Leasehold Expense v. Mothers Work Inc

United States Court of Appeals
Fifth Circuit
F I L E D
Revised May 28, 2003
May 19, 2003
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
___________________
No. 01-11392
___________________
LEASEHOLD EXPENSE RECOVERY, INC.,
Plaintiff-Appellant,
v.
MOTHERS WORK, INC.; MOTHERS Work (RE) INC.,
Defendants-Appellees.
_________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
_________________________________________________
Before BENAVIDES and DENNIS, Circuit Judges, and WALTER*,
District Judge.
BENAVIDES, Circuit Judge:
This appeal concerns the interpretation of a contingency fee
contract under Texas law. The appellant claims that the district
court erred in entering judgment for the appellees on its breach
of contract claims, conspiracy claim, and claim for recovery in
quantum meruit.
*
District Judge of the Western District of Louisiana,
sitting by designation.
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I. Background
Appellant Leasehold Expense Recovery, Inc. (“LER”) is in the
business of reviewing retail leases for overcharges. Appellees
Mothers Work, Inc. and Mothers Work (R.E.) Inc. (collectively
“Mothers”) sell maternity clothing from retail stores operating
from shopping malls throughout the country. On March 15, 1994,
LER entered into a Contingent Fee Contract (the “Contract”) with
A Pea in the Pod (“APIP”), which thereafter merged with Mothers,
who assumed APIP’s rights and responsibilities under the
Contract. Under the Contract drafted by LER, LER agreed to
review sixty-three of APIP’s leases with shopping malls to
determine whether landlords were overcharging for rent and
operating expenses. The Contract authorized LER to negotiate and
collect upon a settlement regarding overcharges with each
landlord, within certain limitations, and described the terms of
LER’s compensation. The Contract also included a provision
regarding termination.
In 1994, LER reviewed twenty-one leases and found more than
$500,000 in potential overcharges. Mothers eventually authorized
LER to proceed with thirteen of the twenty-one audits. From 1996
to 1997, LER contacted landlords and attempted to recoup alleged
overcharges on behalf of Mothers. However, all thirteen of the
landlords refused to deal with LER without an authorization
letter from Mothers. LER maintains that although Mothers
repeatedly promised that such authorizations would be
-2-
forthcoming, they were never provided. LER believes that Mothers
used the knowledge of past overcharges to negotiate new, more
favorable leases with its landlords on its own. Mothers refused
to pay LER for its work, on the grounds that LER was not entitled
to compensation under the terms of the Contract.
On January 10, 2000, LER sued Mothers in Texas state court
for breach of contract, fraud, negligence, grossly negligent
misrepresentation, and conspiracy. Mothers removed the claim to
federal court, which has diversity jurisdiction. Mothers moved
for summary judgment as to all of LER’s causes of action. The
magistrate judge prepared a report and order on April 27, 2001,
recommending that the motion be granted in part and denied in
part. The magistrate judge recommended that summary judgment be
denied only with respect to LER’s breach of contract claims
concerning three stores. On July 26, 2001, the district court
adopted the magistrate judge’s report and recommendations in
full. On August 20, 2001, the district court rejected LER’s
motion to reconsider the July 27, 2001 Order. Following a short
bench trial on LER’s remaining claims, the district court awarded
Mothers judgment as a matter of law, save a $9,074.46 award
concerning an amount that was uncontested.
II. Standard of Review
This court reviews a district court’s grant of summary
judgment de novo. Rivers v. Cent. and S. W. Corp., 186 F.3d 681,
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682 (5th Cir. 1999). Summary judgment is appropriate, when,
viewing the evidence in the light most favorable to the nonmoving
party, the record reflects that no genuine issue of any material
fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-324,
(1986); Sulzer Carbomedics, Inc., 257 F.3d at 456. See also
Transitional Learning Cmty. at Galveston, Inc. v. U.S. Office of
Pers. Mgmt., 220 F.3d 427, 429 (5th Cir. 2000). A material fact
is one that “might affect the outcome of the suit under the
governing law” and a “dispute about a material fact is
‘genuine’...if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Sulzer Carbomedics,
Inc., 257 F.3d at 456 (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)).
Challenges to the district court’s determinations of fact
following a bench trial are reviewed for clear error, and
conclusions of law are reviewed de novo. Kona Tech. Corp. v. S.
Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000). Since this
case comes to the court through diversity jurisdiction, the
substantive law of Texas applies. Id.; See Erie R.R. v.
Tompkins, 304 U.S. 64, 78-79 (1938).
III. Breach of Contract Claims
“Under Texas law, the interpretation of an unambiguous
contract, as well as the determination of whether or not a
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contract is ambiguous, is a legal question.” Steuber Co. v.
Hercules Inc., 646 F.2d 1093, 1098 (5th Cir. 1981). If the
contract terms are susceptible to only one reasonable
construction, the contract is unambiguous and will be enforced as
written. Guaranty Nat. Ins. Co. v. Azrock Industries Inc., 211
F.3d 239, 243 (5th Cir. 2000).
In contract disputes, the court’s primary concern is to give
effect to the written expression of the parties’ intent. Nat’l
Union Fire Ins. Co. v. Care Flight Air Ambulance Service, Inc.,
18 F.3d 323, 328-39 (5th Cir. 1994). In doing so, the court
reads all parts of the contract together to ascertain the
agreement of the parties, ensuring that each provision of the
contract is given effect. Id. at 329; Kona Tech. Corp., 225 F.3d
at 610; Sulzer Carbomedics, Inc., 257 F.3d 449 (5th Cir. 2001).
A. Under the Contract, is LER entitled to compensation for
overcharges discovered, but not recovered?
1. Substantive Claim
LER contends that, by the plain terms of the Contract, the
district court erred in granting summary judgment to Mothers
regarding eighteen stores, and judgment as a matter of law
following a bench trial regarding three stores, with respect to
overpaid charges that it discovered regarding all of the twenty-
one stores. LER contends that the plain terms of the Contract
entitle it to compensation for discovered overcharges, regardless
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of whether Mothers actually recovered any of the overpayments.
Mothers responds that the district court properly held that the
Contract unambiguously assigns LER a 50% interest only in those
overpaid charges that are actually recovered. Two sections of
the Contract are particularly relevant to this dispute:
Article 1, Section 1.2, FEES. In consideration of the
services rendered and to be rendered to the Client by LER,
the Client does hereby assign, transfer and convey to LER as
compensation herein, a fifty percent (50%) undivided
interest in all overpaid Charges relating to each and every
lease, including any other amounts recovered relating
thereto, that:
(a) are actually recovered in cash, check or the like
by Client;
(b) are recovered in the form of a credit to Client’s
account with any landlord pursuant to any lease;
and,
(c) are otherwise recovered by Client.
All compensation herein as stated in Sections 1.2(a) through
1.2(c) shall herein together constitute “LER Fees.” LER
Fees shall be paid to LER by Client within ten (10) days of
Client’s receipt of overpaid Charges on any lease, or the
credit thereof.
...
Article 2, Section 2.1, TERMINATION. LER or Client may
terminate this Agreement upon fifteen (15) days prior
written notice by delivering said notice to Client. Said
termination shall not affect the right of LER to collect LER
Fees for any overpaid Charges either discovered or recovered
as of the date of termination of this Agreement. Under all
circumstances LER’s right to collect LER Fees shall survive
the expiration or termination of this Agreement.
The terms of the Contract unambiguously entitle LER to
compensation only for those overpayments discovered by LER that
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Mothers actually recovers. While Article 1, Section 1.2
(hereinafter “Compensation Provision”) states that LER is
entitled to a fifty percent interest in all overpaid Charges,
that right is subject to the satisfaction of subsections (a),
(b), or (c), each of which require the Charges to be “recovered.”
We find without merit LER’s contention that the three subsections
were intended to relate solely to the phrase “including any other
amounts recovered relating thereto,” particularly given the
placement of a comma (inserted by LER itself, as the drafter),
following the word “thereto.” The presence of the comma
indicates that both the phrase “including any other amounts
recovered relating thereto” and the earlier phrase “all overpaid
Charges relating to each and every lease” are subject to the
condition of recovery noted in subsections (a), (b) and (c).
