CFS Forming Structures Co. v. Flintco, Inc.

Case: 09-50770 Document: 00511205235 Page: 1 Date Filed: 08/16/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 16, 2010
No. 09-50770 Lyle W. Cayce
Clerk
CFS FORMING STRUCTURES CO., INC.
Plaintiff-Appellee
v.
FLINTCO, INC.
Defendant-Appellant
Appeal from the United States District Court
for the Western District of Texas
No. USDC 1:07-cv-00973-LY
Before KING, WIENER, DENNIS, Circuit Judges.
PER CURIAM:*
This contract dispute arises out of a construction contract to build a
conference center in San Marcos, Texas. Defendant-Appellant Flintco, Inc.
(“Flintco”) is a general contractor who contracted with Plaintiff-Appellee CFS
Forming Structures, Inc. (“CFS”) to perform concrete work on the conference
center and an adjacent hotel. During the course of construction, Flintco sent
CFS a “cure” letter, pursuant to their subcontract, which directed CFS to
“commence” installation of concrete work. Ten days later, asserting that
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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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installation had not commenced, Flintco terminated its subcontract with CFS
and hired another concrete subcontractor. CFS sued Flintco for breach of
contract, and Flintco counterclaimed for breach of contract. A jury returned a
verdict for CFS and against Flintco. Flintco properly moved, post-verdict, for a
judgment as a matter of law (“JMOL”), which the district court denied. Flintco
then timely filed a notice of appeal, asserting that the district court abused its
discretion in instructing the jury and erred in denying Flintco’s motion for
JMOL. We affirm.
I. FACTS AND PROCEEDINGS
The subcontract at issue was signed on February 6, 2007. It provided that
CFS’s work was to occur on or before the date specified in the “master project
schedule.” This term was not defined in the subcontract, and no date for work
completion was specified. The subcontract also contained a “time is of the
essence” provision. Crucially, paragraph 9 of the subcontract also gave CFS the
right to “cure” any noncompliance under the subcontract for “fail[ure] or refus[al]
to proceed with or properly perform Work as directed by FLINTCO . . . .”
Specifically, the subcontract stated that “FLINTCO shall notify Subcontractor
in writing of Subcontractor’s failure to comply. If FLINTCO determines that
Subcontractor has not remedied and cured the event(s) of default within three
(3) days of written notification, then FLINTCO may . . . terminate this
Subcontract . . . .”
Central to the organization and coordination of the overall construction
project was the “master project schedule,” which the district court held to be the
“critical path method” schedule (the “CPM”). This CPM scheduled the project's
tasks, specifying both commencement and completion dates, and arranged the
sequence of each task so that, as necessary, it would occur before, during, or
after other tasks. “Noncritical” tasks were those that, if delayed or not timely
completed, would not delay the project’s ultimate completion date; “critical”
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tasks were those whose delayed or untimely completion would delay the project.
The CPM was updated and re-issued by Flintco monthly as tasks were
completed or not completed; a particular task’s status could shift between
noncritical and critical.
The bid documents that predated the subcontract’s execution contained a
baseline schedule outlining the subtasks and the project completion date. This
was re-issued on February 22, 2007, with new interim dates and a project
completion date of October 14, 2008. This completion date never changed during
the course of the nine interim CPM updates that CFS received between the
subcontract’s execution and its termination by Flintco on October 9, 2007.
Completion dates for some tasks did change, however, including, for example,
CFS’s slab work, which was eventually scheduled to be completed by October
25th. After construction commenced, there were multiple alterations to the CPM
schedule issued by Flintco, which pushed back CFS’s schedule several times.
Accordingly, CFS could not and did not commence or complete its work either as
originally scheduled or by the updated schedule.
Because of delays attendant on the installation of concrete by CFS, Flintco
became concerned about meeting the project’s ultimate deadline and being able
to proceed with other components of the project, such as structural steel
installation. Attributing the delay in concrete floor installation to what Flintco
considered to be CFS’s dilatory performance, Flintco’s project manager sent CFS
a “cure letter” on September 28, 2007, which directed that CFS “commence”
operations on the “conference center slab on grade” task. The cure letter stated
that the slab work was scheduled to be completed by October 8. Immediately
after sending the letter, the project manager left on vacation. As soon as it
received the letter, CFS “commenced” the slab work by laying down vapor
barriers, applying pest control, grading the site, and the like. It also scheduled
concrete pours for October 10 and 11. Importantly, CFS put on evidence at trial
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that the cure letter’s October 8 completion date came from an older CPM update
and that the CPM date in effect on September 28 was actually October 25.
