Uretek (USA), Inc. v. Ureteknologia De Mexico S.A. De C.V.

Case: 13-20430 Document: 00512819338 Page: 1 Date Filed: 10/29/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-20430 United States Court of Appeals
Fifth Circuit
FILED
URETEK (USA), INCORPORATED, October 29, 2014
Lyle W. Cayce
Plaintiff – Appellant, Clerk
v.
URETEKNOLOGIA DE MEXICO S.A. DE C.V.,
Defendant – Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:11-CV-3060
Before DAVIS, DeMOSS, and ELROD, Circuit Judges.
PER CURIAM:*
After a jury verdict against Uretek USA, Inc. (“Uretek”) in this breach of
contract dispute, the district court entered judgment for Ureteknologia de
Mexico S.A. de C.V. (“UdeM”) and awarded it $211,609.88 in attorney’s fees.
On appeal, Uretek contends that the district court’s judgment is not supported
by sufficient evidence and that the attorney’s fee award amounted to an abuse
of discretion. Because ample evidence supported the verdict and judgment,
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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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and because the district court acted well within its discretion in awarding
attorney’s fees to UdeM, we AFFIRM.
I.
Uretek, an Iowa corporation with its principal place of business in Texas,
has developed a proprietary polyurethane foam and “deep injection” process to
repair pavement and foundations. In a sublicense agreement executed in
March 2003, Uretek granted UdeM the right to use its products and processes
in Mexico. This agreement required UdeM to annually purchase from Uretek,
at a minimum, 100,000 pounds of Uretek’s polyurethane. It also required
UdeM to pay a royalty whenever it used Uretek’s deep injection process and
prohibited UdeM from purchasing Uretek products from sources other than
Uretek.
In December 2009 and January 2010, Uretek provided labor and
materials to UdeM as a subcontractor to UdeM’s “Metro Project” in Mexico.
Uretek sent invoices to UdeM, but UdeM disputed the charges and refused to
pay. Uretek’s chairman and CEO, Brent J. Barron, and UdeM’s president,
Francisco Alvarez, met in May 2010 in an attempt to resolve the dispute. At
this meeting, Barron and Alvarez executed an agreement that modified the
sublicense agreement and declared that UdeM had satisfied its polyurethane
purchase requirement through May 2010. Uretek also accepted and deposited
a check for $175,023.34 to pay four invoices.
Alvarez again met with Barron in June 2010, presenting to him a
document entitled “First Amendment to Sublicense Agreement.” The
amendment recited that it was for “$10.00 and other good and valuable
consideration.” Barron and Alvarez initialed the document in several places.
Barron also dated and initialed a release, which contained an identical
consideration recitation. During this meeting, Uretek accepted four checks
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from UdeM. The amounts and memo lines of these checks were as follows: (1)
$10.00 “As per First Amendment to Sublicense Agreement between [Uretek]
and [UdeM]”; (2) $76,950.89 for “Full payment on Technical Assistance”; (3)
$225,471.05 for “Full payment on Royalties”; and (4) $10.00 for “Full Release
[Uretek] to [UdeM].” Barron accepted the checks by signing and dating
photocopies, and he placed a “paid” stamp on the invoices that accompanied
the second and third checks. Uretek deposited all four of the checks. Notably,
Uretek employees deposited the amendment’s $10 consideration payment at
Barron’s specific direction.
The June 2010 amendment modified the sublicense agreement in several
respects. It eliminated the royalty that UdeM owed Uretek for the use of its
deep injection process. In addition, while the sublicense agreement originally
provided that UdeM must purchase all its polyurethane requirements—and
any Uretek products—directly from Uretek, the amendment eliminated these
provisions, requiring only that Uretek make its polyurethane available to
UdeM at a specified purchase price. The amendment also eliminated UdeM’s
minimum purchase requirement and deleted a provision that had empowered
Uretek to terminate the sublicense agreement if UdeM failed to purchase
polyurethane from Uretek. Finally, the amendment added a new paragraph
to the agreement, providing that UdeM would owe royalties to Uretek on
UdeM’s purchases of any materials that were subject to Uretek’s patent. These
royalties were to be paid “at the rate of fifty (50) percent of the lesser of (a) the
actual cost of such materials only as purchased by [UdeM] from URETEK, or
(b) the actual cost of such materials only as purchased by URETEK for, and re-
sold and actually delivered by URETEK to, [UdeM].”
