Garrison Realty, L.P. v. Fouse Architecture & Interiors, P.C.

Case: 12-40764 Document: 00512415458 Page: 1 Date Filed: 10/21/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 21, 2013
No. 12-40764
Lyle W. Cayce
Clerk
GARRISON REALTY, L.P.,
Plaintiff
GARRARD CONSTRUCTION GROUP, INC.,
Intervenor Plaintiff - Appellee Cross Appellant
v.
FOUSE ARCHITECTURE & INTERIORS, P.C.,
Defendant - Appellant Cross Appellee
Appeals from the United States District Court
for the Eastern District of Texas
USDC No. 2:10-CV-576
Before REAVLEY, ELROD, and HAYNES, Circuit Judges.
PER CURIAM:*
This appeal arises from a dispute in connection with the construction of
a nursing home facility in Garrison, Texas. The builder of the facility, Garrard
Construction Group, Inc. (“Garrard”), sued the facility’s architect, Fouse
Architecture & Interiors, P.C. Both parties appeal following a jury verdict in
favor of Garrard on claims of negligence and negligent misrepresentation. We
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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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AFFIRM in part and REVERSE in part, and REMAND for modification of the
judgment.
I.
In 2008, Garrard entered into a contract with Garrison Realty, L.P. to be
the general contractor on construction of a nursing home facility designed by
Fouse. Pursuant to the contract, Fouse was to act as the communication conduit
between Garrard and Garrison. Fouse also set the initial budget on the project
of $2.8 million. This amount was set forth in the contract as the guaranteed
maximum price. Garrard had concerns about meeting that price, however,
because its bid had been approximately $3.2 million. It therefore included an
exhibit in the contract stating that all parties recognized the contract price had
not been met and that the parties would cooperate in completing the project as
close to the maximum price as possible. According to Garrard, Fouse assured it
that the owner, Garrison, would work with Garrard in good faith negotiation of
the price.
The contract provided for cost-plus remuneration, with Garrard to receive
its costs plus an eight percent profit. During the course of construction,
numerous change orders were required because Fouse’s design plans were
allegedly faulty. These change orders increased the cost of the project. Fouse
approved the change orders and again assured Garrard that Garrison would pay
the increased costs. Fouse allegedly did not communicate with Garrison about
the changes, however, nor did it send to Garrison the exhibit that Garrard had
included in the contract. Garrison refused to pay the additional costs of the
project, and two lawsuits ensued.
In the first suit, Garrison sued both Garrard and Fouse. Garrard, which
had placed a lien on the facility, counterclaimed against Garrison. Garrison and
Garrard entered a settlement, and Fouse was dismissed without prejudice.
Garrison then initiated the instant suit against Fouse, and Garrard intervened
as a plaintiff. Garrison settled its claims against Fouse, leaving only claims and
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counterclaims between Garrard and Fouse to be tried to the jury. Garrard
prevailed on claims of negligence and negligent misrepresentation. On the
negligence claim, the jury awarded Garrard $330,000 for additional expenses
incurred by Garrard and $256,000 in lost profits. On the negligent
misrepresentation claim, the jury awarded Garrard $125,000.
The district court reduced the negligence award by applying an offset from
Garrard’s settlement with Garrison in the first suit. Fouse appeals from the jury
verdict and the award of damages. Garrard cross-appeals the district court’s
application of the offset. We address Fouse’s claims first.
II.
A.
Fouse argues first that (1) Garrard lacked standing because Garrard’s
claims are barred by the economic loss rule and (2) as a settling defendant in the
first suit, Garrard may not, under Texas law, seek contribution from Fouse.
These arguments fail.
Although Fouse admitted during oral argument that it raised the economic
loss rule for the first time on appeal, it argues that it may do so because the rule
implicates Garrard’s standing, and therefore the court’s jurisdiction. It reasons
that because it owed no duty in tort to Garrard, Garrard lacked standing and the
economic loss rule prevents Garrard’s recovery of what are essentially contract
damages. But whether Fouse owed a legal duty to Garrard is an element of the
tort claims, not a component of standing that implicates the court’s subject
matter jurisdiction. See, e.g., IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v.
