Standard Bank, PLC v. Runge, Inc.

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
TENTH CIRCUIT February 25, 2014
Elisabeth A. Shumaker
Clerk of Court
STANDARD BANK, PLC,
Plaintiff - Appellee,
No. 12-1340
v. (D.C. No. 1:07-CV-01989-RPM)
(D. Colo.)
RUNGE, INC., f/k/a Runge Mining, Inc.,
d/b/a Pincock, Allen & Holt,
Defendant - Appellant.
ORDER AND JUDGMENT*
Before HARTZ, MATHESON and McKAY, Circuit Judges.
Standard Bank PLC (“Standard”) sued Runge, Inc. (“PAH”)1 in tort for
professional negligence and negligent misrepresentation. The district court granted
summary judgment to PAH based on Colorado’s economic loss rule, and we affirmed.
Standard Bank, PLC v. Runge, Inc., 443 F. App’x 347, 349, 353-54 (10th Cir. 2011).
PAH then moved to recover costs, including attorney fees, based on the contract between
PAH and Bronco Hazleton Company (“Bronco”). The district court denied PAH’s
* This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. It may be cited, however, for its
persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
Runge, Inc. does business as Pincock, Allen & Holt, which has been referred to
throughout this case as PAH.
motion, holding that fee-shifting was not part of the contract. Exercising jurisdiction
under 28 U.S.C. § 1291, we reverse and remand for further consideration.
I. BACKGROUND
In 2005, Bronco sought a loan from the Royal Bank of Scotland (“RBS”) to
purchase the Hazleton coal mine in southern Indiana. RBS asked PAH to perform
independent engineering evaluation as part of RBS’s due diligence.
Instead of forming a contract with PAH for the engineering work, RBS asked PAH
to make arrangements with Bronco. PAH submitted a 24-page proposal to Bronco (copy
to RBS), which included PAH’s standard “Terms and Conditions.” PAH’s terms called
for, among other things, a $35,000 prepayment. The terms also included a fee-shifting
provision to allow the prevailing party in a contract dispute to recover costs, including
attorney fees, from the losing party.
Although no one signed the proposal, Bronco paid the $35,000. Standard later
replaced RBS as the lender, understanding that PAH would continue as the independent
engineer. Standard relied on PAH reports to make its loan decision.
Standard loaned $35 million to Bronco in December 2005. Bronco acquired the
mine, but within months the mine failed and Bronco went bankrupt. Standard sued PAH
in the U.S. District Court for the District of Colorado for $43 million, alleging the torts of
professional negligence and negligent misrepresentation. The district court, exercising
diversity jurisdiction, granted summary judgment based on the Colorado economic loss
rule, which prevents parties “suffering only economic loss from the breach of an express
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or implied contractual duty” from “assert[ing] a tort claim for such breach absent an
independent duty of care under tort law.” Standard Bank, 443 F. App’x at 349-50
(quotations omitted). We affirmed the summary judgment. Id. at 354.
On remand, the district court denied PAH’s request under the fee-shifting
provision. The fee-shifting provision appears in the Terms and Conditions as follows:
14. DISPUTES RESOLUTION. . . . (iii) The prevailing party will
be entitled to recovery of all reasonable costs incurred, including staff time,
court costs, attorneys’ fees, and other claim-related expenses.
Appx., Vol. IV at 813.
II. DISCUSSION
The district court and this court previously held there was a contract between
Bronco and PAH. The issues here are (A) whether the contract includes the fee shifting
provision, and if it does, (B) whether that provision is valid, and if so, (C) whether it
applies to Standard.
In its December 14, 2012 order, the district court made the following statements
about the fee shifting provision:
While this Court decided that the proposal became a contract when Bronco
paid the $35,000 advance fee, it did not decide that the fee shifting
provision in the Terms and Conditions was part of the agreement. There
was no need to make that decision. . . .
Colorado courts have strictly construed fee shifting agreements because
they are in derogation of the American rule and their scope depends, in part,
on the circumstances surrounding the formation of the contract. There has
been no evidence of any negotiations between PAH and Bronco and no
occasion for this Court to determine whether it and the other PAH standard
Terms and Conditions were accepted by Bronco. In the absence of a
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finding that attorney’s fees and costs would be recoverable from Bronco,
the defendant’s argument for recovery from Standard are rejected.
Standard Bank, PLC v. Runge, Inc., No. 07-cv-01989-RPM, 2012 WL 3264288, at
*3 (D. Colo. Aug. 9, 2012)
As to issue (A)—whether the contract includes the fee shifting provision—the
district court’s first statement, as we explain below, appears to conflict with the law of
the case holding that the fee-shifting provision is part of the Bronco-PAH contract.
As to issue (B)—whether the provision is valid—the district court’s second
statement appears to give brief consideration to this issue, but the reference to having “no
occasion . . . to determine whether [the fee provision was] accepted by Bronco” suggests
less than full consideration. Id.As to issue (C)—whether the fee shifting provision applies to Standard—the
district court, because of its conclusion based on “the absence of a finding,” did not
address this issue. Id. 2 We are confident the district court addressed issue (A), and we
turn to it next.