In October 2010, UdeM purchased Uretek polyurethane from another
company. In December 2010, Uretek accepted, endorsed, and deposited two
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more checks from UdeM. These checks—one for $25,230.00 and the other for
$18,021.00—stated in the memo lines that they were “[p]ayment on behalf of
[UdeM] DI Royalties paid in full as per First Amendment for polymers
delivered by” the company from which UdeM had bought the polyurethane.
However, Uretek subsequently refused to sell any more polyurethane to UdeM
and terminated the sublicense agreement.
Uretek brought suit against UdeM in Texas state court, seeking a
declaration that the June 2010 amendment never became effective. Uretek
also sought damages for UdeM’s alleged breaches of the sublicense agreement
and attorney’s fees. UdeM counterclaimed, seeking a declaration that the
sublicense agreement, as modified by the May 2010 agreement and June 2010
amendment, was valid and enforceable; the June 2010 amendment was valid
and enforceable; Uretek’s attempted termination was ineffective; and the June
2010 release was valid and enforceable. UdeM also sought attorney’s fees and
specific performance of the sublicense agreement.
The district court granted summary judgment to UdeM on the issue of
whether the amendment was supported by consideration. The case then
proceeded to trial. The jury found that UdeM did not fraudulently procure
Barron’s initials on the amendment or release, that in June 2010 Uretek did
not agree to the amendment but did agree to the release, and that Uretek later
ratified both the amendment and the release. The district court then entered
a judgment declaring that the sublicense agreement, as modified by the May
2010 agreement and the June 2010 amendment, was valid; that Uretek’s
termination constituted a breach of the sublicense agreement; and that the
June 2010 release was valid. The district court denied, however, UdeM’s
specific performance claims. The district court then awarded UdeM
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$211,609.88 in attorney’s fees. After the district court denied its motion for
new trial, Uretek initiated this appeal.
II.
We review a jury’s verdict for sufficiency of the evidence. “We must view
the evidence in the light most favorable to upholding the jury’s verdict and may
only reverse if the evidence points so strongly and overwhelmingly in favor of
one party that the court believes that reasonable men could not arrive at a
contrary conclusion.” Douglas v. DynMcDermott Petroleum Operations Co.,
144 F.3d 364, 369 (5th Cir. 1998) (internal quotation marks omitted).
“The district court’s award of attorney’s fees under Chapter 38 of the
Texas Civil Practice & Remedies Code is . . . reviewed for abuse of discretion.”
Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 341 (5th Cir. 2008).
Supporting factual findings, however, are reviewed for clear error. Id.
III.
The jury found that Uretek, although it did not execute the June 2010
amendment to the sublicense agreement, later ratified it. “Ratification is the
adoption or confirmation, by a party with actual knowledge of all material
facts, of a prior act that did not then legally bind that party and which that
party had a right to repudiate.” PanAmerican Operating, Inc. v. Maud Smith
Estate, 409 S.W.3d 168, 176 (Tex. App.—El Paso 2013, pet. denied). “A party
ratifies a contract by acting under it, performing under it, or affirmatively
acknowledging it.” Id. “Any act inconsistent with an intent to avoid a contract
has the effect of ratifying the contract.” Barker v. Roelke, 105 S.W.3d 75, 85
(Tex. App.—Eastland 2003, pet. denied). In particular, a party can ratify an
agreement by cashing a check. Texas Emp’rs Ins. Ass’n v. Bottoms, 200 S.W.2d
418, 420–21 (Tex. Civ. App.—Fort Worth 1947, no writ).
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Uretek asserts that its cashing of the two December 2010 checks and the
June 2010 check for $10.00 “as per” the amendment could not support the
jury’s ratification finding. We address each of Uretek’s contentions in turn.
We first address the December 2010 checks. Uretek argues that its
acceptance of payments for “DI [r]oyalties” in connection with purchases of
polyurethane from another company could not constitute ratification because
the June 2010 amendment would abolish deep injection royalties and, on
Uretek’s reading, would not permit UdeM to purchase Uretek polyurethane
from other companies. Uretek’s argument misrepresents the June 2010
amendment and sidesteps an ambiguity in the checks’ memo lines.
To begin, Uretek observes that although paragraph 16 of the June 2010
amendment deleted the provisions of the sublicense agreement that prohibited
UdeM from purchasing Uretek polyurethane from others, it left “unaltered”
the provision that obligated UdeM to purchase all its Uretek polyurethane
requirements from Uretek. It is true that paragraph 16 of the amendment did
not alter the requirements provision. In making this observation, however,
Uretek omits to mention the effect of the amendment’s preceding paragraph.