The project manager returned from vacation on October 8 and was
authorized by Flintco to terminate CFS’s subcontract on October 9. He did so by
letter, stating that, because “no significant carton form operation has taken
place” Flintco deemed CFS to have refused to commence work under the
subcontract.
At the jury charge conference before commencement of the jury trial on the
parties’ opposing breach of contract claims, the opposing parties’ lawyers
disagreed on the appropriate structure of the jury charge. Flintco wanted the
court to use a so-called Mustang Pipeline1 charge (“Mustang Charge”) which
would ask disjunctively (1) whether either party was in breach, and (2), if so,
which breach occurred first. Flintco also objected to the fact that the court’s
proposed jury charge would ask if CFS was in breach at the time of the Flintco
cure letter, September 28, rather than at the time of the subcontract’s
termination, October 9.
The district court denied these objections and submitted the jury charge
without Flintco’s proposed changes. The court also held as a matter of law that
the CPM in effect on September 28 was the “master project schedule” for
purposes of CFS’s putative breach, ruling that this date was the only reasonable
candidate. Flintco argued that the February baseline schedule should be the
master schedule, but the court discounted this, reasoning that heavy rain delays
in the spring, which in turn had delayed the beginning of construction, as well
as the fact that the CPM updates effected multiple changes in interim task
completion dates, rendered the February schedule untenable.
The submitted jury charge read:
1
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004).
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Question 1: Do you find that CFS was in compliance with the master
project schedule on September 28? If “No”proceed to question 2; if yes,
proceed to question 3.
Question 2: Do you find that CFS satisfied the notice in the “cure letter”
of September 28 by commencing operations? If yes, proceed to question 3;
if “no” proceed to question 4.
Question 3: What amount of money would compensate CFS for Flintco’s
termination?
Question 4: What amount of money would compensate Flintco for CFS's
breach?
The jury found that CFS was not in breach of the subcontract on
September 28 and awarded it damages for Flintco’s unjustified termination.
Flintco then moved for a JMOL, asserting that CFS’s actions were a material
breach of contract because of the “time is of the essence” clause. The district
court denied this motion.
On appeal, Flintco contends that the district court abused its discretion by
(1) not giving a Mustang Charge in the disjunctive, and (2) not instructing the
jury to determine CFS’s putative breach as of the day that Flintco terminated
the subcontract with CFS. Flintco also claims that the district court erred in
denying its JMOL motion because CFS’s actions constituted a material breach
of the subcontract by virtue of its “time is of the essence” clause.
II. ANALYSIS
A. Standard of Review
We review challenges to jury instructions for abuse of discretion.2 “A
judgement will be reversed only if the charge as a whole creates substantial and
ineradicable doubt whether the jury has been properly guided in its
deliberations.”3 “In diversity actions, a federal court's jury instructions must
accurately describe the applicable state substantive law, but the district court
2
Huss v. Gayden, 571 F.3d 442, 460 (5th Cir. 2009).
3
United States v. Monroe, 178 F.3d 304, 307 (5th Cir. 1999).
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has wide discretion in formulating the charge.”4 Even if we find error, “we will
not reverse if we determine, based on the entire record, that the challenged
instruction could not have affected the outcome of the case.” 5
We review a district court’s grant or denial of a JMOL de novo, applying
the same legal standard as the district court.6 “A motion for judgment as a
matter of law . . . in an action tried before a jury is a challenge to the legal
sufficiency of the evidence supporting the jury’s verdict.”7 JMOL is proper when,
after a party as been heard by a jury, there is no legally sufficient evidentiary
basis for a reasonable jury to have found for that party with respect to that
issue.8
B. Discussion
The facts here closely track those in Mustang Pipeline . There, the pipeline
owner Mustang Pipeline contracted with Driver to build a pipeline. The contract
dictated that time was of the essence in the completion of the work by Driver.9
Driver’s work was delayed, and Mustang repeatedly asked for assurances that
the work would be timely completed. Convinced by Driver’s pattern of delay that
the project would not be completed on time, Mustang ultimately terminated the
Driver contract forty days before the targeted completion date and hired another
pipeline contractor.
4
Baker v. Canadian Nat'l/Ill. Cent. R.R., 536 F.3d 357, 363-64 (5th Cir.2008).