Nor does Article II, Section 2.1 (hereinafter “Termination
Provision”), support LER’s argument that it is entitled to
compensation for charges that Mothers has not recovered. The
Termination Provision was clearly intended to preserve LER’s
right to compensation as described in the Compensation Provision,
as reflected by its use of the term “LER Fees.” The Compensation
Provision unambiguously requires that Mothers actually recover on
the discovered overpayments. By implication, the parties
intended the Termination Provision to protect LER’s right to
compensation upon termination to the same degree. The phrase
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“discovered or recovered” in the Termination Provision was merely
intended to protect LER’s entitlement to compensation for
overpaid charges that it discovered before termination, but were
not recovered until after termination. LER’s proposed
interpretation of the Termination Provision, which would entitle
it to compensation upon termination for overcharges merely
discovered or recovered, is not only contrary to the plain
meaning of the Contract, but would create a perverse incentive
for LER to prematurely terminate the contract in order to avoid
the recovery requirement under the Compensation Provision. The
district court properly granted Mothers judgment on this issue.1
2. Procedural Claim
LER contends that the district court’s decision to enter
summary judgment on its breach of contract claims regarding
eighteen stores was based on improperly considered evidence. The
magistrate judge struck the appendix that Mothers attached to its
reply brief to LER’s response to Mothers’s motion for summary
judgment as an impermissible attempt to introduce new evidence at
the reply stage. The magistrate judge also struck the
Declaration of Eric Stahl for failure to include a date, as
required by 28 U.S.C. § 1746. LER argues that the district court
1
Our resolution of this issue renders LER’s contention that
the district court erred in refusing to entertain its assertion
that the Contract was terminated by operation of a letter dated
August 9, 2001, moot.
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improperly relied upon this excluded evidence in granting summary
judgment for Mothers.
LER’s assertion is groundless. Following the district
court’s grant of summary judgment, LER, by motion, asked the
district court to reconsider its judgment on the grounds that the
district court had improperly taken into account the excluded
evidence. Judge Solis, in denying the motion, stated that his
decision did not implicitly or explicitly rely upon the excluded
appendix or affidavit, and reemphasized that with or without the
excluded evidence, LER failed to demonstrate genuine issues of
material fact that any savings on the stores in question met the
criteria for recovery set out in the Contract. Given this
unequivocal denial and the ample support in the record for his
conclusion in the absence of the excluded evidence, we see no
reason to further question Judge Solis’s ability to properly
consider evidence.
B. Under the Contract, Is LER entitled to compensation for
future savings?
LER argued at trial that it was entitled under the Contract
to be compensated for prospective overcharges that its efforts
enabled Mothers to avoid in relation to three of its stores.
LER’s argument is premised upon a portion of the Compensation
Provision, specifically Article 1, Section 1.2(c), which entitles
LER to a fifty percent interest in “all overpaid Charges relating
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to each and every lease, including any other amounts recovered
relating thereto, that:...(c) are otherwise recovered by Client.”
LER contends that this language can reasonably be interpreted as
entitling LER to compensation for future overcharges that its
efforts prevented. LER contends that the district court’s
determination that the Contract unambiguously did not provide for
compensation for such savings was erroneous, and parol evidence
should not have been permitted to clear up the ambiguity in the
Contract.
Mothers argued, and the district court agreed, that the
Compensation Provision entitles LER to recover only when two
things occur: (1) Mothers actually overpaid a charge to the
landlord; and (2) the overpaid charge was recovered. We agree
that this the only reasonable interpretation of the Contract.
“[A] contract is ambiguous only when the application of the
applicable rules of interpretation to the instrument leave it
genuinely uncertain which one of the two meanings is the proper
meaning...”. R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc.,
596 S.W.2d 517, 519 (Tex. 1980). While LER concedes that the
phrase “overpaid Charges” does not encompass future savings on
rent or other charges, it contends that future savings are
nonetheless recoverable as “other amounts relating thereto.”
Such an interpretation, however, ignores the requirement of
subsections (a),(b), and (c), all of which require “other
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amounts” to be recovered. A landlord’s decision to charge
Mothers the proper amount of rent in the future does not
constitute a “recovery” for prior overcharges paid. If a
landlord were to give Mothers a discount on the proper amount of
rent, or provide free utilities for a year as repayment for the
prior overcharges, this would constitute a recovery, and LER
would be entitled to 50% of the value of the discount.
