factual elements.8 In short, quasi-contract is a doctrine used to impose liability.
Classification of quasi-contract as a liability doctrine forecloses this appeal to Rule 54(c), for as we
held in Flannery v. Carroll,9 Rule 54(c) is limited to allowing a court "to order appropriate relief;
it does not permit [a] court to impose liability where none has been established."10
Southern, under another version of its argument, urges that a party may be entitled to
recovery under any legal theory that would fit allegations of fact contained in the operative pleadings.
Southern contends that this rule would apply even after extensive discovery and a pretrial order have
been used to narrow the facts and relevant legal issues for trial, or, as in the present case, arbitration.
Adoption of Southern's blind-hog-occasionally-finds-an-acorn approach would play havoc
with trial procedure and would negate the narrowing and winnowing process that occurs under the
5
Southern cites to, among other cases, Doss v. South Central Bell Telephone Co., 834 F.2d
421, 425 (5th Cir.1987) (reversing dismissal even though plaintiff had failed to request equitable
relief under the ADEA) and Dotschay v. National Mutual Insurance Co., 246 F.2d 221 (5th
Cir.1957) (reversing a dismissal of a damages action when the plaintiff had a viable claim for
declaratory relief) to support its argument that relief is not waived even when it is not specifically
requested.
While we agree with Southern that the relief need not always be specifically
enumerated in its prayer, we disagree with Southern's implied characterization of
quasi-contract as merely a variation of relief.
6
Southern has argued to the district court that Louisiana law applies to its quasi-contract
claims. We will assume, for purposes of this appeal, that Southern's choice-of-law contention is
correct.
7
See LA.CIV.CODE ANN. art. 2292.
8
See e.g. Smith v. Hudson, 519 So. 2d 783, 786-87 (La.App.1987) (discussing and applying
quasi-contract as a liability doctrine and enumerating the elements of a quasi-contract claim). In
Smith the court explained the relationship between quasi-contract and quantum meruit:
quasi-contract is the basis for liability under the Civil Code (article 2293), while quantum meruit
provides the measure of recovery. Id.; see also, Fullerton v. Scarecrow Club, Inc., 440 So. 2d
945, 949-50 (La.App.1983) (stating same).
9
676 F.2d 126 (5th Cir.1982).
10
Id. at 132.
present federal rules.11 Although we have been willing to construe pleadings liberally at the pretrial
stage, thus allowing a party to engage in discovery to develop theories of liability,12 we have never
construed notice pleading as broadly as Southern wishes. Put simply, Southern asks us to grant carte
blanche to a litigant to throw facts at the court, while placing responsibility on the court—not the
litigant—to sort through those facts and come up with possible theories for recovery. Such an
approach would controvert our jurisprudence on pretrial orders, which includes the rule that any
claim omitted from the pretrial order is deemed waived.13 It would also render nugatory any concept
of relevancy contained in the Federal Rules of Evidence.14
The fact that the adjudicatory process here was arbitration instead of trial fails to justify
absolving Southern of the rules we have applied to trials. Reduced to the essentials, Southern was
doing nothing less than asking the district court to give it a second chance. Southern asked
permission to bring a claim that was not presented to—and that Southern had effectively agreed could
not be presented to—the arbitration panel. One consequence of adopting Southern's approach would
be to undermine the efficacy of arbitration agreements and awards.15 Another would be to add to the
11
See e.g. Simon v. United States, 891 F.2d 1154, 1158 (5th Cir.1990) (noting that the pretrial
order provides needed notice of the relevant issues for trial and discussing how the pretrial order
is used to control the scope and course of the trial); Flannery, 676 F.2d at 129 (discussing how
pretrial order, which determines which claims will actually be tried, narrows the course of the trial
and expedites the proceeding).
12
E.g., Dussouy v. Gulf Coast Invest. Corp., 660 F.2d 594, 597-600 (5th Cir.1981) (reversing
dismissal under Rule 12(b)(6) so that the plaintiff could pursue a conspiracy theory with different
participants); Doss, 834 F.2d at 422 (reversing dismissal under Rule 12(b)(6) so that the plaintiff
could seek equitable relief).