5
Wright v. Ford Motor Co., 508 F.3d 263, 268 (5th Cir.2007).
6
Flowers v. Southern Regional Physician Serv’s, Inc., 247 F.3d 229, 235 (5th Cir. 2001)
(citation omitted).
7
Ford v. Cimarron Ins. Co., 230 F.3d 828, 830 (5th Cir. 2000).
8
Id.9
The several opinions that resulted are silent as to whether there was also a “cure”
provision, but if such a provision existed, it played no role in the determinations of either the
trial court or the appellate courts.
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Mustang then sued Driver for breach of contract, and Driver
counterclaimed for wrongful termination of the contract. The case was tried to
a jury, and the trial court submitted the following four-question charge:
1) Did Driver Pipeline Company fail to comply with the contract it
had with Mustang Pipeline Company?
2) Was Mustang Pipeline Company justified or not justified in
terminating Driver Pipeline Company?
3) What sum of money, if any, if now paid in cash would fairly and
reasonably compensate Mustang Pipeline Company for its damages,
if any, that resulted from such failure to comply?
4) What sum of money would fairly and reasonably compensate
Driver for its damages, if any, that resulted from Mustang's failure
to comply with the Contract? 10
Although the jury found that Driver had breached the contract, it also
found that Mustang had wrongfully terminated the contract. Mustang moved
to set aside the jury’s verdict as to Mustang’s conduct, arguing that, if Driver
materially breached the contract first, Driver could not then seek damages for
wrongful termination. The trial court denied Mustang’s motion, and it appealed.
The intermediate appellate court affirmed the trial court, holding that the jury
verdict as to Mustang could only be set aside if Driver’s breach was material,
and that materiality was a question for the jury. The Texas Supreme Court
reversed, holding that, based on the evidence of Driver’s delay, the emphasis
that Mustang had placed on (1) timeliness, (2) the aggressive schedule which
had never varied in target completions dates, and (3) the “time is of the essence”
clause, Driver’s breach was material as a matter of law.11 Accordingly, the Texas
Supreme Court set aside the verdict against Mustang.12
10
Id. at 197.
11
Id. at 200.
12
Id.
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The court then noted in dicta that the jury instruction’s defects could have
been avoided by a charge worded in the disjunctive, reasoning:
These problems could have been avoided had the trial court submitted the
breach of contract question disjunctively (“Did Driver Pipeline Company
or Mustang Pipeline Company fail to comply with the parties’ contract?”)
accompanied by an appropriate instruction directing the jury to decide
who committed the first material breach.
....
In the standard contract dispute, one party cancels the contract or refuses
to pay due to alleged breaches by the other; in such circumstances, jurors
will often find both parties failed to comply with the contract (as the jury
did here) unless instructed that they must decide who committed the first
material breach.13
Flintco insists that this case is indistinguishable from Mustang Pipeline
and that the district court abused its discretion in refusing to give the
disjunctive jury instruction mentioned in dicta by the Texas Supreme Court.
Specifically, Flintco asserts that “when a party contends that its termination of
a contract is excused because the other committed a material breach first, the
issue should be submitted . . . in the disjunctive. That is, the question should
ask whether either party breached, and if both did, which party breached first.”
Flintco also urges that the jury instructions submitted by the district court were
in error because they presume that, if the jury should find that CFS was either
not in breach on September 28 or was in breach and failed to cure that breach
in the cure period, Flintco’s termination was automatically wrongful. Flintco
asserts that a Mustang Charge would have obviated this problem, i.e., when both
parties are in putative breach, by allowing the jury to determine which party
breached first. According to Flintco, this would effectuate the principle that a
contract is not enforceable against a party in putative breach when there is an
antecedent material breach by the other party.
13
Id. (emphasis added).
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Contrary to Flintco’s contention that the sequence of the breaches is the
essential issue, the key question that the Texas Supreme Court’s instruction in
Mustang Pipeline attempted to resolve is materiality. If the jury finds that both
parties breached the contract under facts akin to those in Mustang Pipeline, i.e.,
a second breach that occurs as a result of an earlier breach, the sequence of the
breach – who breached first – is obvious. In Mustang Pipeline, Driver had to
breach first because that was the antecedent event to the subsequent breach by
Mustang, after which no further business was done between the parties.