In particular, paragraph 15 of the amendment modified the requirements
provision so that UdeM merely had the option (rather than the obligation) of
purchasing Uretek polyurethane directly from Uretek. Paragraphs 15 and 16
of the amendment, operating together, unambiguously relieved UdeM of its
obligation to purchase its Uretek polyurethane requirements exclusively from
Uretek. Furthermore, while Uretek points to paragraph 33 of the amendment
and the strike-out of the phrase “parties other than [Uretek],” that paragraph
dealt only with the computation of royalties. Under the edited version of
paragraph 33, regardless of the source from which UdeM purchased Uretek
products, the royalties that it owed would depend on the actual cost of the
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products had Uretek sold them to UdeM. This calculation-of-royalties
provision, contrary to Uretek’s assertion, did not require UdeM to purchase its
polyurethane requirements exclusively from Uretek.
Finally, Uretek notes that the June 2010 amendment, in paragraph 7,
deleted a provision in the sublicense agreement that required UdeM to pay
Uretek a royalty for any use of Uretek’s deep injection process. As Uretek
argues, because the memo lines of the December 2010 checks said they were
for “DI [r]oyalties,” the jury could have concluded that they were inconsistent
with the June 2010 amendment. This conclusion was not, however, the only
reasonable one that the jury could have drawn. The entire memo line on the
checks read: “Payment on behalf of [UdeM] DI Royalties paid in full as per
First Amendment for polymers delivered by [another company].” The
amendment had added a new paragraph to the agreement, providing that
UdeM would owe royalties to Uretek on UdeM’s purchases of any Uretek
products. The jury was entitled to conclude that the December 2010 checks
represented royalty payments for UdeM’s purchase of Uretek products, rather
than its use of Uretek’s deep injection process. Indeed, Alvarez testified to that
effect and explained that he included the “DI [r]oyalties” phrase because
“[t]hat’s the way Mr. Barron wanted to call it.” This factual dispute was
properly left to the jury.
In sum, sufficient evidence showed that the two December 2010 checks
referenced, and were consistent with, the June 2010 amendment. The jury
was entitled to find that by cashing them, Uretek acted under or affirmatively
acknowledged the amendment. Cf. Coastal Plains Dev. Corp. v. Tech-Con
Corp., 531 S.W.2d 143, 147 (Tex. Civ. App.—Houston [1st Dist.] 1975, writ ref’d
n.r.e.) (holding that when a party accepts and deposits a check as-written,
retaining the proceeds, “it is deemed to have agreed to any conditions which
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are clearly shown by the draft to have constituted part of the agreement
between the parties”).
Uretek argues that the $10 check it cashed “as per” the June 2010
amendment was merely a nominal sum without legal significance, and that its
acceptance could not ratify the amendment. In support of this proposition,
Uretek cites irrelevant cases that address whether a sale-leaseback
transaction, because the leaseholder’s option to purchase is supported by only
nominal consideration, is a secured loan for purposes of Article 9 of the U.C.C.
Uretek does not cite any authority demonstrating that the acceptance of a
small sum “as per” an unexecuted contract or amendment—when the contract
or amendment designates that sum as the consideration—cannot constitute
ratification. Furthermore, viewing the evidence in the light most favorable to
the verdict, the jury could have found that Barron took the check to Uretek’s
office and specifically instructed his employees to deposit it. Thus, the jury
had sufficient evidence to find that by cashing the $10 check, Uretek acted
under or affirmatively acknowledged the June 2010 amendment. Cf. Coastal
Plains Dev. Corp., 531 S.W.2d at 147.
Finally, we note that the circumstances surrounding the June 2010
meeting properly informed the jury’s finding that Uretek ratified the
amendment. Alvarez and Barron met in May 2010, and again in June 2010,
to resolve an ongoing dispute over the amount that UdeM owed Uretek for the
Metro Project. At the first meeting, an agreement was executed, four invoices
were paid, and Barron indicated receipt and acceptance of the checks by
signing and dating photocopies. At the second meeting, Alvarez and Barron
initialed the amendment to the sublicense agreement, executed a release, and
settled two more matters concerning payment for the Metro Project. As during
the first meeting, Barron indicated receipt and acceptance of the checks—one
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of which expressly stated that it was tendered in consideration for the
amendment—by signing and dating photocopies. Uretek deposited those
checks and, several months later, deposited two more checks that UdeM
tendered for royalties “as per” the amendment. In addition, Alvarez testified
that after the June 2010 meeting, he and Barron were satisfied that the parties
had settled their disagreements. The jury could reasonably conclude that the
parties had engaged in an ongoing effort to resolve the Metro Project dispute,
the amendment represented part of that effort, and Uretek’s deposit of
payments after the June 2010 meeting ratified the amendment.