The Contract simply does not contemplate the situation where
Mothers may be unable to recover past overpayments, but benefits
from LER’s work nonetheless in the sense that it does not overpay
in the future. “The failure to include more express language of
the parties’ intent does not create an ambiguity when only one
reasonable interpretation exists. Columbia Gas Transmission
Corp. V. New Ulm Gas, Ltd., 940 S.W.2d 587, 591 (Tex. 1996). Nor
is parol evidence of the parties’ intent permitted to create an
ambiguity. Constitution State Ins. Co. v. Iso-Tex Inc. 61 F.3d
405, 408 (5th Cir. 1995). Read as a whole, the Compensation
Provision clearly entitles LER to compensation only for charges
that Mothers overpaid and actually recovered. This is the only
reasonable interpretation of the Contract, as the district court
correctly found.
C. Did Mothers breach the Contract by settling overcharges with
the landlords without the knowledge of LER?
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LER contends that with respect to eight2 store locations
where overcharges were discovered, Mothers engaged in secret
“side deals” with each landlord by executing lease amendments by
which it recovered the overcharges in the form of credits and
lower future rents. LER alleges that Mothers engaged in these
quid pro quo settlements in explicit violation of Article I,
Section 1.1 which bars settlements in the absence of LER’s
consent, in an attempt to avoid compensating LER under the
Contract.
Mothers does not dispute that if it had entered into the
settlements alleged by LER, it would indeed have breached the
Contract. However, it contends, and we agree, that in order to
prove that a lease amendment was executed as a form of quid pro
quo transaction, LER needs to demonstrate two things: (1) that
the new lease terms were more favorable to Mothers than the
previous terms; and (2) that the new, more favorable terms were
obtained in exchange for the release of an Overcharge Claim. In
other words, LER, to prevail on any one of its eight quid pro quo
claims, needs demonstrate that Mothers successfully used
knowledge of overcharges, obtained as a result of LER’s efforts,
2
One of the stores cited by LER, as Mothers points out, was
not subject to the Contract. The Albany (Crossgates) store was
not included in the addendum to the Contract, which listed the
stores whose leases LER was granted authority to review. There
was therefore no possible breach of contract regarding any lease
alterations to this store location.
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as leverage to negotiate improved lease terms with a landlord.
LER’s evidence on appeal suffers from the same defect as
that noted by the magistrate judge:
With respect to most of these leases, LER has done
nothing more than include the amendments in its
appendix. There is no evidence that the terms of the
amendments are more favorable to Mothers Work than
those of the prior leases. The court is neither
required nor inclined to come [sic] through LER’s 687
page appendix in search of evidence to support these
claims.
Though equally disinclined to comb through the disorganized
and ill explained documents provided by LER, a thorough review of
the record reveals that the evidence submitted regarding the
stores located in Beverly Hills, California, Pasadena,
California, Palo Alto, California, Dallas, Texas, Buffalo, New
York, and Syracuse, New York, do not create an issue of material
fact regarding whether the amended terms are more favorable to
Mothers than those that preceded them. We are simply not
provided with any standard of comparison that would allow us to
determine that the above mentioned leases were either modified or
terminated to Mothers’s benefit.
Moreover, we are unable to link any benefits that Mothers
may have gained through modifications or terminations to any of
the leases to a promise on the part of Mothers to relinquish an
Overcharge Claim discovered by LER. LER’s bald assertion that
Mothers must have used overcharge information gleaned from LER’s
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reviews as leverage to obtain better lease terms is insufficient
to withstand judgment as a matter of law. The district court
therefore correctly granted Mothers summary judgment on LER’s
quid pro quo claims.
D. Did Mothers have an implied duty to cooperate under the
Contract?
Next, LER contends that the district court erred in granting
summary judgment on its claim that Mothers violated an implied
duty in the Contract to cooperate. Specifically, LER asserts
that after it made initial contact with thirteen landlords,
pursuant to Mothers’s approval, these landlords refused to
negotiate with LER in the absence of a letter on Mothers
letterhead confirming that LER was authorized to act on Mothers’s
behalf. LER made several requests, both oral and written, to at
least three different Mothers employees for such letters. LER
contends that Mothers employees repeatedly informed LER that they
wished LER to continue its work pursuant to the Contract and that
the necessary authorization letters would be forthcoming.
Because it never received the letters, LER alleges that it was
unable to recover discovered overcharges with respect to those
thirteen stores and was thus denied compensation under the
Contract.