A. Is the Fee-Shifting Provision Part of the Bronco-PAH Contract?
The proposition that the fee-shifting provision was part of a valid contract between
Bronco and PAH finds support in our previous Order and Judgment affirming summary
judgment for PAH. Standard Bank, 443 F. App’x at 347-48 & n.1. In that opinion, we
2
Much of PAH’s and Standard’s briefs address the third issue—whether the fee-
shifting provision applies to Standard—an issue the district court did not address and that,
as explained below, we remand.
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agreed with the district court that Colorado’s economic loss rule precluded Standard’s
tort claim, and we recognized there was a “contract between Bronco and PAH.” Id. at
348 (footnote omitted). Although “[t]here was no signed contract between Bronco and
PAH,” we said that “PAH’s written proposal to provide services became the contract
when Bronco made payment for PAH’s services. The parties do not argue otherwise.”
Id. at 348 n.1. We further stated that “[w]hen we refer to the contract, we are referring to
PAH’s proposal.” Id.The law of the case is that Bronco and PAH formed a contract and the contract
consists of PAH’s proposal. See Guidry v. Sheet Metal Workers Int’l Ass’n, Local No. 9,
10 F.3d 700, 705 (10th Cir. 1993) (“The ‘law of the case’ doctrine requires every court to
follow the decisions of courts that are higher in the judicial hierarchy” for “issues
previously decided either explicitly or by necessary implication.” (citations omitted)).
This court’s determination that the economic loss rule applied to Standard’s tort claims
against PAH presupposed a contract between Bronco and PAH based on the PAH
proposal. The PAH proposal contained the fee-shifting provision in paragraph 14 of the
Terms and Conditions.
Although the district court on remand said “it did not decide that the fee shifting
provision in the Terms and Conditions was part of the agreement,” Standard Bank, 2012
WL 3264288, at *2 (denial of attorney fees), we had previously determined PAH’s
proposal was the contract, see Standard Bank, 443 F. App’x at 348 & n.1. And because
the proposal contains the fee-shifting provision, that provision is part of the Bronco-PAH
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contract. Although we did not specifically address the fee-shifting provision in our
previous decision, nothing in that decision, the contract, or the record suggests that any
part of the proposal, including the fee-shifting provision, should be carved out or ignored.
We therefore reverse the district court to the extent it held the Bronco-PAH
contract does not include the fee-shifting provision.
B. Is the Fee-Shifting Provision Valid Against Bronco?
This next issue presents us with a difficult choice: whether we should attempt to
address the validity of the fee-shifting provision under Colorado law.
On the one hand, the court’s order appears to address the fee shifting provision’s
validity even though its brief analysis addresses only lack of negotiation between Bronco
and PAH and lack of acceptance by Bronco—matters that speak more to contract
formation than the validity of certain provisions. Even so, the Colorado Supreme Court
has suggested that how an agreement is made has some bearing on whether a fee-shifting
provision is valid. See Agritrack, Inc. v. DeJohn Housemoving, Inc., 25 P.3d 1187, 1193
(Colo. 2001). And even if the district court’s analysis was incomplete, the interest in
judicial economy points to addressing the validity question on this appeal.
On the other hand, it is not entirely clear the district court addressed the validity
issue. If it did, the court wrote only three sentences without discussion of or citation to
any Colorado cases. If we were to find the provision valid, we would still remand to the
district court to decide whether it applies to Standard because the district did not address
that question. This undercuts the judicial economy point made above. Moreover, we
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already have decided to reverse the district court on the first issue of whether the
provision is part of the PAH-Bronco contract. Finally, we lack the benefit of the district
court’s full consideration of the validity question, which itself might benefit from this
court’s analysis of the first issue.
In light of the foregoing, we think the prudent course is to reverse the district court
to the extent it ruled that the fee-shifting provision is not part of the contract, and to
remand for further consideration of whether the fee-shifting provision is valid.
C. Does the Fee-Shifting Provision Apply to Standard?
Due to the manner in which the district court denied PAH’s request for fees and
costs, it did not discuss whether the fee-shifting provision applies to Standard. We
generally do not consider issues not ruled on in the district court. See Pac. Frontier v.
Pleasant Grove City, 414 F.3d 1221, 1238 (10th Cir. 2005) (“Where an issue has been
raised, but not ruled on, proper judicial administration generally favors remand for the
district court to examine the issue initially.”); Workman v. Jordan, 958 F.2d 332, 337
(10th Cir. 1992).
We therefore remand for the district court to determine whether the fee-shifting
provision applies to Standard if it determines the fee-shifting provision is valid.
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III. CONCLUSION
For the foregoing reasons, we reverse and remand to the district court for further
consideration of PAH’s motion to recover costs, including attorney fees, consistent with
this opinion.
ENTERED FOR THE COURT
Scott M. Matheson, Jr.
Circuit Judge
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