IV.
The district court awarded UdeM $211,609.88 in attorney’s fees,
including fees for claims upon which UdeM did not prevail, after finding that
the claims were so interrelated that the fees could not be segregated. Uretek
argues that the award was error for two reasons. First, Uretek contends that
the fees should have been segregated. Second, Uretek contends that UdeM’s
attorneys billed excessively for the removal, depositions, work by a specific
attorney, and an unsuccessful summary judgment motion.
“State law controls both the award of and the reasonableness of fees
awarded where state law supplies the rule of decision.” Mathis v. Exxon Corp.,
302 F.3d 448, 461 (5th Cir. 2002). Both as a matter of Texas law and pursuant
to the June 2010 amendment to the sublicense agreement, UdeM, as the
prevailing party in a breach of contract suit, was entitled to recover its
reasonable attorney’s fees. Tex. Civ. Prac. & Rem. Code § 38.001; see also
Mohican Oil & Gas, LLC v. Scorpion Exploration & Prod., Inc., 337 S.W.3d
310, 321 (Tex. App.—Corpus Christi 2011, pet. denied) (parties are free to
contract for their own fee-recovery standard). Generally, a court may award
fees only in connection with claims on which the party prevailed. Stewart Title
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Guar. Co. v. Sterling, 822 S.W.2d 1, 10–11 (Tex. 1991). An exception applies,
however, “when the attorney’s fees rendered are in connection with claims
arising out of the same transaction and are so interrelated that their
prosecution or defense entails proof or denial of essentially the same facts.” Id.
at 11. In such cases, a court may award “the entire amount covering all
claims.” Id. Intertwined facts alone, however, can no longer trigger this
exception. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313 (Tex. 2006)
(discussing and limiting Sterling). Rather, “it is only when discrete legal
services advance both a recoverable and unrecoverable claim that they are so
intertwined that they need not be segregated.” Id. at 313–14.
The district court correctly found that the legal services of UdeM’s
attorneys advanced both recoverable and unrecoverable claims so that the
services could not be segregated. Uretek’s conclusory argument that the
pursuit of additional claims necessarily requires additional work dodges the
relevant inquiry. The test is not whether the pursuit of unsuccessful claims
added to the workload in the abstract, but instead whether discrete legal
services can be segregated between those devoted to the successful claims and
those devoted to the unsuccessful ones. Uretek fails to show how any discrete
legal service that UdeM’s counsel provided could be so segregated. The district
court, familiar with the progress of the litigation, did not err when it awarded
unsegregated fees.
Uretek’s argument that the district court failed to adequately scrutinize
the fees is also wholly without merit. First, Uretek misplaces reliance on El
Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012). In that case, the Texas
Supreme Court reversed an attorney’s fee award where the affidavit listed only
the total number of hours that counsel had billed in the case. Id. at 759. In
this case, however, UdeM’s counsel supplied the district court with daily billing
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entries. Moreover, Uretek simply reiterates on appeal the same objections to
the billing entries that the district court carefully rejected. The district court,
in calculating the lodestar amount, expressly considered the factors specified
in Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex.
1997). Uretek did not object to the hourly rates charged by UdeM’s counsel,
and the district court found that they were reasonable. As for the hours
expended, the district court observed that to defeat Uretek’s damages claim,
UdeM had to show that the 2010 release and 2010 amendment were valid and
enforceable. The district court found that UdeM’s counsel sufficiently
documented the hours and did not bill excessively in light of the complex issues
involved, the amounts in controversy, and counsel’s experience and expertise.
Noting that “[s]ummary judgment motions are common in contract disputes,”
the district court found that UdeM’s unsuccessful summary judgment motion
was reasonable and, therefore, UdeM was entitled to fees in connection with
its summary judgment motion. See DP Solutions, Inc. v. Rollins, Inc., 353 F.3d
421, 434 (5th Cir. 2003) (“[A] party may recover for time spent on unsuccessful
motions so long as it succeeds on the overall claim.”).
Where, as here, the district court has carefully considered the billing
records and lodestar factors, and the appellant merely reiterates on appeal the
contentions that the district court rejected, we will uphold the award. See, e.g.,
DP Solutions, 353 F.3d at 433–34. This is especially true under Texas law,
which presumes the reasonableness of “usual” or “customary” fees in breach of
contract suits. Mathis, 302 F.3d at 462.
V.
For the foregoing reasons, we AFFIRM the judgment of the district court.
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