Mason, 143 S.W.3d 794, 798 (Tex. 2004) (stating the elements for a negligence
cause of action). Whether a party has standing is a distinct question from
whether it has asserted a valid cause of action. See Davis v. Passman, 442 U.S.
228, 239 n.18, 99 S. Ct. 2264, 2274 n.18 (1979). Here, Garrard alleged that it
suffered injury in the form of increased costs and lost profits as a result of
Fouse’s negligent design of the project, its negligence in communicating between
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Garrard and Garrison, and its negligent or false assurances that Garrison was
aware of the increased costs and would pay Garrard. Garrard has sufficiently
alleged an injury caused by Fouse that is redressable by the court. See Procter
& Gamble Co. v. Amway Corp., 242 F.3d 539, 560 (5th Cir. 2001) (stating
requirements for standing). Because Fouse’s economic-loss-rule argument does
not implicate standing and is raised for the first time on appeal, we decline to
address it. See LeMaire v. La. Dep’t of Transp. & Dev., 480 F.3d 383, 387 (5th
Cir. 2007) (“[A]rguments not raised before the district court are waived and
cannot be raised for the first time on appeal.”). With respect to the argument
that Garrard’s damages claim was an impermissible claim for contribution,
Garrard’s settlement of claims against Garrison were primarily as a plaintiff.
There is no showing that Garrard paid a disproportionate amount to Garrison
as compensation for a common liability with Fouse. Fouse’s reliance on Beech
Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 22 (Tex. 1987), is inapposite.
B.
Fouse next argues that Garrard’s recovery of damages for both negligence
and negligent misrepresentation amounted to an impermissible double recovery.
Based on our review of the evidence and the circumstances of this case, we agree.
In Texas, a party may not recover twice for the same injury under different
legal theories. See, e.g., Hart v. Moore, 952 S.W.2d 90, 97 (Tex. App.–Amarillo
1997, pet. denied) (“Double recoveries for alternative measures of damages are
not permitted.”) (citing Birchfield v. Texarkana Mem’l Hosp., 747 S.W.2d 361,
367 (Tex. 1987)). The jury awarded Garrard $330,000 in additional costs and
$256,000 in lost profits on the negligence claim. The jury also awarded $125,000
in economic loss for negligent misrepresentation. Fouse argues that Garrard
failed to show distinct injuries arising from the claims of negligence and
negligent misrepresentation and relied on the same evidence in support of both
claims. Fouse is correct.
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Garrard relied primarily on two documents in support of its damages
claim, and counsel referred to both as justification for the negligence and
negligent misrepresentation claims when arguing to the jury. First, exhibit 2A,
a change order log, listed twenty-nine items that Garrard alleged resulted in
change orders and additional expenses. Garrard’s theory at trial was that these
change orders were necessitated by Fouse’s negligence, that Fouse approved the
change orders, and that Fouse also assured Garrard that Garrison would pay for
the changes. Garrard also presented exhibit 3, a printout from Garrard’s
accounting software program showing the project costs. Because the contract
provided for cost-plus remuneration, Garrard sought to recover as damages not
only the additional costs incurred from the change orders shown in exhibit 2A,
but also its contracted profit of eight percent of the total project cost shown in
exhibit 3.
Exhibit 3 shows that the total cost of the project was approximately $3.2
million. Eight percent of $3.2 million yields the $256,000 that the jury awarded
Garrard as lost profits on the negligence claim. The difficulty arises from the
amounts awarded for Garrard’s economic loss of additional expenses.
Exhibit 2A shows the total amount of change orders to be $567,807.
Garrard did not seek to recover this entire amount, however, because it
acknowledged that it was paid for some of the changes and that the work for
some of the others was never performed.1 Garrard sought recovery only for work
performed for which it was not paid. Excluding the items for which Garrard was
paid and the items for which no work was done, Garrard’s counsel argued that
the remainder owed was $417,000.2
1
Testimony from Eric Sluss showed that Garrard received payment for the fire pump,
natural gas HVAC units, cabinets/door in breakroom, a freezer, and the dish Net Work
System. Testimony also showed that the work was not done for the pavilion and the fencing
additions.
2
It is not clear how counsel derived the amount of $417,000 as our own review of the
exhibit shows a higher amount. But since that is what counsel sought from the jury, we will
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At trial, Eric Sluss testified that Garrard’s total damages were $673,000.