The court predicated its grant of summary judgment on this
claim upon the language of the Contract, which it interpreted as
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unambiguously giving Mothers the authority to withhold its
cooperation. The court referred to Article 1, Section 1.1, which
proceeds as follows:
1.1 Services. Concerning all sixty-three (63) leases,
Client hereby employs LER to review the leases and the
terms thereof and certain books and records relating to
the Charges, and collect overpaid Charges from the
landlords, if any. LER is fully authorized to
negotiate a settlement thereof; but it is distinctly
understood that no settlement shall be made by LER
without the approval of Client, and Client hereby
agrees to make no settlement or offer of settlement
without the consent of LER. LER may determine the
order of review of the sixty-three (63) leases. Prior
to LER contacting any landlord, Client shall approve
all potential contact and action by LER, it being
understood that LER shall have no right to sue the
landlord or otherwise harass the landlord, without
Client’s express written instructions. (emphasis
added).
Relying on Bank One, Texas, N.A. v. Stewart, 967 S.W.2d 419,
434 (Tex. Ct. App. 1998), the district court adopted the
magistrate judge’s finding that “under Texas law, implied
covenants are disfavored and grafted onto contracts, ‘only if
necessary to effectuate the intention of the parties as disclosed
by the contract as a whole, but not to make the contract fair,
wise or just...[and] [t]here can be no implied covenant as to a
matter specifically covered by the written terms of the
contract.’” We disagree, however, with the district court’s
application of this rule of law. It appears to us that the above
portion of the Contract does not address the question of
cooperation as clearly as the court presumed. Section 1.1 states
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that “LER is fully authorized to negotiate a settlement
[regarding overpaid Charges].” The section requires LER to
receive the approval of Mothers prior to (1) posing an offer of
settlement to a landlord; (2) contacting a landlord; or (3) suing
or harassing a landlord. Mothers’s failure to provide
authorization letters, an assertion that it does not dispute,
does not constitute a valid exercise of its right to approve or
disapprove contact between LER and a landlord. Nor can Mothers
legitimately claim that it withheld the authorization letters
because of a fear that simply confirming LER’s authority to
negotiate would disrupt its relationships with its landlords.
Otherwise, it would not have contractually granted LER the
authority to negotiate on its behalf in the first place. In
failing to supply the needed authorization, Mothers did not
merely determine that a good relationship with a particular
landlord superceded recovering overcharges by vetoing a
particular contact. Instead, it ended negotiations altogether
with thirteen landlords, and thus made it impossible for LER to
perform under the Contract. A duty on the part of Mothers to
cooperate by providing LER with authorization letters was so
clearly in the contemplation of the parties that they deemed it
unnecessary to immortalize it in the contract. A duty to
cooperate must necessarily be implied to enable LER to negotiate
pursuant to the limited powers granted to it in the Contract.
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There is ample support in the case law for implying a duty
to cooperate in the circumstances of this case. This court held
in Citizens Nat’l Bank of Orlando v. Vitt, that:
‘in every contract between a contractor and a
subcontractor, an implied promise exists on the part of
the contractor that he will do nothing to prevent,
interfere or hinder the subcontractor in his
performance or increase the cost thereof’...[w]henever
the cooperation of a promisee is necessary for the
performance of a contract, there is an implied
condition of the contract that the cooperation will be
given.
367 F.2d 541, 544-45 (5th Cir. 1966)(citations omitted). The
relationship between LER and Mothers can be analogized to that of
a contractor and a subcontractor, or that of any other principal
and agent. Similarly, in Levine v. Bayne, Snell & Krause, Ltd.,
Justice Owens, in her concurrence, noted that a client may be
subject to an implied covenant to cooperate with the attorney
whom he hired on a contingency basis. 40 S.W.3d 92, 99 (Tex.
2000). Perhaps most analogously, in an unpublished opinion a
Texas Court of Appeals affirmed a trial court’s judgment against
a homeowner for violating an implied duty to cooperate in a
contract conveying the plaintiff an option to purchase the
defendant’s home. Elliott v. Lewis, 1994 WL 709333 (Tex. Ct.