13
E.g. Valley Ranch Dev. Co. v. FDIC, 960 F.2d 550, 554 (5th Cir.1992); Flannery, 676 F.2d
at 129.
14
Relevancy requires that the evidence relate to a "fact of consequence" under FED.R.EVID.
401. The trial court would be unable to ascertain what is "of consequence" in a dispute unless the
court has some idea of the various legal theories that the parties are pursuing.
15
We have stated that the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-15, is a
congressional declaration of a national policy in favor of arbitration. E.g. Hartford Lloyd's Ins.
Co. v. Teachworth, 898 F.2d 1058, 1061 (5th Cir.1990) (citing Moses H. Cone Memorial
Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765
(1983)). To effectuate that policy we have recognized that courts must engage in a deferential
review of arbitration decisions, a review that avoids unnecessary intrusion into questions settled
by the arbitration process so as to avoid upsetting the efficiency of that process. Anderman/Smith
already crowded dockets of our district courts, instead of finding ways to ease them. Southern can
offer no viable reason to accept these disfavored consequences other than the harm it caused itself
by failing timely to assert its quasi-contractual claims on the merits. Clearly these preclusive harms
are self-inflicted, the result of Southern's own litigation strategy. We cannot bend or break the
rules—and set harmful precedent—simply to achieve what one party perceives to be a "just result"
in one case.
B. Amending a Complaint After Judgement
Southern asserts as its second ground for reversal that the district court abused its discretion
when it denied Southern's motion to vacate, alter, or amend its judgement under Rule 59(e).
Southern's announced reason for this motion was to be able to file an amended complaint under Rule
15 so as to add quasi-contract claims.
Denial of a motion to vacate, alter, or amend a judgment so as to permit the filing of an
amended pleading draws the interest in finality of judgments into tension with the federal policy of
allowing liberal amendments under the rules. A threshold question is whether we are reviewing the
denial under the standards applicable to Rule 59(e)—which favor the denial of motions to alter or
amend a judgment16—or under Rule 15—which favor granting leave to amend.17 Under either rule
Operating Co. v. Tennessee Gas Pipeline Co., 918 F.2d 1215, 1218 (5th Cir.1990), cert. denied -
-- U.S. ----, 111 S. Ct. 2799, 115 L. Ed. 2d 972 (1991).
Southern's challenge to the district court's waiver ruling is an indirect attempt to
avoid the consequences of its agreement to arbitrate. In short, Southern seeks to
circumvent the arbitration process by: 1) agreeing to submit all disputes to arbitration, 2)
agreeing to condition all claims in that arbitration on proof of the existence of a contract,
and then 3) bring the non-contract claims before the district court. By bringing these
claims in district court, Southern would be able to avoid the explicit terms of its arbitration
agreement, a result that would clearly be at odds with our mandate to enforce those
agreements. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225-26,
107 S. Ct. 2332, 2336-37, 96 L. Ed. 2d 185 (1987) (stating that the FAA was intended to
make arbitration agreements enforceable to the same extent as any other contract).
16
See Simon, 891 F.2d at 1159 (noting that motions to alter or amend a judgment under Rule
59(e) must clearly establish either a manifest error of law or fact or must present newly discovered
evidence and that such motions should not be used to argue a case under a new legal theory).
17
E.g. Dussouy, 660 F.2d at 597-98 (stating that Rule 15 evinces a bias in favor of granting
leave to amend).
we review the district court's decision only to determine whether it was an abuse of discretion.18
While we have held that the Rule 15 standards apply when a party seeks to amend a judgment
that has been entered based on the pleadings,19 we seriously doubt whether these liberal standards
would apply to amendment of a judgment after trial or, as here, after completion of arbitration.20 We
need not resolve this issue today, however, as we conclude that the district court's decision to deny
Southern's motion was not an abuse of discretion even under the more liberal standards applicable
to Rule 15.