Because Driver was alleged to have breached first and Mustang second, the
determinative question was whether Driver’s initial breach was material. This
is borne out by the Mustang Pipeline court’s analysis, which was concerned solely
with whether Driver’s delay constituted a material breach as a matter of law,
and thus excused Mustang’s subsequent breach.14
The district court’s jury instructions here adequately capture the question
of materiality despite their not being worded in the disjunctive. The charge
contains the implicit assumption that the breaches, if they occurred, were
material.15 That is, the jury questions require that, (1) if the jury finds that
CFS breached the subcontract by failing to comply with the CPM , Flintco must
14
Mustang Pipeline, 134 S.W.3d at 200.
15
Under the jury instructions, this is true for both parties. If the jury had found that
CFS was not in compliance on September 28th and failed to cure, its breach was deemed,
under the questions, to be material because the jury was then to assess damages.
Importantly, if the jury had found CFS to be in breach, it was not to consider whether Flintco
breached the subcontract, presumably because, as CFS’s delay was material, Flintco’s
termination could not be wrongful.
This assumption of materiality by the jury instructions is supported by the fact that
the questions specifically refer to discrete occurrences as potential breaches. Contrast the
specificity of these instructions with those in Mustang Pipeline: “Did Driver Company fail to
comply with the contract it had with Mustang Pipeline?”. 134 S.W.3d at 197. In fact, the very
generality of the Mustang Pipeline instructions is what gives rise to the need for the Texas
court’s fix because, under the original instructions, it is impossible to know which specific act
of Driver’s constituted the breach and, therefore, whether it was material.
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be awarded damages, but (2) if CFS was in compliance, then Flintco’s
termination was wrongful and the jury must determine the quantity of damages
incurred by CFS. Even though they do not explicitly require the jury to decide
materiality,16 these instructions will nevertheless establish which breach, if any,
is material. And, because of the “cure” provision, CFS could only be in breach
under the instant facts if it were first notified of a putative breach and afforded
an opportunity to cure. There is no question that Flintco terminated the
subcontract and that it purported to do so because of CFS’s putative failure to
cure the delay outlined in the “cure letter.” It necessarily follows that if CFS
was not actually in breach vel non, then the termination for that breach was
wrongful.
Under the facts presented at trial, there were only two potential breaches
at issue: (1) CFS’s tardiness as of September 28, and (2) Flintco’s contract
termination for delay. The district court’s jury instructions put the question of
materiality of both breaches to the jury and did so in a way that prevented any
possible conflicting jury findings. The charge was proper, given the fact that
CFS’s “breach” triggered a “cure letter” under the subcontract, and Flintco’s
breach terminated the entire subcontract before completion. The jury
instructions prevented an inconsistent jury verdict, such as the one that
occurred in Mustang Pipeline. Accordingly, Flintco has failed to show
“substantial and ineradicable doubt whether the jury has been properly guided
in its deliberations.”
16
Put another way, by structuring the instruction in the way that it did, the district
court appears to have held that, as a matter of law, each breach, if proved, was material. This
is amply supported by the evidence. First, it is clear that an unwarranted termination of the
subcontract is a material breach. Termination is only unwarranted if the reason for the
breach – here CFS’s delay – was not material. Failure to satisfy the requirements of a valid
cure letter is also, under the terms of the subcontract, a material breach. Clearly then, both
putative breaches at issue were potentially material.
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Flintco’s other issues with the jury instructions are that (1) the verdict
form asked the jury whether CFS was in compliance on the date of the cure
letter rather than the date of Flintco’s termination of the subcontract, and (2) the
jury charge refers to “first floor slab,” the cure letter refers to commencement of
the “slab on grade operation,” and the termination letter refers to “slab on carton
form operation,” potentially confusing the jury.
Flintco has failed to show an abuse of discretion under either issue. First,
the termination letter refers to CFS’s delay and failure to cure as the reasons for
terminating the subcontract, and it references the Paragraph of the subcontract,
that outlines the materiality of delay, the right to cure, and the termination
consequences for failing to cure. The right to cure for delay means that Flintco
had to send the cure letter and give CFS 72 hours to commence curing the delay.
Necessarily, CFS could not be in breach until and unless it were never given
such notice and right to cure.
Flintco argues in response that CFS’s conduct following receipt of the cure
letter but before Flintco terminated the subcontract could have supported
Flintco’s claim of breach. The flaw in this argument is that Flintco sent only one
cure letter. It certainly may be (and the jury instructions capture this fact) that
if CFS failed to comply with the cure letter in this interim period, it was in
breach. Under the terms of the cure provision in the subcontract, however, CFS’s
conduct during the interim period can only fall into one of four categorical
descriptions: (1) continuing compliance with the subcontract, notwithstanding
the cure letter’s complaints; (2) resulting compliance with the subcontract by
correcting the earlier breaches outlined in the cure letter; (3) continuing non-
compliance with the subcontract through failure to comply with the cure letter;
or (4), irrespective of any earlier breach, committing an independent breach of
the subcontract.