App. 1994). The defendant homeowner had refused to sell her home
to the plaintiff after the expiration of the option. The
plaintiffs had been unable to arrange financing before the option
expired, and the court held that the defendant had a duty to
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cooperate with their attempts to obtain financing within the
option period. Id. The trial court had instructed the jury that
“whenever cooperation is necessary for performance of a contract,
there is an implied condition of contract that cooperation will
be given.” Id. at *9.3
We therefore find that the district court erred in granting
summary judgment to Mothers as a matter of law on LER’s breach of
an implied duty to cooperate claim. Neither the rule of law in
this jurisdiction or the terms of the Contract bar the court from
finding an implied duty to cooperate, and LER has presented
sufficient evidence to raise a genuine issue of fact as to
whether this duty was breached. The grant of summary judgment is
therefore vacated, and we remand the claim to the district court
for trial.
E. Can LER recover in quantum meruit?
LER claims that the district court erred in dismissing its
request for relief in quantum meruit. Quantum meruit is an
equitable theory which permits a “right to recover...based upon a
promise implied by law to pay for beneficial services rendered
3
But c.f. Bank One, 967 S.W.2d at 434 (refusing to imply
that a bank has a duty to cooperate with its client when the
parties specifically contracted the extent of their bailment
relationship; Chapman Children’s Trust v. Porter & Hedges,
L.L.P., 32 S.W.3d 429 (Tex. Ct. App. 2000) (declining to imply a
duty to cooperate on the grounds that the parties purposefully
determined during the course of negotiations not to subject the
defendant to an express contractual duty to cooperate).
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and knowingly accepted.” Black Lake Pipeline v. Union Const.
Co., Inc., 538 S.W.2d 80, 86 (Tex. 1976). “As a general rule, a
plaintiff who seeks to recover the reasonable value of services
rendered or materials supplied will be permitted to recover in
quantum meruit only when there is no express contract covering
those services or materials.” Black Lake Pipeline, 538 S.W.2d at
86. See Jhaver v. Zapata Off-Shore Co., 903 F.3d 381, 385 (5th
Cir. 1990).
A review of the Contract reveals that the terms of LER’s
compensation was indeed dealt with under the Compensation
Provision of the Contract. The mere fact that the Contract does
not particularly address LER’s out-of-pocket expenses does not
imply that such expenses fall beyond the scope of the Contract,
as LER contends, because the services for which the out-of-pocket
expenses were incurred were covered by the Contract. Had the
parties contemplated that LER would be reimbursed for its out-of-
pocket expenses, such compensation would have been included in
the Compensation Provision. Instead, the parties intentionally
structured the Contract as a contingency fee arrangement, whereby
LER would risk its out-of-pocket expenses for the promise of a
fifty percent interest in any recovered overcharge.
There is, however, a clear exception to the general rule
which LER may take advantage of if it successfully demonstrates
at trial that Mothers breached an implied duty to cooperate. In
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1988, the Texas Supreme Court held that "recovery in quantum
meruit is allowed when a plaintiff has partially performed an
express contract but, because of the defendant's breach, the
plaintiff is prevented from completing the contract." Truly v.
Austin, 744 S.W.2d 934, 936 (Tex. 1988)(emphasis in original).
See McFarland v. Sanders, 932 S.W.2d 640, 646 (Tex. Ct. App.
1996). If Mothers violated the duty to cooperate implied in the
Contract, then LER was unable to recover any potential
overcharges on Mothers’s behalf because Mothers breached the
contract. We must therefore also vacate the district court’s
grant of summary judgment for Mothers on LER’s claim that it is
entitled to recover in quantum meruit insofar as it relates to
LER’s implied duty to cooperate claim.4
4
LER did not challenge on appeal the district court’s
determination that the benefit-of-the-bargain damages that it
claimed were the result of Mothers’s non-cooperation were too
speculative to be given credence. Failure to raise an issue on
appeal constitutes a waiver of that argument, and thus LER may
not recover expectation damages if it prevails on its duty to
cooperate claim. See United States v. Thibodeaux, 211 F.3d 910,
912 (5th Cir. 2000); Yohey v. Collins, 985 F.2d 222, 224-25 (5th
Cir.1993). However, LER did dispute the district court’s
conclusion that it had failed to include damages in the form of
out-of-pocket expenses in its pleadings or in its response to
Mothers’s motion for summary judgment. Because LER did indeed
assert out-of-pocket damages in its “Appendix to Plaintiff’s
Response to Defendants’ Motion For Summary Judgment,” this
finding of the district court was clearly erroneous. LER may
thus seek to recover the value of its time and the out-of-pocket
expenses it incurred in investigating the billing practices of
the thirteen stores for whom an authorization letter was
requested but never received. See McFarland v. Sanders, 932
S.W.2d 640, 645-46 (Tex. Ct. App. 1996).