When Garrard’s counsel argued to the jury, he first addressed the negligence
claim and also argued that Garrard’s damages were $673,000. He urged that the
jury should find that Garrard’s lost profits were $256,000 and that its additional
expenses were $417,000. Significantly, when turning to the negligent
misrepresentation claim, counsel argued that the damages were also $673,000.
He made no distinction between the damages sought for negligence and
negligent misrepresentation, and exhibits 2A and 3, upon which counsel relied,
do not show a different injury or differentiate between the two theories.3
accept that number for purposes of the appeal.
3
Counsel argued to the jury as follows on the two claims:
I am going to go through very quickly with you the damages in this case. We
have suffered damages. My client has suffered damages of $417,000 for these
things that were promised to be paid and weren’t.
You will remember the pavilion isn’t at issue, it wasn’t done, it was
suggested and then not done. And you will remember that the fencing is not at
issue because it wasn’t done. And then my client testified what they got paid for,
they got paid for – on this list [in exhibit 2A] they got paid for No. 6, they got paid
for No. 9, they got paid for No. 13, they got paid for No. 15, and they got paid for
No. 19. So those aren’t at issue. But if you add the rest of those up, it’s $417,000.
My client -- there was a profit in that contract because they ended up
getting cross ways with the owner because of Mr. Fouse, they ended up losing an
8 percent profit $256,000. So they have lost a total of $673 (sic).
****
If you go on to Question 3 [concerning the negligence claim], it’s going to ask
you to write in the damages, and we have lost $417,000 as well as $256,000.
And they are going to ask you did Mr. Fouse make a negligent
misrepresentation and we believe that the answer to that question is yes. He
negligently misrepresented many things to us.
And then there is a damage question and it’s the same amount of money.
His negligence, his negligent misrepresentation cost us $673,000.
(Emphasis added).
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“When a party tries a case on alternative theories of recovery and a jury
returns favorable findings on two or more theories, the party has a right to a
judgment on the theory entitling him to the greatest or most favorable relief.”
Boyce Iron Works, Inc. v. Sw. Bell Tel. Co., 747 S.W.2d 785, 787 (Tex. 1988).
Here, the jury’s award on the negligence claim afforded Garrard the greatest
relief and was supported by Garrard’s exhibits. As noted, the jury awarded the
$256,000 in lost profits (as counsel requested) but $330,000 in additional
expenses, slightly less than counsel requested. The award of $125,000 for
economic loss due to negligent misrepresentation was an improper double
recovery for the same injury. That award was also contrary to the argument of
Garrard’s own counsel and appears to be based on pure speculation.4 Therefore,
Garrard should have been entitled to a judgment only on the higher award for
negligence, and the district court’s judgment must be reversed.
C.
Fouse also raises several arguments challenging the district court’s jury
charge, the statute of limitations, and various evidentiary issues. None of
Fouse’s arguments have merit. Fouse asserts that the district court erroneously
instructed the jury on the standard of care for architects and improperly placed
the standard of care instruction in a section of the charge apart from the
definitions of negligence and negligent misrepresentation. The court’s charge
was virtually identical to the charge that Fouse requested, however, and was
consistent with Texas law. See, e.g., Dukes v. Philip Johnson/Alan Ritchie
Architects, P.C., 252 S.W.3d 586, 594 (Tex. App.–Fort Worth 2008, pet. denied).
4
It might be argued that the jury’s combined award for negligence and negligent
misrepresentation ($711,000) was close to the total amount argued by Garrard as its damages
($673,000). However, the jury awarded more than even Garrard asserted as its harm, and it
cannot be discerned from the record how the jury arrived at the award it made. Although
mathematical precision is not required, “damages must be ascertainable in some manner other
than by mere speculation or conjecture, and by reference to some fairly definite standard,
established experience, or direct inference from known facts.” Richter, S.A. v. Bank of Am.
Nat’l Trust & Sav. Ass’n, 939 F.2d 1176, 1188 (5th Cir. 1991).
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Furthermore, the court specifically instructed the jury to consider the charge as
a whole. We presume the jury followed its instructions, and we see no error in
the charge. See Zafiro v. United States, 506 U.S. 534, 540, 113 S. Ct. 933, 939
(1993); United States v. Davis, 609 F.3d 663, 677 (5th Cir. 2010).