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The jury instructions capture only the first three of these possibilities by
charging the jury to consider CFS’s alleged breach as of September 28. This is
absolutely the correct date to use, however, because CFS could only have been
in breach for delay after being notified and afforded the opportunity to cure. If
CFS had in fact committed a new breach in the interim period after the cure
letter, i.e., conduct other than that complained of in the cure letter, Flintco
would have been obliged to issue a new cure letter and give CFS another 72
hours to cure before lawfully terminating the contract. Otherwise, any conduct
occurring in the interim period would not be actionable or be related to the
initial cure letter. As it is undisputed that Flintco sent only the September 28
cure letter, the district court’s decision to charge the jury with determining
CFS’s compliance as of that date was not only not an abuse of discretion, but the
only licit choice. If instead of the cure letter’s date, the court had specified the
subcontract’s termination date as the material date of breach, the jury could
have found CFS in breach for conduct unrelated to the September 28th cure
letter. Such a finding would have been wrongful, however, because the evidence
shows that no subsequent conduct was ever afforded the cure period as required
by the subcontract. By setting September 28 as the date of putative breach, the
district court prevented this erroneous outcome. Accordingly, the court’s date
of choice does not give rise to substantial doubt that the jury was misguided in
its deliberations.
Flintco also claims that the term “first floor slab” may have misled the jury
to conclude that CFS’s initial steps to lay down the concrete slab constituted
“commencement” under the cure letter when, in fact, the cure and termination
letter’s terminology actually contemplated commencement of the “final stages”
of the slab work. Flintco simply states that the term “first floor slab” is
“narrower,” and that the “earlier steps” CFS undertook after the cure letter were
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not what Flintco complained of and “should not have been considered steps
toward compliance.”
Beyond these bald assertions, Flintco does not otherwise support its
contention that the term “first floor slab” misled the jury to view non-compliant
conduct erroneously as compliant. The cure letter lucidly states that CFS has
72 hours after receipt to “commence” its concrete work, and the evidence
adduced at trial supports a jury finding that CFS did in fact commence this
work. Even assuming that the term is inaccurate, Flintco’s self-serving
assertions as to the definitions of these terms fail to give rise to “substantial and
ineradicable doubt” that the jury was misled or, assuming error, that it affected
the outcome of the trial.
Finally, Flintco argues that it is entitled to a JMOL because the “time is
of the essence” clause in the subcontract renders CFS’s myriad delays material
breaches. As discussed above, however, the Texas Supreme Court held in
Mustang Pipeline held that, under the discrete facts of that case, Driver’s delay
was a material breach of the contract as a matter of law.17 That court did not
hold that, in every case, a “time is of the essence” provision ipso facto makes any
delay a material breach. Under the JMOL standard, Flintco had to show that
the “time is of the essence” provision meant that, in light of the evidence
adduced, “there is no legally sufficient evidentiary basis for a reasonable jury to
have found” that CFS was in compliance on September 28. First, unlike in
Mustang Pipeline, CFS had a right to cure any breach for delay. Under the
terms of the subcontract, CFS would only be in material breach if it were notified
of that fact and afforded an opportunity to cure. As none of the delays prior to
the September 28 cure letter prompted a cure letter, CFS could not have been
17
137 S.W.3d at 200.
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in material breach for any conduct preceding the conduct that prompted the cure
letter of September 28.
As for its conduct that did prompt the September 28 letter, CFS points out
that evidence adduced at trial proved that CFS’s work on the slab operation was
not delaying the overall project. For example, the CPM in effect on September
28 confirms that the slab was to be completed on October 25, and that it was a
“noncritical” task. Furthermore, contrary to Flintco’s assertion that the
structural steel installation was delayed by CFS’s conduct, CFS has shown that
Flintco’s project superintendent testified that the slab work did not need to be
completed for steel installation to commence.
In sum, Flintco has failed to meet the high standard of showing that there
is no “legally sufficient evidentiary basis” for the jury’s verdict.
IV. CONCLUSION
For the foregoing reasons, the district court is, in all respects,
AFFIRMED.
14