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IV. Conspiracy Claim
LER asserts that the district court erred in granting
summary judgment to Mothers on LER’s claim that Mothers conspired
with its counsel, Graham Miles, to enter secret “side deals” with
its landlords in an attempt to avoid compensating LER under the
Contract. The district court concluded that LER had waived this
argument by failing to present evidence of a “Miles conspiracy”
to the magistrate judge, and in the alternative, had failed to
create a genuine issue of material fact as to the existence of a
conspiracy.
We agree with the district court that LER’s allegations
regarding a “Miles conspiracy” were legally insufficient. First,
a conspiracy to breach a contract is not actionable under Texas
law. Grizzle v. Texas Comm. Bank, 38 S.W.3d 265, 285 (Tex. Ct.
App. 2001), pet. granted on other grounds, 45 Tex. S. Ct. J. 358
(Feb. 9, 2002). LER, however, has not alleged that Miles
conspired with Mothers to commit any tort, nor did it appeal the
district court’s dismissal of its tort claims as a matter of law.
See Carmon v. Lubrizol Corp., 17 F.3d 791, 794 (5th Cir.
1994)(“[I]ssues not raised at all [on appeal] are waived.”).
Second, it is established that a corporation cannot conspire
with itself, no matter how many of its agents participated in the
wrongful action. 13 Tex. Jr. 3d Civil Conspiracy § 3. Graham
Miles, as Mothers’s lawyer, is an agent. See Restatement (2d) of
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Agency §§ 1,2. LER has not alleged that Miles has any
independent interest that would make it possible for him, under
Texas law, to conspire with Mothers. The district court
therefore properly granted Mothers summary judgment on this
claim.
V. Rule 60 Claim
LER alleges that Mothers improperly withheld documents at
the summary judgment stage, thereby denying LER of procedural and
substantive due process and requiring that summary judgment be
vacated. In support of its contention, LER points to Mothers’s
belated production of documents at trial, and alleges that by
implication, Mothers probably withheld documents at the summary
judgment stage as well.
LER’s claim is properly styled as one to set aside the
district court’s grants of summary judgment pursuant to Fed. R.
Civ. P. 60(b)(3). Rule 60(b)(3) reads: “...On motion and upon
such terms as are just, the court may relieve a party or a
party’s legal representative from a final judgment...for the
following reasons...(3) fraud,...misrepresentation, or other
misconduct of an adverse party;....” LER, however, does not deny
that it failed to file a 60(b)(3) motion in the district court.
Instead, it contends that its motion for sanctions regarding the
production of documents at the trial stage can be construed also
as a motion to set aside summary judgment.
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The broadest reading of LER’s motion for sanctions does not
permit us to construe it as a motion to set aside summary
judgment. LER’s Rule 60(b)(3) motion is therefore not properly
before this court. City of Waco, Texas v. Bridges, 710 F.2d 220,
227 (5th Cir. 1983) (“As a general rule, an appellate court will
not consider a new issue raised for the first time on appeal for
the purpose of reversing the lower court’s judgment.”).
Exceptions are made typically only in exceptional circumstances.
LER has not attempted to explain its failure to make this motion
to the district court. The trial court is the forum charged with
the duty of determining questions of fact, and fairness requires
that the motion be sent back to the district court in order to
permit Mothers to present evidence to rebut LER’s assertions.
See Wilson v. Johns-Malville Sales Corp., 873 F.2d 869, 871
(1989).
VI. Conclusion
We conclude that the district court improperly granted
Mothers summary judgment regarding LER’s claim that Mothers
breached an implied duty to cooperate. The district court’s
dismissal of LER’s claim for recovery in quantum meruit was also
erroneous, insofar as it precludes LER from recovering its out-
of-pocket expenses in the event that it is able to prove that
Mothers breached an implied duty to cooperate at trial. Those
judgments are therefore VACATED and the claims REMANDED to the
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district court for further proceedings. The district court’s
judgments regarding all other claims are AFFIRMED.
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