With respect to limitations, claims for negligence and negligent
misrepresentation are subject to a two-year limitations period. See Hendricks
v. Thornton, 973 S.W.2d 348, 364 (Tex. App.—Beaumont 1998, pet. denied).
Here, the limitations period began “when the elements of duty, breach, and
resulting injury or damage [were] present.” Waxler v. Household Credit Servs.,
Inc., 106 S.W.3d 277, 280 (Tex. App.—Dallas 2003, no pet.) (internal quotation
marks and citation omitted); see also Black v. Wills, 758 S.W.2d 809, 816 (Tex.
App.—Dallas 1988, no pet.) (“Under the ‘legal injury’ rule, a cause of action
sounding in tort generally accrues when the tort is completed, that is, the act
committed and damage suffered. . . . This is the date of legal injury and the
statute of limitations begins to run at that time.” (citation omitted)). Garrard
was not injured, and its claims did not accrue, until Garrison refused to pay the
additional costs that Fouse had assured would be paid, which was “‘the factor
essential to consummate the wrong—only then was the tort complained of
completed.’” Waxler, 106 S.W.3d at 281 (quoting Atkins v. Crosland, 417 S.W.2d
150, 153 (Tex. 1967)). Fouse did not meet its burden of showing that this
occurred outside of the limitations period. See Rogers v. Ricane Enters., Inc., 772
S.W.2d 76, 80–81 (Tex. 1989).
The district court’s evidentiary rulings are reviewed for an abuse of
discretion. See Jowers v. Lincoln Elec. Co., 617 F.3d 346, 355 (5th Cir. 2010).
Fouse has not shown that the district court abused its discretion with respect to
any evidentiary issues. Although it challenges the sufficiency of the evidence
because it argues that exhibit 2A and exhibit 3 were admitted as improper
summaries, Fouse does not address the district court’s ruling that the exhibits
were admissible as business records pursuant to the hearsay exception of
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Federal Rule of Evidence 803(6). Therefore, this issue is not properly briefed.
See Brinkmann v. Dallas Cnty. Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir.
1987) (holding that the failure to identify error in the district court’s legal
analysis is the same as failing to appeal the judgment).
Fouse relatedly argues that the district court improperly reconsidered the
admission of exhibit 2A after engaging in ex parte communication and without
giving it time to file a response to Garrard’s motion for reconsideration. Fouse
does not mention, let alone analyze, the district court’s explanation that
Garrard’s counsel re-urged the motion during a pretrial conference after
informing the court’s law clerk merely that he would be doing so. Nor does
Fouse address the court’s finding and that Fouse was not entitled under the local
rules to file a written response to the oral motion. There was no ex parte
communication, and this issue is both frivolous and improperly briefed. See
Brinkmann, 813 F.2d at 748.
Finally, Fouse argues that the district court improperly limited the
testimony of its expert economic witness, but it fails to explain what the
purportedly excluded testimony would have been or what the testimony would
have proved, and it does not explain how the district court improperly limited
the expert. Fouse’s citation to thirty-five pages of the transcript where its
expert’s testimony appears, and its conclusory assertion that the district court
had no basis to limit the expert’s testimony, is insufficient to preserve this issue
for review. See Yohey v. Collins, 985 F.2d 222, 225 (5th Cir. 1993) (a party may
not incorporate by reference arguments made in the district court); see also Fed.
R. App. P. 28(a)(9).
III.
We next turn to Garrard’s cross-appeal. Garrard argues that the district
court erroneously reduced the jury’s damages award by the amount of the
settlement it received from Garrison in the first suit. It argues in part that
Fouse did not plead offset as an affirmative defense, and therefore the offset was
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waived. It further argues that its damages model at trial had already taken into
account the fact that it had recovered some damages from Garrison in the first
suit and that in the instant case it sought only damages attributable to Fouse’s
conduct. It reasons that had it not been surprised by Fouse’s belated assertion
of the offset defense, it could have submitted additional evidence of damages.
Garrard is correct that an offset due to a settlement credit is an
affirmative defense that must be pleaded and proved by the defendant. See Giles
v. Gen. Elec. Co., 245 F.3d 474, 494 & n.36 (5th Cir. 2001); see also Goose Creek
Consol. Indep. Sch. Dist. v. Jarrar’s Plumbing, Inc., 74 S.W.3d 486, 501–02 (Tex.