In construing Rule 15 we have concluded that a district court's discretion is limited because
Rule 15 evinces a bias in favor of granting leave to amend.21 In Dussouy we stated:
The policy of the federal rules is to permit liberal amendment to facilitate determination of
claims on the merits and to prevent litigation from becoming a technical exercise in the fine
points of pleading. Thus, unless there is a substantial reason to deny leave to amend, the
discretion of the district court is not broad enough to permit denial.22
We have also stated, however, that leave to amend under Rule 15 is by no means automatic,23 and
we have affirmed denials when the moving party engaged in undue delay24 or attempted to present
theories of recovery seriatim to the district court.25
18
E.g. Little v. Liquid Air Corp., 952 F.2d 841, 846 (5th Cir.1992) (noting that the decision to
deny or grant leave to amend under Rule 15 lies within the sound discretion of the trial court);
Midland West Corp. v. FDIC, 911 F.2d 1141, 1145 (5th Cir.1990) (holding that denial of a Rule
59(e) motion is reviewed for an abuse of discretion).
19
Id. at 597 n. 1.
20
Cf. Dussouy, 660 F.2d at 598 n. 2 (discussing how interest in finality becomes more
compelling after a litigant has had some type of hearing on the merits of his claim); Union
Planters Nat. Leasing Inc. v. Woods, 687 F.2d 117, 121 (5th Cir.1982) (noting that the interest in
finality become more compelling after a court has decided a motion for summary judgment).
21
Dussouy, 660 F.2d at 597.
22
Id. at 598 (citations omitted).
23
E.g., Little, 952 F.2d at 846.
24
Id. at 846-847 (concluding that the district court did not abuse its discretion in denying the
leave to amend when the plaintiff sought to amend over one year after they had instituted their
action and several months after discovery had been effectively terminated).
25
Union Planters, 687 F.2d at 121 (concluding that district court did not abuse its discretion in
denying leave to amend after it had granted summary judgment in favor of the defendants and
Southern's attempt to amend its complaint was nothing more than an attempt to try its theories
of recovery seriatim. After conditioning all of its theories of recovery on the existence of a
contract—and losing conclusively on this issue at arbitration—Southern wished to amend its
complaint to try a different tack by claiming that it was entitled to recovery under quasi-contract.26
The fact that the first theory was tried at an arbitration proceeding, while the second would be tried
in a court of law, fails to provide a justifiable distinction for ignoring the policy against allowing
litigants to assert their claims in series. By applying this anti-seriatim policy to the arbitration award
in the instant case, we protect the efficacy of that award27 while we avoid adding to the already
burgeoning dockets of the district courts. As we concluded in an earlier case,28 a district court need
not subject itself to the presentation of theories seriatim: We perceive no justification for not applying
that rule to the instant case.
III
CONCLUSION
Southern suffered its loss after a full arbitration on the merits of its claims. The arbitration
was consented to by Southern and was one in which Southern unequivocally agreed to condition its
recovery on the existence of a contract. Only after losing on the contract issue did Southern attempt
to proffer new grounds for recovery, and only after judgment did Southern attempt to amend its
complaint. As the district court aptly noted in rejecting Southern's attempt to retry its dispute:
"Unfortunately for Southern, its train has not merely left the station—it has already reached its
noting that a busy district court need not allow itself to be imposed on by the presentation of
theories seriatim).
26
Southern has failed to provide any satisfactory explanation for its failure to assert these
theories in the alternative at the time it asserted its contract claims. The only justification that can
be extracted from Southern's brief is that Southern mistakenly assumed the quantum meruit and
quasi-contract claims were raised by its amended complaint. This error of law fails to constitute a
sufficient reason to subject Dynalectric, and the court system, to another adjudication on the
merits.
27
See supra, note 14, for a brief discussion of the federal policy in favor of enforcing
arbitration agreements and awards.
28
Union Planters, 687 F.2d at 121.
destination and discharged its cargo."
As we conclude that the district court properly found that Southern waived its quasi-contract
claims by failing to raise them in a timely fashion, and that the di strict court did not abuse its
discretion in denying Southern's attempt to amend its complaint to include those claims, the judgment
of the district court is AFFIRMED.