App.—Texarkana 2002, pet. denied). The failure to plead an affirmative defense
generally results in waiver of that defense. See Davis v. Huskipower Outdoor
Equip. Corp., 936 F.2d 193, 198 (5th Cir. 1991); see also Fed. R. Civ. P. 8(c).
A court may excuse the failure to plead an affirmative defense, however,
if the opposing party is not prejudiced. Giles, 245 F.3d at 494; see Blonder-
Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 350, 91 S. Ct. 1434, 1453
(1971) (stating that the purpose of the pleading requirement in Rule 8(c) is to
give the opposing party notice and an opportunity to argue why the defense is
inappropriate). This court employs a fact-specific analysis when deciding
whether the plaintiff was unfairly surprised. Woodfield v. Bowman, 193 F.3d
354, 362 (5th Cir. 1999). In Giles, for example, we held that the failure to plead
offset was excused where both parties had addressed the issue before trial in a
motion in limine and in a trial brief. Giles, 245 F.3d at 494.
Here, Fouse did not expressly plead an offset or settlement credit as an
affirmative defense. It argues, however, that it did plead that Garrard’s claims
were barred because of the settlement with Garrison. We are not persuaded.
Fouse pleaded that “[Garrard’s] claims are barred in whole due to its settlement
with Plaintiff [Garrison].” Under our fact-specific review, and in the context of
this case, Fouse’s pleading was insufficient to indicate that it was asserting a
defense of offset or settlement credit.
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First, the defense did not explicitly assert that an offset or settlement
credit should partially reduce any judgment. This is unlike several other
affirmative defenses pleaded by Fouse in which Fouse did specifically assert that
Garrard’s claims were “barred in whole or in part” by the various defenses. Had
Fouse been seeking a partial reduction of Garrard’s claims due to an offset, it
logically would have included similar language in the defense concerning the
settlement.
Second, all through the pre-trial and trial stages of litigation, Fouse’s
theory was that Garrard’s claims were completely barred because the settlement
meant that Garrard was a settling defendant and its claims against Fouse
amounted to impermissible claims for contribution. This was the only theory
that Fouse argued in its motion for summary judgment and in a subsequent
motion for reconsideration. Fouse did not raise the prospect of an offset until
after the verdict. This is unlike Giles, where offset was affirmatively raised in
a motion in limine. See Giles, 245 F.3d at 494.
Because Fouse neither articulated the theory nor proved the basis for
offset, it could not be allowed. See Woodfield, 193 F.3d at 362 (stating that a
defendant “must plead an affirmative defense with enough specificity or factual
particularity to give the plaintiff ‘fair notice’ of the defense that is being
advanced”). In support of its claim of undue surprise, Garrard submitted
evidence post-verdict suggesting that its damages model at trial was limited to
damages caused by Fouse and did not include any amounts obtained in the first
suit. Had Garrard known about Fouse’s offset defense, it could have developed
this evidence during trial and tried to show that its damages were actually more
than those presented in its trial exhibits.
Furthermore, Fouse was aware that Garrard was seeking damages in this
suit that were at least similar to claims Garrard had made against Garrison in
the first suit, and it therefore knew that offset or a settlement credit might be
relevant in this case. Its failure to explicitly plead offset was therefore
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unjustified. Cf. Trinity Carton Co. v. Falstaff Brewing Corp., 767 F.2d 184, 194
(5th Cir. 1985) (holding that the district court did not erroneously preclude
assertion of affirmative defenses where the defendant failed to raise them until
several months after a jury’s verdict, and the delay could not be justified because
the defendant necessarily knew from the nature of the suit that the affirmative
defenses would be relevant). The judgment should not have been reduced by the
amount of the offset.
IV.
The district court’s entry of judgment on the jury’s verdict in favor of
Garrard was proper, but we conclude that there was error in the calculation of
the damages. The jury’s award of $125,000 for negligent misrepresentation was
an improper double recovery. Additionally, the application of the offset or
settlement credit was erroneous. We remand for the district court to modify
Garrard’s damages by omitting the $125,000 for negligent misrepresentation
and applying no settlement offset.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED.
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